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What changed in RLJ Lodging Trust's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of RLJ Lodging Trust's 2023 and 2024 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 2024 report.

+207 added−203 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-27)

Top changes in RLJ Lodging Trust's 2024 10-K

207 paragraphs added · 203 removed · 169 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe following table sets forth the brand affiliations of our hotel properties as of December 31, 2023: Brand Affiliations Number of hotels Percentage of total hotels Number of rooms Percentage of total rooms Marriott Courtyard 12 12.4 % 2,664 12.4 % Residence Inn 10 10.3 % 1,444 6.7 % Marriott 4 4.1 % 1,500 7.0 % Fairfield Inn & Suites 4 4.1 % 552 2.6 % Renaissance 3 3.1 % 782 3.7 % SpringHill Suites 2 2.1 % 273 1.3 % AC Hotel 1 1.0 % 205 1.0 % Moxy 1 1.0 % 170 0.8 % Tribute Portfolio 1 1.0 % 132 0.6 % Subtotal 38 39.1 % 7,722 36.1 % Hilton Embassy Suites 19 19.6 % 5,289 24.7 % Hilton Garden Inn 5 5.2 % 1,125 5.3 % DoubleTree/DoubleTree Suites by Hilton 4 4.1 % 927 4.3 % Hampton Inn/Hampton Inn & Suites 3 3.1 % 499 2.3 % Curio Collection 2 2.1 % 468 2.2 % Homewood Suites 2 2.1 % 345 1.6 % Hilton 1 1.0 % 231 1.1 % Tapestry Collection 1 1.0 % 124 0.6 % Subtotal 37 38.2 % 9,008 42.1 % Hyatt Hyatt House 7 7.2 % 1,204 5.6 % Hyatt Place 3 3.1 % 466 2.2 % Hyatt Centric 2 2.1 % 266 1.2 % Subtotal 12 12.4 % 1,936 9.0 % Wyndham Wyndham 5 5.2 % 1,893 8.8 % Subtotal 5 5.2 % 1,893 8.8 % Other Brand Affiliation/Independent 5 5.1 % 858 4.0 % Total 97 100.0 % 21,417 100.0 % Asset Management We have a dedicated team of asset management professionals that proactively work with our third-party management companies to maximize profitability at each of our hotels to the extent permitted under the REIT rules.
Biggest changeThe following table sets forth the brand affiliations of our hotel properties as of December 31, 2024: Brand Affiliations Number of hotels Percentage of total hotels Number of rooms Percentage of total rooms Marriott Courtyard 13 13.5 % 2,917 13.7 % Residence Inn 9 9.4 % 1,366 6.4 % Marriott 4 4.2 % 1,500 7.0 % Fairfield Inn & Suites 3 3.1 % 418 2.0 % Renaissance 3 3.1 % 782 3.7 % SpringHill Suites 2 2.1 % 273 1.3 % AC Hotel 1 1.0 % 205 1.0 % Moxy 1 1.0 % 170 0.8 % Tribute Portfolio 1 1.0 % 132 0.6 % Subtotal 37 38.4 % 7,763 36.5 % Hilton Embassy Suites 19 19.8 % 5,289 24.8 % Hilton Garden Inn 5 5.2 % 1,125 5.3 % DoubleTree/DoubleTree Suites by Hilton 4 4.2 % 937 4.4 % Hampton Inn/Hampton Inn & Suites 3 3.1 % 499 2.3 % Curio Collection 2 2.1 % 468 2.2 % Homewood Suites 2 2.1 % 345 1.6 % Hilton 1 1.0 % 231 1.1 % Tapestry Collection 1 1.0 % 124 0.6 % Subtotal 37 38.5 % 9,018 42.3 % Hyatt Hyatt House 7 7.3 % 1,204 5.6 % Hyatt Place 3 3.1 % 466 2.2 % Hyatt Centric 2 2.1 % 266 1.2 % Subtotal 12 12.5 % 1,936 9.0 % Wyndham Wyndham 4 4.2 % 1,642 7.7 % Subtotal 4 4.2 % 1,642 7.7 % Other Brand Affiliation/Independent 6 6.4 % 968 4.5 % Total 96 100.0 % 21,327 100.0 % Asset Management We have a dedicated team of asset management professionals that proactively work with our independent managers to maximize profitability at each of our hotels to the extent permitted under the REIT rules.
The hotel properties may be branded and operated under the manager’s brand or branded under a separate franchise agreement. • Franchisors — own a brand or brands and provide the franchised hotels with brand recognition, marketing support and worldwide reservation systems. • Managers — responsible for the day-to-day operation of the hotel property, including the employment of the hotel staff, the determination of room rates, the development of sales and marketing plans, the preparation of operating and capital expenditure budgets and the preparation of financial reports for the owner.
The hotel properties may be branded and operated under the independent manager’s brand or branded under a separate franchise agreement. • Franchisors — own a brand or brands and provide the franchised hotels with brand recognition, marketing support and worldwide reservation systems. • Independent Managers — responsible for the day-to-day operation of the hotel property, including the employment of the hotel staff, the determination of room rates, the development of sales and marketing plans, the preparation of operating and capital expenditure budgets and the preparation of financial reports for the owner.
Item 1. Business Our Company We are a self-advised and self-administered Maryland real estate investment trust ("REIT") that owns primarily premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels located within heart of demand locations. We are one of the largest U.S. publicly-traded lodging REITs in terms of both number of hotels and number of rooms.
Item 1. Business Our Company We are a self-advised and self-administered Maryland real estate investment trust that owns primarily premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels located within heart of demand locations. We are one of the largest U.S. publicly-traded lodging REITs in terms of both number of hotels and number of rooms.
We believe in affiliating our hotels with premium brands owned by leading international franchisors such as Marriott, Hilton and Hyatt. We believe that utilizing premium brands provides significant advantages because of their guest loyalty programs, worldwide reservation systems, effective product segmentation, global distribution and strong customer awareness. 3 Table of Contents • Focus on high-growth markets.
We believe in affiliating our hotels with premium brands owned by leading international franchisors such as Marriott, Hilton and Hyatt. We believe that utilizing premium brands provides significant advantages because of their guest loyalty programs, worldwide reservation systems, effective product segmentation, global distribution and strong customer awareness. 4 Table of Contents • Focus on high-growth markets.
We believe that our strong asset management process helps to ensure that each hotel is being operated to our and our franchisors' standards, that our hotel properties are being adequately maintained in order 5 Table of Contents to preserve the value of the asset and to ensure the safety of our customers, and that our management companies are maximizing revenues, profits and operating margins.
We believe that our strong asset management process helps to ensure that each hotel is being operated to our and our franchisors' standards, that our hotel properties are being adequately maintained in order to preserve the value of the 6 Table of Contents asset and to ensure the safety of our customers, and that our management companies are maximizing revenues, profits and operating margins.
We are the sole general partner of the Operating Partnership and, as of December 31, 2023, we owned 99.5% of the OP units in the Operating Partnership. In the future, we may issue OP units from time to time in connection with acquiring hotel properties, financing, compensation or other reasons.
We are the sole general partner of the Operating Partnership and, as of December 31, 2024, we owned 99.5% of the OP units in the Operating Partnership. In the future, we may issue OP units from time to time in connection with acquiring hotel properties, financing, compensation or other reasons.
We consolidate our real estate interests in the 96 hotel properties in which we hold a controlling financial interest, and we record the real estate interest in the one hotel property in which we hold an indirect 50% non-controlling interest using the equity method of accounting.
We consolidate our real estate interests in the 95 hotel properties in which we hold a controlling financial interest, and we record the real estate interest in the one hotel property in which we hold an indirect 50% non-controlling interest using the equity method of accounting.
We are the sole general partner of the Operating Partnership. As of December 31, 2023, we owned, through a combination of direct and indirect interests, 99.5% of the units of limited partnership interest in the Operating Partnership ("OP units").
We are the sole general partner of the Operating Partnership. As of December 31, 2024, we owned, through a combination of direct and indirect interests, 99.5% of the units of limited partnership interest in the Operating Partnership ("OP units").
Certain of our properties in our portfolio are located in areas known to be subject to hurricanes and we believe that we have appropriate insurance for those risks, although they are subject to higher deductibles for named windstorms than our other properties.
Certain of our properties in our portfolio are located in areas known to be subject to hurricanes and we believe that we have appropriate insurance for those risks, although they are subject to higher deductibles for 8 Table of Contents named windstorms than our other properties.
We structure our debt profile to maintain financial flexibility and a balanced maturity schedule with access to different forms of financing. 4 Table of Contents Our Hotels Our hotel properties operate under strong, premium brands, with approximately 90.0% of our hotel properties operating under existing relationships with Marriott, Hilton or Hyatt.
We structure our debt profile to maintain financial flexibility and a balanced maturity schedule with access to different forms of financing. 5 Table of Contents Our Hotels Our hotel properties operate under strong, premium brands, with approximately 89.4% of our hotel properties operating under existing relationships with Marriott, Hilton or Hyatt.
Our capital expenditure priorities are focused heavily on projects that, in addition to strengthening our market positioning, also enhance profitability by bringing about energy and water usage reductions and savings. Throughout 2021 and 2022, we invested in over 300 efficiency projects.
Our capital expenditure priorities are focused heavily on projects that, in addition to strengthening our market positioning, also enhance profitability by bringing about energy and water usage reductions and savings. Since 2021, we have invested in over 300 efficiency projects.
Our asset management team works closely with our third-party management companies on key aspects of each hotel's operation, including, among others, revenue management, market positioning, cost structure, capital and operational budgeting, as well as the identification and evaluation of return on investment initiatives and overall business strategy.
Our asset management team works closely with our independent managers on key aspects of each hotel's operation, including, among others, revenue management, market positioning, cost structure, capital and operational budgeting, as well as the identification and evaluation of return on investment initiatives and overall business strategy.
We lease 96 of the 97 hotel properties to our TRSs, of which we own a controlling financial interest. For U.S. federal income tax purposes, we elect to be taxed as a REIT. Substantially all of our assets and liabilities are held by, and all of our operations are conducted through, the Operating Partnership.
We lease 95 of the 96 hotel properties to our TRSs, of which we own a controlling financial interest. We elect to be taxed as a real estate investment trust for U.S. federal income tax purposes (a "REIT"). Substantially all of our assets and liabilities are held by, and all of our operations are conducted through, the Operating Partnership.
We do not carry insurance for generally uninsurable risks, including, but not 7 Table of Contents limited to losses caused by communicable or infectious diseases, war or governmental actions such as government seizures of property. In addition, we do not carry cyber insurance. Human Capital As of December 31, 2023, we had 79 employees.
We do not carry insurance for generally uninsurable risks, including, but not limited to losses caused by communicable or infectious diseases, war or governmental actions such as government seizures of property. In addition, we do not carry cyber insurance. Human Capital As of December 31, 2024, we had 73 employees.
Environmental, Social, and Governance ("ESG") We are committed to driving long-term value creation for our shareholders by upholding our corporate responsibility and incorporating ESG initiatives in all key aspects of our strategy and business.
Sustainability We are committed to driving long-term value creation for our shareholders by upholding our corporate responsibility and incorporating sustainability initiatives in all key aspects of our strategy and business.
As of December 31, 2023, we owned 97 hotel properties with approximately 21,400 rooms, located in 23 states and the District of Columbia. We owned, through wholly-owned subsidiaries, a 100% interest in 95 of our hotel properties, a 95% controlling interest in one hotel property, and a 50% non-controlling interest in an entity owning one hotel property.
As of December 31, 2024, we owned 96 hotel properties with approximately 21,300 rooms, located in 23 states and the District of Columbia. We owned, through wholly-owned subsidiaries, a 100% interest in 94 of our hotel properties, a 95% controlling interest in one hotel property, and a 50% non-controlling interest in an entity owning one hotel property.
We intend to continue to enhance our ESG initiatives and our disclosures by striving to adhere to other widely recognized frameworks to provide additional transparency regarding our ESG initiatives. We also intend to enhance strategic decision making by identifying and addressing material risks and opportunities that mitigate long-term environmental impacts to our hotel properties.
We intend to continue to enhance our sustainability initiatives and our disclosures by striving to adhere to the widely recognized frameworks in order to continue to provide transparency regarding our sustainability initiatives. We also intend to enhance strategic decision making by identifying and addressing material risks and opportunities that mitigate long-term environmental impacts to our hotel properties.
We are also committed to supporting our third-party management companies with integrating the 5-Star Promise principles throughout their hotel operations. Our labor and human rights policy outlines our approach to ensuring fair and equitable labor practices.
We are also committed to supporting our independent managers with integrating the 5-Star Promise principles throughout their hotel operations. Our labor and human rights policy outlines our approach to ensuring fair and equitable labor practices.
Additionally, in connection with our adherence to the American Hotel Lodging Association ("AHLA") Safe Stay® initiative, we are committed to promoting the health and well-being of all members of our community – from our customers and associates to the employees of our third-party management companies.
In connection with our adherence to the American Hotel Lodging Association ("AHLA") Safe Stay® initiative, we are committed to promoting the health and well-being of all members of our community – from our customers and associates to the employees of our independent managers.
We actively monitor and advise our third-party management companies on most aspects of our hotels' operations, including property positioning, physical design, capital planning and investment, guest experience and overall strategic direction.
We actively monitor and advise our independent managers on most aspects of our hotels' operations, including property positioning, physical design, capital planning and investment, guest experience and overall strategic direction.
We continue to uphold high standards with respect to governance, which is reflected in our approach to maintaining a highly diverse board and our overall approach to risk management. With respect to our board, three trustees are women, five are ethnically diverse and seven are independent. Nearly 80% of our board has deep expertise and experience in risk management.
We continue to uphold high standards with respect to governance, which is reflected in our approach to maintaining a highly diverse board and our overall approach to risk management. With respect to our board, three trustees are women, five 9 Table of Contents are ethnically diverse and seven are independent.
We have an internal ESG committee that reports ESG matters directly through our CEO to the board’s NCG Committee and typically meets at least once each quarter. The NCG Committee, with critical support from management, is leading the effort to formulate our strategy with respect to adapting and responding to the risks and opportunities presented by ESG-related matters.
We have an internal sustainability committee that reports sustainability matters directly through our CEO to the board’s NCG Committee and meets several times a year. The NCG Committee, with critical support from management, is leading the effort to formulate our strategy with respect to adapting and responding to the risks and opportunities presented by sustainability-related matters.
In addition, our board, via the Nominating and Corporate Governance Committee (the "NCG Committee") of the 8 Table of Contents board, has the overall responsibility for overseeing ESG-related issues, policies and programs for our company.
Nearly 80% of our board has deep expertise and experience in risk management. In addition, our board, via the Nominating and Corporate Governance Committee (the "NCG Committee") of the board, has the overall responsibility for overseeing sustainability-related issues, policies and programs for our company.
In January 2023, we released our inaugural Corporate Sustainability Report, which updated the Global Reporting Initiative (“GRI”) disclosures for our portfolio, the Sustainable Accounting Standards Board (“SASB”) Real Estate disclosures and disclosures in accordance with the Task Force on Climate-Related Financial Disclosures (“TCFD”).
In April 2024, we released our second annual Corporate Sustainability Report, which included the Global Reporting Initiative (“GRI”) disclosures for our portfolio, the Sustainable Accounting Standards Board (“SASB”) Real Estate disclosures and disclosures in accordance with the Task Force on Climate-Related Financial Disclosures (“TCFD”). Going forward, we also expanded our sustainability frameworks to include GRESB participation.
Organizational Structure We conduct our business through a traditional umbrella partnership real estate investment trust ("UPREIT") in which our hotel properties are indirectly owned by the Operating Partnership, through limited partnerships, limited liability companies or other subsidiaries.
Organizational Structure We conduct our business through a traditional umbrella partnership real estate investment trust ("UPREIT") structure in which our assets are owned and our business activities are undertaken by the Operating Partnership and its subsidiaries.
In addition, we retain approval rights on key staffing positions at many of our hotels, such as the hotel's general manager and director of sales.
While we have limited ability (or in some cases, no ability) to impact our independent managers' decisions with respect to their employees, we do retain approval rights on key staffing positions at many of our hotels, such as the hotel's general manager and director of sales.
Through these and our wider initiatives and support from our hotel operators, across our portfolio since 2019, we have reduced our energy usage per square foot by 11% and our greenhouse gas emissions per square foot by 22%. We are taking measurable steps to address the impact of climate change on our portfolio.
Through these and our wider initiatives and support from our hotel operators, across our portfolio since 2019, we were able to reduce our energy usage per square foot by 11% and our greenhouse gas emissions per square foot by 22% as of 2023, bringing us closer to achieving our stated goal of reducing carbon emissions by 35% by 2030.
Our TRSs are subject to U.S. federal, state and local income taxes applicable to corporations. 6 Table of Contents Regulation General Our hotel properties are subject to various U.S. federal, state and local laws, ordinances and regulations, including regulations relating to common areas and fire and life safety requirements.
As a REIT, we generally are not subject to U.S. federal income tax on our income that we distribute to our shareholders as dividends and we are required to distribute 90% of our REIT taxable income (excluding net capital gains) in order to maintain our qualification as a REIT. 7 Table of Contents Regulation General Our hotel properties are subject to various U.S. federal, state and local laws, ordinances and regulations, including regulations relating to common areas and fire and life safety requirements.
In 2023, we continued our support for Habitat for Humanity’s Maryland chapter, sponsoring two volunteer days. Company associates helped to build housing at Habitat for Humanity’s Maryland locations, a short distance from our corporate headquarters in Bethesda, MD.
With respect to social causes, we continue to show our commitment to making an impact in the communities we serve. In 2024, we continued our support for Habitat for Humanity’s Maryland chapter, sponsoring two volunteer days. Company associates helped to build housing at Habitat for Humanity’s Maryland locations.
Removed
In order for the income from our hotel operations to constitute "rents from real property" for purposes of the gross income tests required for REIT qualification, we cannot directly or indirectly operate any of our hotel properties.
Added
Our hotel properties are indirectly owned by the Operating Partnership, through limited partnerships, limited liability companies or subsidiary REITs (“hotel owners”). The hotel owners lease the hotels to our TRSs, which engage independent managers to operate our hotel properties on market terms.
Removed
Accordingly, we lease our hotels, and we intend to lease any hotels we acquire in the future, to subsidiaries of our TRSs ("TRS lessees"), which are owned by us. Our TRS lessees have engaged, or will engage, third-party management companies to manage our hotel properties, and any hotel properties we acquire in the future, on market terms.
Added
The independent managers operate the hotels, collect hotel operating revenue, pay operating expenses (including the independent managers’ management fees) on behalf of the TRS pursuant to the relevant hotel management agreement.
Removed
Our TRS lessees pay rent to us that we intend to treat as "rents from real property," provided that the third-party management companies engaged by our TRS lessees to manage our hotel properties are deemed to be "eligible independent contractors" and certain other requirements are met.
Added
Our TRSs are corporations for U.S. federal income tax purposes and, thus, are subject to U.S. federal corporate income tax, as well as applicable state and local income tax, on their taxable income. We treat the rent paid by our TRS lessees to our OP lessors as "rents from real property" for purposes of our qualification as a REIT.
Removed
One of our properties that was converted to an independent brand in Southern California received an Energy Star certification, and we have identified additional hotels in the portfolio that are currently eligible for certification.
Added
In addition, we treat any distributions received from our TRSs out of after-tax earnings as dividend income.
Removed
We are committed to setting specific and quantifiable targets including reducing our carbon emissions by 35% by 2030 and are working on steps to achieve this objective. With respect to social causes, we continue to show our commitment to making an impact in the communities we serve.
Added
We maintain our partnership with a number of other locally-based charitable organizations including the N Street Village, Bridges from School to Work, and Don Bosco Cristo Rey. Additionally, we continue to support small businesses in our community through a $5.0 million deposit at Industrial Bank, a minority-owned financial institution which aims to empower under-banked businesses and individuals locally.
Removed
We also expanded our community outreach through initiating a $5.0 million deposit with a local minority banking partner that aims to empower under-banked businesses and individuals locally.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe generally will attempt to resolve any such disputes through discussions and negotiations; however, if we are unable to reach satisfactory results through discussions and negotiations, we may choose to terminate our management agreement, litigate the dispute or submit the matter to third-party dispute resolution, the outcome of which may be unfavorable to us. 10 Table of Contents In the event that any of our management agreements are terminated, we can provide no assurances that we could find a replacement manager or that our franchisors will consent to a replacement manager in a timely manner, or at all, or that any replacement manager will be successful in operating our hotels.
Biggest changeWe generally will attempt to resolve any such disputes through discussions and negotiations; however, if we are unable to reach satisfactory results through discussions and negotiations, we may choose to terminate our management agreement, litigate the dispute or submit the matter to third-party dispute resolution, the outcome of which may be unfavorable to us.
In addition, our hotel properties are subject to various operating risks common to the lodging industry, many of which are beyond our control, including, among others, the following: • seasonality of the lodging industry may cause quarterly fluctuations in our operating results; • over-building of hotels in the markets in which we operate, which results in an increased supply of hotels that will adversely affect Occupancy and revenues at our hotel properties; • consolidation among companies in the lodging industry may increase the resulting companies' negotiating power relative to ours, and decrease competition among those companies for management and franchise agreements, which could result in higher management or franchise fees; • increases in the number of brands owned by Marriott, Hilton and Hyatt, which could result in increased competition for our hotels; 15 Table of Contents • competition from non-traditional accommodations for travelers, such as online services that market homes, apartments and condominiums as an alternative to hotel rooms; • dependence on business and leisure travelers; • increases in energy costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and leisure travelers; • increases in operating costs due to inflation and other factors that may not be offset by increased room rates; • 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; • adverse effects of international, national, regional and local economic and market conditions; • adverse effects of worsening conditions in the lodging industry; and • risks generally associated with the ownership of hotels and real estate, as we discuss in detail below.
In addition, our hotel properties are subject to various operating risks common to the lodging industry, many of which are beyond our control, including, among others, the following: • seasonality of the lodging industry may cause quarterly fluctuations in our operating results; • over-building of hotels in the markets in which we operate, which results in an increased supply of hotels that will adversely affect Occupancy and revenues at our hotel properties; • consolidation among companies in the lodging industry may increase the resulting companies' negotiating power relative to ours, and decrease competition among those companies for management and franchise agreements, which could result in higher management or franchise fees; • increases in the number of brands owned by Marriott, Hilton and Hyatt, which could result in increased competition for our hotels; • competition from non-traditional accommodations for travelers, such as online services that market homes, apartments and condominiums as an alternative to hotel rooms; • dependence on business and leisure travelers; • increases in energy costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and leisure travelers; • increases in operating costs due to inflation and other factors that may not be offset by increased room rates; 16 Table of Contents • 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; • adverse effects of international, national, regional and local economic and market conditions; • adverse effects of worsening conditions in the lodging industry; and • risks generally associated with the ownership of hotels and real estate, as we discuss in detail below.
Our outstanding debt, and any additional debt borrowed in the future, may subject us to many risks, including the risk that: • our cash flows from operations may be insufficient to make required payments of principal and interest; 13 Table of Contents • we may be required to use a substantial portion of our cash flows to pay principal and interest, which would reduce the cash available for distributions to our shareholders; • we may be at a competitive disadvantage compared to our competitors that have less debt; • we may be vulnerable to economic volatility, particularly if growth were to slow or stall and reduce our flexibility to respond to difficult market, industry, or economic conditions; • the terms of any refinancing may not be in the same amount or on terms as favorable as the terms of the debt being refinanced; and • the use of leverage could adversely affect our ability to borrow more money for operations and capital improvements, to finance future acquisitions of hotel properties, to make distributions to our shareholders, and to repurchase common shares, and it could adversely affect the market price of our common shares.
Our outstanding debt, and any additional debt borrowed in the future, may subject us to many risks, including the risk that: • our cash flows from operations may be insufficient to make required payments of principal and interest; • we may be required to use a substantial portion of our cash flows to pay principal and interest, which would reduce the cash available for distributions to our shareholders; 14 Table of Contents • we may be at a competitive disadvantage compared to our competitors that have less debt; • we may be vulnerable to economic volatility, particularly if growth were to slow or stall and reduce our flexibility to respond to difficult market, industry, or economic conditions; • the terms of any refinancing may not be in the same amount or on terms as favorable as the terms of the debt being refinanced; and • the use of leverage could adversely affect our ability to borrow more money for operations and capital improvements, to finance future acquisitions of hotel properties, to make distributions to our shareholders, and to repurchase common shares, and it could adversely affect the market price of our common shares.
Such joint venture investments involve risks not otherwise present in a wholly-owned hotel property or a redevelopment project, including the following: • we may not have exclusive control over the hotel property or the joint venture, which may prevent us from taking actions that are in our best interest but opposed by our partners; • joint venture agreements often restrict the transfer of a partner's interest or may otherwise restrict our ability to sell the interest when we desire, or on advantageous terms; • joint venture agreements may contain provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner's interest or selling its interest to that partner; • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which would mean that we and any other remaining partners generally would remain liable for the joint venture's liabilities; or • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our ability to qualify as a REIT, even though we do not control the joint venture.
Such joint venture investments involve risks not otherwise present in a wholly-owned hotel property or a redevelopment project, including the following: 15 Table of Contents • we may not have exclusive control over the hotel property or the joint venture, which may prevent us from taking actions that are in our best interest but opposed by our partners; • joint venture agreements often restrict the transfer of a partner's interest or may otherwise restrict our ability to sell the interest when we desire, or on advantageous terms; • joint venture agreements may contain provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner's interest or selling its interest to that partner; • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which would mean that we and any other remaining partners generally would remain liable for the joint venture's liabilities; or • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our ability to qualify as a REIT, even though we do not control the joint venture.
The costs of these capital improvements may increase due to ongoing supply-chain disruptions and increased construction costs, and could materially and adversely affect us. In addition, due to the current supply-chain constraints and disruptions, we could face difficulties sourcing the goods and services in a timely manner, which could adversely affect us.
The costs of these capital improvements may increase due to ongoing supply-chain disruptions and increased construction costs, and could materially and adversely affect us. In addition, due to supply-chain constraints and disruptions, we could face difficulties sourcing the goods and services in a timely manner, which could adversely affect us.
We face possible risks associated with natural disasters, weather events, and the physical effects of climate change. We are subject to the risks associated with natural disasters, weather events, and the physical effects of climate change, any of which could have a material adverse effect on our properties, operations and business.
We face possible risks associated with natural disasters, weather events, wildfires, and the physical effects of climate change. We are subject to the risks associated with natural disasters, weather events, wildfires, and the physical effects of climate change, any of which could have a material adverse effect on our properties, operations and business.
In addition, we could face some challenges meeting workforce requirements resulting from changes in workforce dynamics, such as higher standards and working remotely or more flexibility, which could result in increased labor costs in the future. 11 Table of Contents Restrictive covenants in certain of our management and franchise agreements contain provisions limiting or restricting the sale or financing of our hotels, which could have a material and adverse effect on us.
In addition, we could face some challenges meeting workforce requirements resulting from changes in workforce dynamics, such as higher standards and working remotely or more flexibility, which could result in increased labor costs in the future. 12 Table of Contents Restrictive covenants in certain of our management and franchise agreements contain provisions limiting or restricting the sale or financing of our hotels, which could have a material and adverse effect on us.
Weather events and climate change may also affect our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable in areas most vulnerable to such events, increasing operating costs at our hotel properties, such as the cost of water or energy, and requiring us to expend funds as we seek to repair and protect our hotel properties against such risks.
Natural disasters, weather events and climate change may also affect our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable in areas most vulnerable to such events, increasing operating costs at our hotel properties, such as the cost of water or energy, and requiring us to expend funds as we seek to repair and protect our hotel properties against such risks.
We currently lease and expect to continue to lease substantially all of our hotels to our TRSs, which will not be treated as "related party tenants" so long as they qualify as "taxable REIT subsidiaries" under the Code. To qualify as such, most significantly, a TRS cannot engage in the operation or management of hotels.
We currently lease and expect to continue to lease substantially all of our hotels to our TRSs, which will not be treated as "related party tenants" so long as they qualify as "taxable REIT subsidiaries" under the Code. To qualify as such, most significantly, a TRS cannot engage in the direct or indirect operation or management of hotels.
Our hotels located in the Northern California, Southern California, South Florida, Chicago, Illinois, and Houston, Texas metropolitan areas accounted for approximately 13.2%, 11.0%, 9.0%, 6.8% and 5.8%, respectively, of our total number of rooms available for the fiscal year ended December 31, 2023.
Our hotels located in the Northern California, Southern California, South Florida, Chicago, Illinois, and Houston, Texas metropolitan areas accounted for approximately 13.2%, 11.0%, 9.0%, 6.6% and 5.8%, respectively, of our total number of rooms available for the fiscal year ended December 31, 2024.
Even when insurable, these policies may have high deductibles and/or high premiums. 26 of our coastal hotel properties each have a deductible of 5% of total insured value for a named storm, and our hotels located in areas susceptible to earthquakes have deductibles of up to 5% of total insured value.
Even when insurable, these policies may have high deductibles and/or high premiums. Certain of our coastal hotel properties each have a deductible of 5% of total insured value for a named storm, and our hotels located in areas susceptible to earthquakes have deductibles of up to 5% of total insured value.
These advance notice provisions 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 shareholders' best interests.
These advance notice provisions 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 shares or otherwise be in our shareholders' best interests.
In addition, our declaration of trust limits the liability of our trustees and officers to us and our shareholders for monetary damages, except for liability resulting from the: • actual receipt of an improper benefit or profit in money, property or services; or • active and deliberate dishonesty by the trustee or officer that was established by a final judgment as being material to the cause of action adjudicated.
In addition, our declaration of trust limits the liability of our trustees and officers to us and our shareholders for monetary damages, except for liability resulting from the: • actual receipt of an improper benefit or profit in money, property or services; or 18 Table of Contents • active and deliberate dishonesty by the trustee or officer that was established by a final judgment as being material to the cause of action adjudicated.
At December 31, 2023, we had approximately $2.2 billion of debt outstanding, which could materially and adversely affect our operating performance and put us at a competitive disadvantage. Required repayments of debt and related interest may materially and adversely affect our operating performance. At December 31, 2023, we had approximately $2.2 billion of outstanding debt.
At December 31, 2024, we had approximately $2.2 billion of debt outstanding, which could materially and adversely affect our operating performance and put us at a competitive disadvantage. Required repayments of debt and related interest may materially and adversely affect our operating performance. At December 31, 2024, we had approximately $2.2 billion of outstanding debt.
In addition, we may incur substantial additional debt, including secured debt, in the future. After taking into consideration the effect of interest rate swaps, 88.5% of our payments are fixed or effectively fixed.
In addition, we may incur substantial additional debt, including secured debt, in the future. After taking into consideration the effect of interest rate swaps, 69.5% of our payments are fixed or effectively fixed.
Although we intend to monitor future acquisitions and improvements of hotels, the REIT provisions of the Code provide only limited guidance for making determinations under the requirements for qualified lodging facilities, and there can be no assurance that these requirements will be satisfied in all cases.
Although we intend to monitor future acquisitions and improvements of hotels, the REIT provisions of the Code provide only 21 Table of Contents limited guidance for making determinations under the requirements for qualified lodging facilities, and there can be no assurance that these requirements will be satisfied in all cases.
We own certain hotel properties through joint ventures. In the future, we may enter into additional joint ventures to acquire, develop, improve or partially dispose of hotel properties, thereby reducing the amount of capital required by us to make investments and diversifying our capital sources for growth.
In the future, we may enter into additional joint ventures to acquire, develop, improve or partially dispose of hotel properties, thereby reducing the amount of capital required by us to make investments and diversifying our capital sources for growth.
Real estate investments, including the focused-service and compact full-service hotels in our portfolio, are relatively illiquid. As a result, we may not be able to sell a hotel or hotels quickly or on favorable terms in response to changing economic, financial and investment conditions or changes in the hotel's operating performance when it otherwise may be prudent to do so.
Real estate investments, including the hotels in our portfolio, are relatively illiquid. As a result, we may not be able to sell a hotel or hotels quickly or on favorable terms in response to changing economic, financial and investment conditions or changes in the hotel's operating performance when it otherwise may be prudent to do so.
Even if the U.S. economy and the global economy remain stable or grow in 2024, we cannot provide any assurances that demand for hotel rooms will increase from current levels. If demand does not increase in the near future, or if demand weakens, our future results of operations and our growth prospects could be materially and adversely affected.
Even if the U.S. and global economies remain stable or grow in 2025, we cannot provide any assurances that demand for hotel rooms will increase from current levels. If demand does not increase in the near future, or if demand weakens, our future results of operations and growth prospects could be materially and adversely affected.
In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the hotel property. We could incur significant costs related to government regulation and litigation with respect to environmental matters, which could have a material and adverse effect on us.
In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the hotel property. 19 Table of Contents We could incur significant costs related to government regulation and litigation with respect to environmental matters, which could have a material and adverse effect on us.
In addition, repurchases of our common 22 Table of Contents shares pursuant to our share repurchase program could affect our share price and increase its volatility. The existence of our share repurchase program could cause our share price to be higher than it would be in the absence of such a program.
In addition, repurchases of our common shares pursuant to our share repurchase program could affect our share price and increase its volatility. The existence of our share repurchase program could cause our share price to be higher than it would be in the absence of such a program.
Additionally, our hotels located in the Austin, Texas metropolitan area, which accounted for 3.0% of our total number of rooms available for the fiscal year ended December 31, 2023, face the risk of the potential closure of the Austin Convention Center in 2025, which could result in a decrease in lodging demand in this market.
Additionally, our hotels located in the Austin, Texas metropolitan area, which accounted for 3.0% of our total number of rooms available for the fiscal year ended December 31, 2024, face the risk of the anticipated closure of the Austin Convention Center in 2025, which could result in a decrease in lodging demand in this market.
Any delay or failure on our part to identify, negotiate, finance on favorable terms, consummate and integrate such acquisitions could materially and adversely impede our growth. Following an acquisition or expansion, we may incur acquisition-related costs and assume potential unknown liabilities and unforeseen increased costs or 12 Table of Contents expenses.
Any delay or failure on our part to identify, negotiate, finance on favorable terms, consummate and integrate such acquisitions could materially and adversely impede our growth. Following an acquisition or expansion, we may incur acquisition-related costs and assume potential unknown liabilities and unforeseen increased costs or expenses.
If we failed to meet either the asset tests or the gross income tests, we would likely lose our REIT status. 20 Table of Contents If any management companies that we engage do not qualify as "eligible independent contractors," or if our hotel properties are not "qualified lodging facilities," we would likely fail to qualify as a REIT.
If we failed to meet either the asset tests or the gross income tests, we would likely lose our REIT status. If any management companies that we engage do not qualify as "eligible independent contractors," or if our hotel properties are not "qualified lodging facilities," we would likely fail to qualify as a REIT.
The integration of such acquisitions, especially acquisitions of portfolios of hotel properties, may cause disruptions to our business, strain management time and resources and materially and adversely affect our operating results and financial condition.
The integration of such acquisitions, especially acquisitions of portfolios of hotel properties, may cause disruptions 13 Table of Contents to our business, strain management time and resources and materially and adversely affect our operating results and financial condition.
In addition, we have developed policies and procedures with respect to company-wide business processes and cycles in order to implement an effective system of internal control over financial reporting. We have established, or caused our third-party management companies to establish, controls and procedures designed to ensure that hotel revenues and expenses are properly recorded at our hotels.
In addition, we have developed policies and procedures with respect to company-wide business processes and cycles in order to implement an effective system of internal control over financial reporting. We have established, or caused our independent managers to establish, controls and procedures designed to ensure that hotel revenues and expenses are properly recorded at our hotels.
Most of our hotel properties operate under either Marriott, Hilton or Hyatt brands; therefore, we are subject to the risks associated with concentrating our portfolio in just three brand families. 87 of the 97 hotel properties that we owned as of December 31, 2023 utilize brands owned by Marriott, Hilton or Hyatt.
Most of our hotel properties operate under either Marriott, Hilton or Hyatt brands; therefore, we are subject to the risks associated with concentrating our portfolio in just three brand families. 86 of the 96 hotel properties that we owned as of December 31, 2024 utilize brands owned by Marriott, Hilton or Hyatt.
Risks Related to Our Common Shares Our cash available for distribution to shareholders may not be sufficient to pay distributions at expected or required levels, and we may need to borrow funds or rely on other external sources in order to make such distributions, or we may not be able to make such distributions at all, which could cause the market price of our common shares to decline significantly.
Risks Related to Our Common Shares Our cash available for distribution to shareholders may not be sufficient to pay distributions at expected or required levels, and we may need to borrow funds or rely on other external sources in order to make such distributions, or we may not be able to make such distributions at all, which could cause the market price of our common shares to decline significantly. 22 Table of Contents We intend to continue to pay regular quarterly distributions to holders of our common shares.
Our inability to dispose of assets at opportune times or on favorable terms could materially and adversely affect our cash flows and results of operations.
Our inability to dispose of assets at opportune times or on favorable terms could materially and adversely affect our cash flows and results of operations. Uninsured and underinsured losses at our hotel properties could materially and adversely affect us.
These alternatives could increase our costs or reduce our shareholders' equity. Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could adversely affect the value of our shares. If our leases are not respected as true leases for U.S. federal income tax purposes, we would likely fail to qualify as a REIT.
Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could adversely affect the value of our shares. 20 Table of Contents If our leases are not respected as true leases for U.S. federal income tax purposes, we would likely fail to qualify as a REIT.
Ongoing volatility and uncertainty in the financial markets may negatively impact our ability to access additional financing for our capital needs, including growth, acquisition activities and other business initiatives, on favorable terms or at all, which may negatively affect 9 Table of Contents our business.
Price volatility, dislocations and liquidity disruptions in the U.S. financial markets may negatively impact our ability to access additional financing for our capital needs, including growth, acquisition activities and other business initiatives, on 10 Table of Contents favorable terms or at all, which may negatively affect our business.
Particularly in light of current market volatility and the high interest rate environment, if we are unable to obtain the capital necessary to make the required periodic capital expenditures and to renovate our hotel properties on favorable terms, or at all, our financial condition, liquidity and results of operations could be materially and adversely affected.
If we are unable to obtain the capital necessary to make the required periodic capital expenditures and to renovate our hotel properties on favorable terms, or at all, our financial condition, liquidity and results of operations could be materially and adversely affected.
In addition, we may be subject to limitations on the ability to use our net operating loss carryovers to offset taxable income that we do not distribute.
From time to time, we may generate taxable income greater than our cash flow. In addition, we may be subject to limitations on the ability to use our net operating loss carryovers to offset taxable income that we do not distribute.
From time to time, disputes may arise between us and our third-party managers regarding their performance or compliance with the terms of the management agreements, which in turn could adversely affect our results of operations.
The success of our hotel properties depends largely on our ability to establish and maintain good relationships with the hotel managers. From time to time, disputes may arise between us and our third-party managers regarding their performance or compliance with the terms of the management agreements, which in turn could adversely affect our results of operations.
Inflation poses a risk to us due to increases in interest rates, as well as the possibility of future increases in interest rates, which have adversely impacted our outstanding variable rate debt and may result in higher interest rates on any new fixed rate debt we may incur.
In addition to market volatility, any future increases in inflation would pose a risk to us due to the possibility of increases in interest rates, which would adversely impact our outstanding variable rate debt and may result in higher interest rates on any new fixed rate debt we may incur.
We are dependent on the performance of the third-party management companies that manage the operations of each of our hotels and we could be materially and adversely affected if such third-party hotel managers do not manage our hotels in our best interests.
We are dependent on the performance of the independent managers that manage the operations of each of our hotels and we could be materially and adversely affected if such third-party hotel managers do not manage our hotels in our best interests or are financially unable or unwilling to perform their obligations.
Costs associated with, or failure to maintain, franchisor operating standards may materially and adversely affect us. Under the terms of our franchise license agreements, we are required to meet specified operating standards and other terms and conditions. We expect that our franchisors will periodically inspect our hotel properties to ensure that we and the hotel management companies follow brand standards.
Under the terms of our franchise license agreements, we are required to meet specified operating standards and other terms and conditions. We expect that our franchisors will periodically inspect our hotel properties to ensure that we and the hotel management companies follow brand standards.
These events also may make it more difficult or costly for us to raise capital through the issuance of new equity or the incurrence of additional secured or unsecured debt, which could materially and adversely affect us. In addition to market volatility, the United States and the rest of the world have recently experienced significant inflation.
These events also may make it more difficult or costly for us to raise capital through the issuance of new equity or the incurrence of additional secured or unsecured debt, which could materially and adversely affect us.
Our success depends in part upon our third-party management companies' ability to attract, motivate and retain a sufficient number of qualified employees. Qualified individuals needed to fill these positions are in short supply in some areas. The inability to recruit and retain these individuals may adversely impact hotel operations and guest satisfaction, which could harm our business.
Qualified individuals needed to fill these positions are in short supply in some areas. The inability to recruit and retain these individuals may adversely impact hotel operations and guest satisfaction, which could harm our business.
We now own a leasehold or similar interest in 13 hotel properties. Our ground lease at Wyndham San Diego Bayside expires in 2029, and if this lease is not extended, this hotel property would be turned over to the ground lessor.
Our ground lease at Wyndham San Diego Bayside expires in 2029, and if this lease is not extended, this hotel property would be turned over to the ground lessor. Our ground lease agreements require the consent of the lessor or sub-lessor prior to transferring our interest in the ground lease.
Our ground lease agreements require the consent of the lessor or sub-lessor prior to transferring our interest in the ground lease. These provisions may impact our ability to sell our hotel properties which, in turn, could adversely impact the price realized from any such sale.
These provisions may impact our ability to sell our hotel properties which, in turn, could adversely impact the price realized from any such sale.
As of December 31, 2023, 13 of our consolidated hotel properties, as well as one unconsolidated hotel property, were on land subject to ground leases. Accordingly, we only owned a leasehold or similar interest in 14 hotel properties. In January 2024, we acquired a fee simple interest in the Wyndham Boston Beacon Hill for approximately $125.0 million.
As of December 31, 2024, 12 of our consolidated hotel properties, as well as one unconsolidated hotel property, were on land subject to ground leases. Accordingly, we only owned a leasehold or similar interest in 13 hotel properties.
These provisions make it more difficult to change our management by removing and replacing trustees and it may delay or prevent a change in control that is in the best interests of our shareholders. 17 Table of Contents Our rights and the rights of our shareholders to take action against our trustees and officers are limited, which could limit our shareholders' recourse in the event of actions not in our shareholders' best interests.
These provisions make it more difficult to change our management by removing and replacing trustees and it may delay or prevent a change in control that is in the best interests of our shareholders.
Over time, our hotel properties 16 Table of Contents located in coastal markets and other areas that may be impacted by climate change are expected to experience increases in storm intensity and rising sea-levels, causing damage to our hotel properties.
Over time, our hotel properties located in coastal markets and other areas that may be impacted by climate change are expected to experience increases in storm intensity and rising sea-levels, causing damage to our hotel properties. As a result, we could become subject to significant losses and/or repair costs that may or may not be fully covered by insurance.
There is a statutory safe harbor available for a limited number of sales in a single taxable year of properties that have been owned by a REIT for at least two years, but that safe harbor likely would not apply to all sale transactions that we might otherwise consider. 14 Table of Contents Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on joint venture partners' financial condition and liquidity and disputes between us and our joint venture partners.
There is a statutory safe harbor available for a limited number of sales in a single taxable year of properties that have been owned by a REIT for at least two years, but that safe harbor likely would not apply to all sale transactions that we might otherwise consider.
Unless we were entitled to statutory relief under certain Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year in which we failed to qualify as a REIT. 19 Table of Contents Any determination that we do not qualify as a REIT would have a material adverse effect on our results of operations and could materially reduce the value of our common shares.
Unless we were entitled to statutory relief under certain Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year in which we failed to qualify as a REIT.
There can be no assurance that natural disasters, weather events, or climate change will not have a material adverse effect on our hotel properties, operations or business. Risks Related to Our Organization and Structure The share ownership limits imposed by the Code for REITs and our declaration of trust may restrict share transfers and/or business combination opportunities.
Risks Related to Our Organization and Structure The share ownership limits imposed by the Code for REITs and our declaration of trust may restrict share transfers and/or business combination opportunities.
As of December 31, 2023, all of our hotel properties had individual management agreements, 31 of which were with Aimbridge Hospitality ("Aimbridge") and 21 of which were with Hilton. The success of our hotel properties depends largely on our ability to establish and maintain good relationships with the hotel managers.
We retain independent third-party hotel managers to operate our hotel properties pursuant to management agreements. As of December 31, 2024, all of our hotel properties had individual management agreements, 30 of which were with Aimbridge Hospitality ("Aimbridge") and 21 of which were with Hilton.
We believe that our TRSs qualify to be treated as "taxable REIT subsidiaries" for U.S. federal income tax purposes. There can be no assurance, however, that the IRS will not challenge the status of a TRS for U.S. federal income tax purposes or that a court would not sustain such a challenge.
We believe that our TRSs qualify to be treated as "taxable REIT subsidiaries" for U.S. federal income tax purposes.
The resolution of labor disputes or re-negotiated labor contracts could lead to higher labor costs, either by increases in wages or benefits or by changes in work rules that raise hotel operating costs. We do not have the ability to affect the outcome of these negotiations.
From time to time, hotel operations may be disrupted as a result of strikes, lockouts, public demonstrations or other negative actions and publicity. The resolution of labor disputes or re-negotiated labor contracts could lead to higher labor costs, either by increases in wages or benefits or by changes in work rules that raise hotel operating costs.
We generally must distribute to our shareholders annually at least 90% of our "REIT taxable income," subject to certain adjustments and excluding any net capital gain. From time to time, we may generate taxable income greater than our cash flow.
REIT distribution requirements could adversely affect our ability to execute our business plan or require us to make distributions of our shares or other securities. We generally must distribute to our shareholders annually at least 90% of our "REIT taxable income," subject to certain adjustments and excluding any net capital gain.
Thus, compliance with the REIT requirements may hinder our ability to make, and, in certain cases, maintain ownership of, certain attractive investments. We would incur adverse tax consequences if FelCor Lodging Trust Incorporated ("FelCor") failed to qualify as a REIT for U.S. federal income tax purposes prior to our merger with FelCor.
Thus, compliance with the REIT requirements may hinder our ability to make, and, in certain cases, maintain ownership of, certain attractive investments.
Although we do not directly employ or manage the employees at our hotels, we still are subject to many of the costs and risks generally associated with the hotel labor force, particularly those hotels with unionized labor. From time to time, hotel operations may be disrupted as a result of strikes, lockouts, public demonstrations or other negative actions and publicity.
Although we do not employ, supervise, or manage the independent managers' employees, we are responsible for the costs of the independent managers' employees at our hotels, as well as other risks generally associated with having and maintaining a hotel labor force, which may be more pronounced at a hotel where the independent manager's employees are unionized.
Our additional tax liability could be substantial and would reduce our net earnings available for investment, debt service and/or distributions to shareholders. REIT distribution requirements could adversely affect our ability to execute our business plan or require us to make distributions of our shares or other securities.
Any determination that we do not qualify as a REIT would have a material adverse effect on our results of operations and could materially reduce the value of our common shares. Our additional tax liability could be substantial and would reduce our net earnings available for investment, debt service and/or distributions to shareholders.
Removed
Recent price volatility, dislocations and liquidity disruptions in the U.S. financial markets have caused stock market prices to fluctuate substantially and the spreads on prospective debt financings to widen considerably.
Added
In the event that any of our management agreements are terminated, we can provide no assurances that we could find a replacement manager or that our franchisors will consent to a replacement manager in a timely manner, or at all, or that any 11 Table of Contents replacement manager will be successful in operating our hotels.
Removed
Because U.S. federal income tax laws restrict REITs and their subsidiaries from operating or managing hotel properties, we do not operate or manage our hotel properties. Instead, we retain third-party hotel managers to operate our hotel properties pursuant to management agreements.
Added
Any adverse developments in Aimbridge's or Hilton’s business, financial strength or ability to operate our hotel properties efficiently and effectively could have a material adverse effect on our results of operations. Costs associated with, or failure to maintain, franchisor operating standards may materially and adversely affect us.
Removed
We are subject to the risks associated with the employment of hotel personnel, particularly with hotels that employ unionized labor. Our third-party management companies are responsible for hiring and maintaining the labor force at each of our hotels.
Added
We bear the costs and other risks of employment of the independent managers' hotel personnel pursuant to our hotel management agreements. The independent managers that we engage to operate our hotels employ all employees (and contract with other independent contractors and service providers) who work at our hotels.
Removed
Hotels where our managers have collective bargaining agreements with their employees are more highly affected by labor force activities than others. Furthermore, labor agreements may limit the ability of our hotel managers to reduce the size of the hotel workforce during an economic downturn because collective bargaining agreements are negotiated between the hotel managers and labor unions.
Added
We have limited ability (or in some cases, no ability) to control cost increases related to our independent managers' employees. Labor shortages could slow our growth or harm our business. Our success depends in part upon our independent managers' ability to attract, motivate and retain a sufficient number of qualified employees.
Removed
Our ability, if any, to have any material impact on the outcome of these negotiations is restricted by and dependent on the individual management agreement covering a specific property, and we may have limited ability to control the outcome of these negotiations. Labor shortages could slow our growth or harm our business.
Added
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on joint venture partners' financial condition and liquidity and disputes between us and our joint venture partners. We own certain hotel properties through joint ventures.
Removed
As a result, we could become subject to significant losses and/or repair costs that may or may not be fully covered by insurance.
Added
There can be no assurance that 17 Table of Contents natural disasters, weather events, or climate change will not have a material adverse effect on our hotel properties, operations or business.
Removed
In some cases, we may be restricted from disposing of properties contributed to us in the future in exchange for our OP units under tax protection agreements with contributors unless we incur additional costs related to indemnifying those contributors. 18 Table of Contents Uninsured and underinsured losses at our hotel properties could materially and adversely affect us.
Added
Our rights and the rights of our shareholders to take action against our trustees and officers are limited, which could limit our shareholders' recourse in the event of actions not in our shareholders' best interests.
Removed
In connection with the closing of the merger with FelCor on the acquisition date, FelCor received an opinion of counsel to the effect that it qualified as a REIT for U.S. federal income tax purposes under the Code through the acquisition date. FelCor, however, did not request a ruling from the IRS that it qualified as a REIT.
Added
These alternatives could increase our costs or reduce our shareholders' equity.
Removed
If, notwithstanding this opinion, FelCor’s REIT status prior to the acquisition date were successfully challenged, we would face serious tax consequences that would substantially reduce our core funds from operations, and cash available for distribution, including cash available to pay dividends to our shareholders, because: • FelCor, would be subject to U.S. federal, state and local income tax on its net income at regular corporate rates for the years that it did not qualify as a REIT (and, for such years, would not be allowed a deduction for dividends paid to shareholders in computing its taxable income) and we would succeed to the liability for such taxes; 21 Table of Contents • the deemed sale of assets by FelCor on the acquisition date would be subject to U.S. federal, state and local income tax at regular corporate rates (and FelCor would not be allowed a deduction for dividends paid for the deemed liquidating distribution paid to its shareholders) and we would succeed to the liability for such taxes; and • we would succeed to any earnings and profits accumulated by FelCor, as applicable, for the tax periods that FelCor did not qualify as a REIT and we would have to pay a special dividend and/or employ applicable deficiency dividend procedures (including interest payments to the IRS) to eliminate such earnings and profits to maintain our REIT qualification.
Added
However, given recent scrutiny regarding the operational structure of lodging REITs like us and their third-party management agreements, there can be no assurance that the IRS will not challenge the status of a TRS for U.S. federal income tax purposes or that a court would not sustain such a challenge.
Removed
As a result of these factors, FelCor’s failure to qualify as a REIT prior to the acquisition date could impair our ability to expand our business and raise capital and could materially adversely affect the value of our stock.
Added
In the event that we recognize a significant gain from cash settlement of a forward sale agreement under our at-the-market equity offering program, the U.S. federal income tax treatment of the cash that we receive in such instance is unclear and could impact our ability to meet the REIT qualification requirements.
Removed
In addition, even if FelCor qualified as a REIT for the duration of its existence, if there is an adjustment to FelCor’s taxable income or dividends-paid deductions, we could be required to elect to use the deficiency dividend procedure to maintain FelCor’s REIT status.
Added
We enter into forward sale agreements from time to time in connection with our at-the-market equity offering program and, subject to certain conditions, we have the right to elect physical, cash or net share settlement under these agreements at any time and from time to time, in part or in full.
Removed
That deficiency dividend procedure could require us to make significant distributions to our shareholders and pay significant interest to the IRS.
Added
In the event that we elect to settle a forward sale agreement for cash and the settlement price is below the forward sale price, we would be entitled to receive a cash payment from the applicable forward purchaser(s).
Removed
We intend to continue to pay regular quarterly distributions to holders of our common shares.
Added
Under Section 1032 of the Code, generally, no gains and losses are recognized by a corporation in dealing in its own shares, including pursuant to a “securities futures contract,” as defined in the Code by reference to the Exchange Act.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

2 edited+0 added−0 removed13 unchanged
Biggest changeGibson also has experience assessing and addressing cybersecurity risks through her past professional experience. 23 Table of Contents Our Audit Committee has primary responsibility for the oversight of risks from cybersecurity threats. Management, including members of the IT Committee, reports at least annually to the Audit Committee regarding cybersecurity risks and mitigation strategies.
Biggest changeGibson also has experience assessing and addressing cybersecurity risks through her past professional experience. Our Audit Committee has primary responsibility for the oversight of risks from cybersecurity threats. Management, including members of the IT Committee, reports at least annually to the Audit Committee regarding cybersecurity risks and mitigation strategies.
We have established policies, including those related to privacy, information security and cybersecurity, and we employ a broad and diversified set of mitigation strategies and techniques to reduce cybersecurity risks, including continuous monitoring, early detection tools, proactive vulnerability management, and remediation.
We have established 23 Table of Contents policies, including those related to privacy, information security and cybersecurity, and we employ a broad and diversified set of mitigation strategies and techniques to reduce cybersecurity risks, including continuous monitoring, early detection tools, proactive vulnerability management, and remediation.

Item 2. Properties

Properties — owned and leased real estate

13 edited+3 added−2 removed23 unchanged
Biggest changeProperties Our Hotel Properties The following table provides a comprehensive list of our hotel properties as of December 31, 2023: State Hotel Property Name Rooms State Hotel Property Name Rooms Alabama Indiana Embassy Suites Birmingham 242 Courtyard Indianapolis @ The Capitol 124 Arizona Residence Inn Indianapolis Downtown On The Canal 134 Embassy Suites Phoenix - Biltmore 232 Residence Inn Merrillville 78 California Kentucky Courtyard San Francisco 166 Marriott Louisville Downtown 620 Embassy Suites Irvine Orange County 293 Residence Inn Louisville Downtown 140 Embassy Suites Los Angeles Downey 220 Louisiana Embassy Suites Los Angeles - International Airport South 349 Chateau LeMoyne - French Quarter, New Orleans (1) 171 Embassy Suites Milpitas Silicon Valley 267 Hilton Garden Inn New Orleans Convention Center 286 Embassy Suites San Francisco Airport - South San Francisco 316 Hotel Tonnelle New Orleans, a Tribute Portfolio Hotel 132 Embassy Suites San Francisco Airport - Waterfront 340 Wyndham New Orleans - French Quarter 374 Hilton Garden Inn Los Angeles Hollywood 160 Maryland Hilton Garden Inn San Francisco Oakland Bay Bridge 303 Residence Inn Bethesda Downtown 188 Hyatt House Cypress Anaheim 142 Residence Inn National Harbor Washington DC 162 Hyatt House Emeryville San Francisco Bay Area 234 Massachusetts Hyatt House San Diego Sorrento Mesa 193 AC Hotel Boston Downtown 205 Hyatt House San Jose Silicon Valley 180 Embassy Suites Boston Waltham 275 Hyatt House San Ramon 142 Wyndham Boston Beacon Hill 304 Hyatt House Santa Clara 150 Minnesota Hyatt Place Fremont Silicon Valley 151 Embassy Suites Minneapolis - Airport 310 The Pierside Santa Monica 132 New York Residence Inn Palo Alto Los Altos 156 Courtyard New York Manhattan Upper East Side 226 San Francisco Marriott Union Square 401 Hampton Inn Garden City 143 Wyndham San Diego Bayside 600 The Knickerbocker New York (2) 330 Zachari Dunes on Mandalay Beach, Curio Collection by Hilton 250 North Carolina Colorado Hyatt House Charlotte Center City 163 Fairfield Inn & Suites Denver Cherry Creek 134 Oregon Marriott Denver South @ Park Meadows 279 Courtyard Portland City Center 256 Moxy Denver Cherry Creek 170 SpringHill Suites Portland Hillsboro 106 Renaissance Boulder Flatiron Hotel 232 Pennsylvania District of Columbia Hilton Garden Inn Pittsburgh University Place 202 Fairfield Inn & Suites Washington DC Downtown 198 Renaissance Pittsburgh Hotel 300 Homewood Suites Washington DC Downtown 175 Wyndham Philadelphia Historic District 364 Hyatt Place Washington DC Downtown K Street 164 Wyndham Pittsburgh University Center 251 Florida South Carolina DoubleTree Grand Key Resort 216 Courtyard Charleston Historic District 176 24 Table of Contents State Hotel Property Name Rooms State Hotel Property Name Rooms DoubleTree Suites by Hilton Orlando - Lake Buena Vista 236 Mills House Charleston, Curio Collection by Hilton 218 Embassy Suites Deerfield Beach - Resort & Spa 244 Embassy Suites Fort Lauderdale 17th Street 361 Tennessee Embassy Suites Fort Myers Estero 150 The Bankers Alley Hotel, a Tapestry Collection by Hilton 124 Embassy Suites Miami - International Airport 318 Texas Embassy Suites Orlando - International Drive South/Convention Center 244 Courtyard Austin Downtown Convention Center 270 Embassy Suites Tampa Downtown Convention Center 360 Courtyard Houston By The Galleria 190 Embassy Suites West Palm Beach Central 194 Courtyard Houston Downtown Convention Center 191 Fairfield Inn & Suites Key West 106 DoubleTree by Hilton Houston Medical Center Hotel & Suites 287 Hilton Cabana Miami Beach 231 DoubleTree Suites by Hilton Austin 188 Renaissance Fort Lauderdale West Hotel 250 Embassy Suites Dallas - Love Field 248 Georgia Hyatt Centric The Woodlands 72 Courtyard Atlanta Buckhead 181 Residence Inn Austin Downtown Convention Center 179 Embassy Suites Atlanta - Buckhead 326 Residence Inn Houston By The Galleria 146 Hampton Inn and Suites Atlanta Midtown 186 Residence Inn Houston Downtown Convention Center 171 Hyatt Centric Midtown Atlanta 194 SpringHill Suites Houston Downtown Convention Center 167 Residence Inn Atlanta Midtown Historic 90 Washington Hawaii Homewood Suites Seattle Lynnwood 170 Courtyard Waikiki Beach 404 Wisconsin Illinois Hyatt Place Madison Downtown 151 Courtyard Chicago Downtown Magnificent Mile 306 Courtyard Midway Airport 174 Fairfield Inn & Suites Chicago Midway Airport 114 Hampton Inn Chicago Midway Airport 170 Hilton Garden Inn Chicago Midway Airport 174 Holiday Inn Express & Suites Midway Airport 104 Marriott Chicago Midway 200 Sleep Inn Midway Airport 121 (1) We own an indirect 50% ownership interest in this hotel property and we account for the ownership interest using the equity method of accounting.
Biggest changeProperties Our Hotel Properties The following table provides a comprehensive list of our hotel properties as of December 31, 2024: State Hotel Property Name Rooms State Hotel Property Name Rooms Alabama Indiana Embassy Suites Birmingham 242 Courtyard Indianapolis @ The Capitol 124 Arizona Residence Inn Indianapolis Downtown On The Canal 134 Embassy Suites Phoenix - Biltmore 232 Kentucky 24 Table of Contents State Hotel Property Name Rooms State Hotel Property Name Rooms California Marriott Louisville Downtown 620 Courtyard San Francisco 166 Residence Inn Louisville Downtown 140 Embassy Suites Irvine Orange County 293 Louisiana Embassy Suites Los Angeles Downey 220 Chateau LeMoyne - French Quarter, New Orleans (1) 171 Embassy Suites Los Angeles - International Airport South 349 Hilton Garden Inn New Orleans Convention Center 286 Embassy Suites Milpitas Silicon Valley 267 Hotel Tonnelle New Orleans, a Tribute Portfolio Hotel 132 Embassy Suites San Francisco Airport - South San Francisco 316 Wyndham New Orleans - French Quarter 374 Embassy Suites San Francisco Airport - Waterfront 340 Maryland Hilton Garden Inn Los Angeles Hollywood 160 Residence Inn Bethesda Downtown 188 Hilton Garden Inn San Francisco Oakland Bay Bridge 303 Residence Inn National Harbor Washington DC 162 Hyatt House Cypress Anaheim 142 Massachusetts Hyatt House Emeryville San Francisco Bay Area 234 AC Hotel Boston Downtown 205 Hyatt House San Diego Sorrento Mesa 193 Embassy Suites Boston Waltham 275 Hyatt House San Jose Silicon Valley 180 Wyndham Boston Beacon Hill 304 Hyatt House San Ramon 142 Minnesota Hyatt House Santa Clara 150 Embassy Suites Minneapolis - Airport 310 Hyatt Place Fremont Silicon Valley 151 New York The Pierside Santa Monica 132 Courtyard New York Manhattan Upper East Side 226 Residence Inn Palo Alto Los Altos 156 Hampton Inn Garden City 143 San Francisco Marriott Union Square 401 The Knickerbocker New York (2) 330 Wyndham San Diego Bayside 600 North Carolina Zachari Dunes on Mandalay Beach, Curio Collection by Hilton 250 Hyatt House Charlotte Center City 163 Colorado Oregon Hotel Teatro 110 Courtyard Portland City Center 256 Marriott Denver South @ Park Meadows 279 SpringHill Suites Portland Hillsboro 106 Moxy Denver Cherry Creek 170 Pennsylvania Renaissance Boulder Flatiron Hotel 232 Hilton Garden Inn Pittsburgh University Place 202 District of Columbia Renaissance Pittsburgh Hotel 300 Fairfield Inn & Suites Washington DC Downtown 198 Wyndham Philadelphia Historic District 364 Homewood Suites Washington DC Downtown 175 Courtyard Pittsburgh University Center 253 Hyatt Place Washington DC Downtown K Street 164 South Carolina Courtyard Charleston Historic District 176 Florida Mills House Charleston, Curio Collection by Hilton 218 DoubleTree Grand Key Resort 216 Tennessee DoubleTree Suites by Hilton Orlando - Lake Buena Vista 236 The Bankers Alley Hotel, a Tapestry Collection by Hilton 124 Embassy Suites Deerfield Beach - Resort & Spa 244 Texas Embassy Suites Fort Lauderdale 17th Street 361 Courtyard Austin Downtown Convention Center 270 Embassy Suites Fort Myers Estero 150 Courtyard Houston By The Galleria 190 Embassy Suites Miami - International Airport 318 Courtyard Houston Downtown Convention Center 191 Embassy Suites Orlando - International Drive South/Convention Center 244 DoubleTree by Hilton Houston Medical Center Hotel & Suites 297 Embassy Suites Tampa Downtown Convention Center 360 DoubleTree Suites by Hilton Austin 188 Embassy Suites West Palm Beach Central 194 Embassy Suites Dallas - Love Field 248 Fairfield Inn & Suites Key West 106 Hyatt Centric The Woodlands 72 Hilton Cabana Miami Beach 231 Residence Inn Austin Downtown Convention Center 179 Renaissance Fort Lauderdale West Hotel 250 Residence Inn Houston By The Galleria 146 Georgia Residence Inn Houston Downtown Convention Center 171 Courtyard Atlanta Buckhead 181 SpringHill Suites Houston Downtown Convention Center 167 Embassy Suites Atlanta - Buckhead 326 Washington Hampton Inn and Suites Atlanta Midtown 186 Homewood Suites Seattle Lynnwood 170 25 Table of Contents State Hotel Property Name Rooms State Hotel Property Name Rooms Hyatt Centric Midtown Atlanta 194 Wisconsin Residence Inn Atlanta Midtown Historic 90 Hyatt Place Madison Downtown 151 Hawaii Courtyard Waikiki Beach 404 Illinois Courtyard Chicago Downtown Magnificent Mile 306 Courtyard Midway Airport 174 Fairfield Inn & Suites Chicago Midway Airport 114 Hampton Inn Chicago Midway Airport 170 Hilton Garden Inn Chicago Midway Airport 174 Holiday Inn Express & Suites Midway Airport 104 Marriott Chicago Midway 200 Sleep Inn Midway Airport 121 (1) We own an indirect 50% ownership interest in this hotel property and we account for the ownership interest using the equity method of accounting.
In addition, two of our hotels are not operated with a hotel brand so they do not have franchise agreements. The franchisors provide a variety of benefits to the franchisees, including centralized reservation systems, national advertising, marketing programs and publicity designed to increase brand awareness, personnel training and operational quality at the hotels across the brand system.
In addition, three of our hotels are not operated with a hotel brand so they do not have franchise agreements. The franchisors provide a variety of benefits to the franchisees, including centralized reservation systems, national advertising, marketing programs and publicity designed to increase brand awareness, personnel training and operational quality at the hotels across the brand system.
Lease Terms Our TRS leases have initial terms of generally three years and a majority of the leases can be renewed by our TRS lessees for three successive three-year renewal terms unless the lessee is in default at the expiration of the then-current term.
Lease Terms Our TRS leases have initial terms of generally three years and a majority of the leases can be renewed by our TRS lessees for three or four successive three-year renewal terms unless the lessee is in default at the expiration of the then-current term.
The management agreements that include the benefits of a franchise agreement incur a base management fee between 1.75% and 7.0% of hotel revenues. 25 Table of Contents The management companies are also eligible to receive an incentive management fee upon the achievement of certain financial thresholds as set forth in each applicable management agreement.
The management agreements that include the benefits of a franchise agreement incur a base management fee between 1.0% and 7.0% of hotel revenues. The management companies are also eligible to receive an incentive management fee upon the achievement of certain financial thresholds as set forth in each applicable management agreement.
As of December 31, 2023, Aimbridge and Hilton were the management companies for 31 and 21 of our hotel properties, respectively. Our remaining 45 hotel properties were managed by 14 other management companies, including Hyatt and Marriott.
As of December 31, 2024, Aimbridge and Hilton were the management companies for 30 and 21 of our hotel properties, respectively. Our remaining 45 hotel properties were managed by 14 other management companies, including Hyatt and Marriott.
Franchise Agreements As of December 31, 2023, 59 of our hotels operated under franchise agreements with Marriott, Hilton, Hyatt or other hotel brands. This excludes 36 hotel properties that receive the benefits of a franchise agreement pursuant to management agreements with Hilton, Hyatt, Marriott, or other management companies.
Franchise Agreements As of December 31, 2024, 57 of our hotels operated under franchise agreements with Marriott, Hilton, Hyatt or other hotel brands. This excludes 36 hotel properties that receive the benefits of a franchise agreement pursuant to management agreements with Hilton, Hyatt, Marriott, or other management companies.
Amounts Payable under the Leases During the term of each TRS lease, our TRS lessees are obligated to pay us a fixed annual base rent plus a percentage rent and certain other additional charges that our TRS lessees agree to pay under the terms of the respective TRS lease.
Our TRS leases are also subject to early termination upon the occurrence of certain events of default and/or other contingencies described in the lease. 27 Table of Contents Amounts Payable under the Leases During the term of each TRS lease, our TRS lessees are obligated to pay us a fixed annual base rent plus a percentage rent and certain other additional charges that our TRS lessees agree to pay under the terms of the respective TRS lease.
The subsidiaries of the Operating Partnership, as the lessors, lease our hotels to our TRS lessees, which, in turn, are the parties to the existing management agreements with the third-party management companies at each of our hotels. The TRS leases contain the provisions that are described below.
The subsidiaries of the Operating Partnership, as the lessors, lease our hotels to our TRS lessees, which, in turn, are the parties to the existing management agreements with the independent managers at each of our hotels.
Many of our Aimbridge, White Lodging Services ("WLS"), and Hersha Hospitality Management ("HHM") management agreements state that we cannot sell the applicable hotel property to any unrelated third party or engage in certain change of control actions (1) if we are in default under the management agreement, or (2) with or to a person or entity that is known in the community as being of bad moral character or has been convicted of a felony or is in control of or controlled by persons convicted of a felony or would be in violation of any franchise agreement requirements applicable to us.
Certain management agreements also stipulate that in the event that a management company elects to terminate a management agreement due to an event of default by us, the management company may elect to recover a termination fee, as liquidated damages, equal to 2.5 times the actual base management fee and incentive management fee earned by the management company under that management agreement in the fiscal year immediately preceding the fiscal year in which such termination occurred. 26 Table of Contents Many of our Aimbridge, White Lodging Services ("WLS"), and Hersha Hospitality Management ("HHM") management agreements state that we cannot sell the applicable hotel property to any unrelated third party or engage in certain change of control actions (1) if we are in default under the management agreement, or (2) with or to a person or entity that is known in the community as being of bad moral character or has been convicted of a felony or is in control of or controlled by persons convicted of a felony or would be in violation of any franchise agreement requirements applicable to us.
Termination of Leases on Disposition of the Hotels or Change of Control In the event that we sell a hotel to a non-affiliate or a change of control occurs, we generally have the right to terminate the lease by paying the applicable TRS lessee a termination fee to be governed by the terms and conditions of the lease. 27 Table of Contents Ground Leases As of December 31, 2023, 13 of our consolidated hotel properties and one unconsolidated hotel property were subject to ground lease agreements that cover the land under the respective hotel properties.
Termination of Leases on Disposition of the Hotels or Change of Control In the event that we sell a hotel to a non-affiliate or a change of control occurs, we generally have the right to terminate the lease by paying the applicable TRS lessee a termination fee to be governed by the terms and conditions of the lease.
In addition, many of our existing franchise agreements provide the franchisor with a right of first offer in the event of certain sales or transfers of a hotel and provide the franchisor the right to approve a change in the management company who manages the hotel. 26 Table of Contents TRS Leases In order for us to qualify as a REIT, neither our company nor any of our subsidiaries may directly or indirectly operate any of our hotels.
In addition, many of our existing franchise agreements provide the franchisor with a right of first offer in the event of certain sales or transfers of a hotel and provide the franchisor the right to approve a change in the management company who manages the hotel.
The incentive management fee is generally calculated as a percentage of hotel net operating income after we have received a priority return on our investment in the hotel. Each of the management agreements provides us with a right to terminate such management agreement if the management company fails to reach certain performance targets (as provided in the applicable management agreement).
The incentive management fee is generally calculated as a percentage of hotel net operating income after we have received a priority return on our investment in the hotel. Each management agreement provides that the applicable independent manager controls the operations of the applicable hotel property.
Additional information on the ground leases can be found in Note 10 to our accompanying consolidated financial statements.
Ground Leases As of December 31, 2024, 12 of our consolidated hotel properties and one unconsolidated hotel property were subject to ground lease agreements that cover the land under the respective hotel properties. Additional information on the ground leases can be found in Note 10 to our accompanying consolidated financial statements.
Removed
Certain management agreements also stipulate that in the event that a management company elects to terminate a management agreement due to an event of default by us, the management company may elect to recover a termination fee, as liquidated damages, equal to 2.5 times the actual base management fee and incentive management fee earned by the management company under that management agreement in the fiscal year immediately preceding the fiscal year in which such termination occurred.
Added
Our ability to participate in decisions regarding the hotel property is limited under the management agreement to typical owner rights with respect to hotel operations. Each of the management agreements provides us with a right to terminate such management agreement if the management company fails to reach certain performance targets (as provided in the applicable management agreement).
Removed
Our TRS leases are also subject to early termination upon the occurrence of certain events of default and/or other contingencies described in the lease.
Added
TRS Leases In order for us to qualify as a REIT, neither our company nor any of our subsidiaries may directly or indirectly operate any of our hotels.
Added
The independent managers control the daily operations of our hotel properties, and our ability to participate in operating decisions regarding our hotel properties is limited to typical owner rights with respect to hotel operations. The TRS leases contain the provisions that are described below.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeUnregistered Sales of Equity Securities The Company did not sell any securities during the fiscal year ended December 31, 2023 that were not registered under the Securities Act. 30 Issuer Purchases of Equity Securities The following table summarizes all of the share repurchases during the quarter ended December 31, 2023: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs (1) October 1, 2023 through October 31, 2023 328,381 $ 9.75 328,381 23,395,519 November 1, 2023 through November 30, 2023 194,430 $ 10.47 194,430 20,381,886 December 1, 2023 through December 31, 2023 352,099 $ 11.23 352,099 18,253,341 Total 874,910 874,910 (1) A share repurchase program to acquire up to an aggregate of $250.0 million of common and preferred shares was approved in April 2023 and is set to expire on May 8, 2024 (the "2023 Share Repurchase Program").
Biggest changeIssuer Purchases of Equity Securities The following table summarizes all of the share repurchases during the quarter ended December 31, 2024: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs (1) October 1, 2024 through October 31, 2024 327,697 $ 9.16 327,697 25,904,232 November 1, 2024 through November 30, 2024 — $ — — 22,453,717 December 1, 2024 through December 31, 2024 — $ — — 22,453,717 Total 327,697 327,697 (1) A share repurchase program to acquire up to an aggregate of $250.0 million of common and preferred shares was approved in April 2024 and is set to expire on May 8, 2025 (the "2024 Share Repurchase Program").
The maximum number of shares that may yet be repurchased under the 2023 Share Repurchase Program is calculated by dividing the total dollar amount available to repurchase shares by the closing price of our common shares on the last business day of the respective month. Item 6. Reserved
The maximum number of shares that may yet be repurchased under the 2024 Share Repurchase Program is calculated by dividing the total dollar amount available to repurchase shares by the closing price of our common shares on the last business day of the respective month. Item 6. Reserved
Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our common shares are traded on the New York Stock Exchange ("NYSE") under the symbol "RLJ." During the year ended December 31, 2023, we paid a cash dividend of $0.08 per common share in each of the first and second quarters of 2023 and a cash dividend of $0.10 per common share in each of the third and fourth quarters of 2023.
Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our common shares are traded on the New York Stock Exchange ("NYSE") under the symbol "RLJ." During the year ended December 31, 2024, we paid a cash dividend of $0.10 per common share in each of the first and second quarters of 2024 and a cash dividend of $0.15 per common share in each of the third and fourth quarters of 2024.
The graph and the table compare the total shareholder return of our common shares against the cumulative total returns of the Standard & Poor's 500 Index ("S&P 500 Index") and the Dow Jones U.S. Select Real Estate Hotels Index ("Dow Jones US REIT Hotels Index") between December 31, 2018 and December 31, 2023.
The graph and the table compare the total shareholder return of our common shares against the cumulative total returns of the Standard & Poor's 500 Index ("S&P 500 Index") and the Dow Jones U.S. Select Real Estate Hotels Index ("Dow Jones US REIT Hotels Index") between December 31, 2019 and December 31, 2024.
Distribution Information We intend, over time, to make quarterly distributions to our common shareholders. In order to qualify and maintain our qualification for taxation as a REIT, we intend to make annual distributions to our shareholders of at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gain.
In order to qualify and maintain our qualification for taxation as a REIT, we intend to make annual distributions to our shareholders of at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gain.
In order to comply with certain requirements related to our qualification as a REIT, our declaration of trust provides that, subject to certain exceptions, no person or entity (other than a person or entity who has been granted an exception) may directly or indirectly, beneficially or constructively, own more than 9.8% of the aggregate of our outstanding common shares, by value or by number of shares, whichever is more restrictive, or 9.8% of the aggregate of the outstanding preferred shares of any class or series, by value or by number of shares, whichever is more restrictive.
In order to comply with certain requirements related to our qualification as a REIT, our declaration of trust provides that, subject to certain exceptions, no person or entity (other than a person or entity who has been granted an exception) may directly or indirectly, beneficially or constructively, own more than 9.8% of the aggregate of our outstanding common shares, by value or by number of shares, whichever is more restrictive, or 9.8% of the aggregate of the outstanding preferred shares of any class or series, by value or by number of shares, whichever is more restrictive. 30 Distribution Information We intend, over time, to make quarterly distributions to our common shareholders.
During the year ended December 31, 2022, we paid a cash dividend of $0.01 per common share in each of the first and second quarters of 2022 and a cash dividend of $0.05 per common share in each of the third and fourth quarters of 2022.
During the year ended December 31, 2023, we paid a cash dividend of $0.08 per common share in each of the first and second quarters of 2023 and a cash dividend of $0.10 per common share in each of the third and fourth quarters of 2023.
The closing price of our common shares as reported on the NYSE was $11.72 on both December 31, 2023 and February 20, 2024. Share Return Performance The graph and the table set forth below assume $100.00 was invested on December 31, 2018 in RLJ Lodging Trust's common shares.
On December 31, 2024 and February 19, 2025, the closing price of our common shares as reported on the NYSE was $10.21 and $9.60, respectively. 29 Share Return Performance The graph and the table set forth below assume $100.00 was invested on December 31, 2019 in RLJ Lodging Trust's common shares.
However, because many of our common shares are held by brokers and other institutions on behalf of shareholders, we believe there are substantially more beneficial holders of our common shares than holders of record. At February 20, 2024, there were 12 holders (other than our company) of our OP units.
Shareholder Information At February 19, 2025, we had 170 holders of record of our common shares. However, because many of our common shares are held by brokers and other institutions on behalf of shareholders, we believe there are substantially more beneficial holders of our common shares than holders of record.
Name Initial Investment at December 31, 2018 Value of Initial Investment at December 31, 2019 Value of Initial Investment at December 31, 2020 Value of Initial Investment at December 31, 2021 Value of Initial Investment at December 31, 2022 Value of Initial Investment at December 31, 2023 RLJ Lodging Trust $ 100.00 $ 116.41 $ 93.34 $ 92.14 $ 70.85 $ 81.13 S&P 500 Index $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 Dow Jones US REIT Hotels Index $ 100.00 $ 115.93 $ 85.89 $ 98.83 $ 83.64 $ 104.09 This performance graph shall not be deemed to be "filed" for the purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing by us under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. 29 Shareholder Information At February 20, 2024, we had 170 holders of record of our common shares.
Name Initial Investment at December 31, 2019 Value of Initial Investment at December 31, 2020 Value of Initial Investment at December 31, 2021 Value of Initial Investment at December 31, 2022 Value of Initial Investment at December 31, 2023 Value of Initial Investment at December 31, 2024 RLJ Lodging Trust $ 100.00 $ 80.19 $ 79.15 $ 60.86 $ 69.69 $ 63.80 S&P 500 Index $ 100.00 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02 Dow Jones US REIT Hotels Index $ 100.00 $ 74.09 $ 85.25 $ 72.15 $ 89.79 $ 85.80 This performance graph shall not be deemed to be "filed" for the purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing by us under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Our OP units are redeemable for cash or, at our election, for our common shares.
At February 19, 2025, there were 12 holders (other than our company) of our OP units. Our OP units are redeemable for cash or, at our election, for our common shares.
Added
Unregistered Sales of Equity Securities The Company did not sell any securities during the fiscal year ended December 31, 2024 that were not registered under the Securities Act.

Item 7. Management's Discussion & Analysis

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

53 edited+9 added−12 removed54 unchanged
Biggest changeFor similar operating and financial data and discussion of our results for the year ended December 31, 2022 compared to our results for the year ended December 31, 2021, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our annual report on Form 10-K for the year ended December 31, 2022 , which was filed with the SEC on February 28, 2023 and is incorporated herein by reference. 34 Comparison of the year ended December 31, 2023 to the year ended December 31, 2022 For the year ended December 31, 2023 2022 $ Change (amounts in thousands) Revenues Operating revenues Room revenue $ 1,095,028 $ 1,002,454 $ 92,574 Food and beverage revenue 141,625 117,027 24,598 Other revenue 88,924 74,181 14,743 Total revenues 1,325,577 1,193,662 131,915 Expenses Operating expenses Room expense 277,058 253,441 23,617 Food and beverage expense 109,707 87,402 22,305 Management and franchise fee expense 107,417 95,565 11,852 Other operating expenses 340,485 308,000 32,485 Total property operating expenses 834,667 744,408 90,259 Depreciation and amortization 179,103 184,875 (5,772) Property tax, insurance and other 100,229 86,996 13,233 General and administrative 58,998 56,330 2,668 Transaction costs 223 (345) 568 Total operating expenses 1,173,220 1,072,264 100,956 Other income, net 4,364 9,496 (5,132) Interest income 19,743 4,559 15,184 Interest expense (98,807) (93,155) (5,652) (Loss) gain on sale of hotel properties, net (34) 1,017 (1,051) Loss on extinguishment of indebtedness, net (169) (39) (130) Income before equity in income from unconsolidated joint ventures 77,454 43,276 34,178 Equity in income from unconsolidated joint ventures 419 457 (38) Income before income tax expense 77,873 43,733 34,140 Income tax expense (1,256) (1,518) 262 Net income 76,617 42,215 34,402 Net loss (income) attributable to noncontrolling interests: Noncontrolling interest in consolidated joint ventures 35 (210) 245 Noncontrolling interest in the Operating Partnership (247) (80) (167) Net income attributable to RLJ 76,405 41,925 34,480 Preferred dividends (25,115) (25,115) — Net income attributable to common shareholders $ 51,290 $ 16,810 $ 34,480 35 Revenues Total revenues increased $131.9 million to $1.3 billion for the year ended December 31, 2023, from $1.2 billion for the year ended December 31, 2022.
Biggest changeComparison of the year ended December 31, 2024 to the year ended December 31, 2023 For the year ended December 31, 2024 2023 $ Change (amounts in thousands) Revenues Operating revenues Room revenue $ 1,121,586 $ 1,095,028 $ 26,558 Food and beverage revenue 153,108 141,625 11,483 Other revenue 94,746 88,924 5,822 Total revenues 1,369,440 1,325,577 43,863 Expenses Operating expenses Room expense 288,567 277,058 11,509 Food and beverage expense 117,766 109,707 8,059 Management and franchise fee expense 107,978 107,417 561 Other operating expenses 363,631 340,485 23,146 Total property operating expenses 877,942 834,667 43,275 Depreciation and amortization 179,431 179,103 328 Property tax, insurance and other 107,043 100,229 6,814 General and administrative 54,804 58,998 (4,194) Transaction costs 320 223 97 Total operating expenses 1,219,540 1,173,220 46,320 Other income, net 5,342 4,364 978 Interest income 17,314 19,743 (2,429) Interest expense (111,358) (98,807) (12,551) Gain (loss) on sale of hotel properties, net 8,262 (34) 8,296 Loss on extinguishment of indebtedness, net (129) (169) 40 Income before equity in income from unconsolidated joint ventures 69,331 77,454 (8,123) Equity in income from unconsolidated joint ventures 459 419 40 Income before income tax expense 69,790 77,873 (8,083) Income tax expense (1,599) (1,256) (343) Net income 68,191 76,617 (8,426) Net loss (income) attributable to noncontrolling interests: Noncontrolling interest in consolidated joint ventures 45 35 10 Noncontrolling interest in the Operating Partnership (215) (247) 32 Net income attributable to RLJ 68,021 76,405 (8,384) Preferred dividends (25,115) (25,115) — Net income attributable to common shareholders $ 42,906 $ 51,290 $ (8,384) 35 Revenues Total revenues increased $43.9 million to $1.4 billion for the year ended December 31, 2024, from $1.3 billion for the year ended December 31, 2023.
The determination of fair value is subjective and is based in part on assumptions and estimates that could differ materially from actual results in future periods.
The determination of fair value is subjective and is based in part on assumptions and estimates that could differ materially from actual results in future periods.
Room revenue accounts for the majority of our total revenues. 32 ◦ Food and beverage revenue — Occupancy, the nature of the hotel property and the type of customer staying at the hotel are the major drivers of food and beverage revenue (i.e., group business typically generates more food and beverage revenue through catering functions as compared to transient business, which may or may not utilize the hotel's food and beverage outlets). ◦ Other revenue — Occupancy and the nature of the hotel property are the main drivers of other ancillary revenue, such as parking fees, resort fees, gift shop sales and other guest service fees.
Room revenue accounts for the majority of our total revenues. ◦ Food and beverage revenue — Occupancy, the nature of the hotel property and the type of customer staying at the hotel are the major drivers of food and beverage revenue (i.e., group business typically generates more food and beverage revenue through catering functions as compared to transient business, which may or may not utilize the hotel's food and beverage outlets). ◦ Other revenue — Occupancy and the nature of the hotel property are the main drivers of other ancillary revenue, such as parking fees, resort fees, gift shop sales and other guest service fees.
We determine the fair value by using 42 market data and independent appraisals available to us and making numerous estimates and assumptions, such as estimates of future income growth, replacement cost per unit, value per acre or buildable square foot, capitalization rates, discount rates, borrowing rates, market rental rates, capital expenditures and cash flow projections at the respective hotel properties.
We determine the fair value by using market data and independent appraisals available to us and making numerous estimates and assumptions, such as estimates of future income growth, replacement cost per unit, value per acre or buildable square foot, capitalization rates, discount rates, borrowing rates, market rental rates, capital expenditures and cash flow projections at the respective hotel properties.
These key indicators include financial information that is prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") as well as other financial measures that are non-GAAP measures. In addition, we 31 use other information that may not be financial in nature, including industry standard statistical information and comparative data.
These key indicators include financial information that is prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") as well as other financial measures that are non-GAAP measures. In addition, we use other information that may not be financial in nature, including industry standard statistical information and comparative data.
There were no hotels sold during the year ended December 31, 2023. 37 Non-GAAP Financial Measures We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) EBITDA re and (5) Adjusted EBITDA.
There were no hotels sold during the year ended December 31, 2023. Non-GAAP Financial Measures We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) EBITDA re and (5) Adjusted EBITDA.
An incentive management fee is typically paid when the hotel's operating income exceeds certain thresholds, and it is generally calculated as a percentage of hotel operating income after we have received a priority return on our investment in the hotel.
An incentive management fee is typically paid when the hotel's operating income exceeds certain 33 thresholds, and it is generally calculated as a percentage of hotel operating income after we have received a priority return on our investment in the hotel.
Cash flows from Financing Activities The net cash flow used in financing activities totaled $161.5 million for the year ended December 31, 2023 primarily due to $76.0 million paid to repurchase common shares under our share repurchase programs, $74.5 million in distributions to shareholders and unitholders, $4.4 million paid to repurchase common shares to satisfy employee tax withholding requirements, and $7.9 million in deferred financing cost payments.
The net cash flow used in financing activities totaled $161.5 million for the year ended December 31, 2023 primarily due to $76.0 million paid to repurchase common shares under our share repurchase programs, $74.5 million in distributions to shareholders and unitholders, $4.4 million paid to repurchase common shares to satisfy employee tax withholding requirements, and $7.9 million in deferred financing cost payments.
Inflation could also have an adverse effect on consumer spending, which could impact Occupancy levels at our hotel properties and, in turn, our own results of operations. 2023 Significant Activities Our significant activities reflect our commitment to creating long-term shareholder value through enhancing our hotel portfolio's quality, recycling capital and maintaining a prudent capital structure.
Inflation could also have an adverse effect on consumer spending, which could impact Occupancy levels at our hotel properties and, in turn, our own results of operations. 2024 Significant Activities Our significant activities reflect our commitment to creating long-term shareholder value through enhancing our hotel portfolio's quality, recycling capital and maintaining a prudent capital structure.
The cash flows provided by operating activities generally consist of the net cash generated by our hotel operations, cash paid for corporate expenses and other working capital changes. Refer to the "Results of Operations" section for further discussion of our operating results for the years ended December 31, 2023 and 2022.
The cash flows provided by operating activities generally consist of the net cash generated by our hotel operations, cash paid for corporate expenses and other working capital changes. Refer to the "Results of Operations" section for further discussion of our operating results for the years ended December 31, 2024 and 2023.
Principal Factors Affecting Our Results of Operations The principal factors affecting our operating results include the overall demand for lodging compared to the supply of available hotel rooms and other lodging options, and the ability of our third-party management companies to increase or maintain revenues while controlling expenses. • Demand — The demand for lodging, especially business travel, generally fluctuates with the overall economy.
Principal Factors Affecting Our Results of Operations The principal factors affecting our operating results include the overall demand for lodging compared to the supply of available hotel rooms and other lodging options, and the ability of our independent managers to increase or maintain revenues while controlling expenses. • Demand — The demand for lodging, especially business travel, generally fluctuates with the overall economy.
We also use non-GAAP measures such as FFO, Adjusted FFO, EBITDA, EBITDA re and Adjusted EBITDA to evaluate the operating performance of our business. For a more in depth discussion of the non-GAAP measures, please refer to the "Non-GAAP Financial Measures" section.
We also use non-GAAP measures such as FFO, Adjusted FFO, EBITDA, EBITDA re and Adjusted EBITDA to evaluate the operating performance of our business. For a more in depth discussion of these non-GAAP measures, please refer to the "Non-GAAP Financial Measures" section. In addition, we use Hotel EBITDA, a non-GAAP financial measure, to assess operating performance.
Room revenue comprised approximately 82.6% of our total revenues for the year ended December 31, 2023, and it is dictated by demand (as measured by Occupancy), pricing (as measured by ADR) and our available supply of hotel rooms.
Room revenue comprised approximately 81.9% of our total revenues for the year ended December 31, 2024, and it is dictated by demand (as measured by Occupancy), pricing (as measured by ADR) and our available supply of hotel rooms.
Results of Operations At both December 31, 2023 and 2022, we owned 97 hotel properties. Based on when a hotel property is acquired, sold or closed for renovation, the operating results for certain hotel properties are not comparable for the years ended December 31, 2023 and 2022.
Results of Operations At December 31, 2024 and 2023, we owned 96 and 97 hotel properties, respectively. Based on when a hotel property is acquired or sold, the operating results for certain hotel properties are not comparable for the years ended December 31, 2024 and 2023.
Sources and Uses of Cash Cash flows from Operating Activities The net cash flow provided by operating activities totaled $315.1 million and $256.5 million for the years ended December 31, 2023 and 2022, respectively.
Sources and Uses of Cash Cash flows from Operating Activities The net cash flow provided by operating activities totaled $285.4 million and $315.1 million for the years ended December 31, 2024 and 2023, respectively.
As of December 31, 2023, we had approximately $2.2 billion in debt outstanding with a weighted average interest rate of 4.12%, of which $381.0 million is scheduled to become due in the succeeding 12 months.
As of December 31, 2024, we had approximately $2.2 billion in debt outstanding with a weighted average interest rate of 4.58%, of which $181.0 million is scheduled to become due in the succeeding 12 months, excluding extension options.
Cash flows from Investing Activities The net cash flow used in investing activities totaled $134.7 million for the year ended December 31, 2023 primarily due to $132.3 million in capital improvements and additions to our hotel properties and other assets and a purchase deposit of $2.4 million.
The net cash flow used in investing activities was partially offset by $19.5 million in proceeds from the sales of two hotel properties. 40 The net cash flow used in investing activities totaled $134.7 million for the year ended December 31, 2023 primarily due to $132.3 million in capital improvements and additions to our hotel properties and other assets and a purchase deposit of $2.4 million.
Other Revenue Other revenue, which includes revenue derived from ancillary sources such as parking fees, facility fees, gift shop sales and other guest service fees, increased $14.7 million to $88.9 million for the year ended December 31, 2023, from $74.2 million for the year ended December 31, 2022.
Other Revenue Other revenue, which includes revenue derived from ancillary sources such as parking fees, resort fees, gift shop sales and other guest service fees, increased $5.8 million to $94.7 million for the year ended December 31, 2024, from $88.9 million for the year ended December 31, 2023.
EBITDA and EBITDA re EBITDA is defined as net income or loss excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sales of assets; and (3) depreciation and amortization expense.
(4) Represents expenses and income outside of the normal course of operations. 38 EBITDA and EBITDA re EBITDA is defined as net income or loss excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sales of assets; and (3) depreciation and amortization expense.
As of December 31, 2023, our total future minimum lease payments were $592.7 million, of which $10.4 million is scheduled to become due in the succeeding 12 months.
As of December 31, 2024, our total future minimum lease payments were $580.1 million, of which $9.7 million is scheduled to become due in the succeeding 12 months.
As of December 31, 2023, approximately $32.0 million was held in FF&E reserve accounts for future capital expenditures.
As of December 31, 2024, approximately $23.5 million was held in FF&E reserve accounts for future capital expenditures.
The increase was due to an $86.2 million increase in property operating expenses attributable to the comparable properties and a $4.1 million increase in property operating expenses attributable to the non-comparable properties.
The increase was due to a $41.0 million increase in property operating expenses attributable to the comparable properties and a $2.3 million increase in property operating expenses attributable to the non-comparable properties.
Funds From Operations We calculate FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which defines FFO as net income or loss, excluding gains or losses from sales of real estate, impairment, the cumulative effect of changes in accounting principles, plus depreciation and amortization, and adjustments for unconsolidated partnerships and joint ventures.
FFO, Adjusted FFO, EBITDA, EBITDA re, and Adjusted EBITDA, as calculated by us, may not be comparable to FFO, Adjusted FFO, EBITDA, EBITDA re and Adjusted EBITDA as reported by other companies that do not define such terms exactly as we define such terms. 37 Funds From Operations We calculate FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which defines FFO as net income or loss, excluding gains or losses from sales of real estate, impairment, the cumulative effect of changes in accounting principles, plus depreciation and amortization, and adjustments for unconsolidated partnerships and joint ventures.
The components of our interest expense for the years ended December 31, 2023 and 2022 were as follows (in thousands): For the year ended December 31, 2023 2022 $ Change Senior Notes $ 38,764 $ 38,820 $ (56) Revolver and Term Loans 31,000 34,126 (3,126) Mortgage loans 21,014 13,563 7,451 Amortization of deferred financing costs 6,100 5,967 133 Non-cash interest expense related to interest rate hedges 1,929 679 1,250 Total interest expense $ 98,807 $ 93,155 $ 5,652 (Loss) Gain on Sale of Hotel Properties, net During the year ended December 31, 2022, we sold two hotel properties for a combined sales price of approximately $49.9 million and recorded a net gain on sale of approximately $1.0 million.
The components of our interest expense for the years ended December 31, 2024 and 2023 were as follows (in thousands): For the year ended December 31, 2024 2023 $ Change Senior Notes $ 38,764 $ 38,764 $ — Revolver and Term Loans 50,928 31,000 19,928 Mortgage loans 13,451 21,014 (7,563) Amortization of deferred financing costs 6,623 6,100 523 Non-cash interest expense related to interest rate hedges 1,592 1,929 (337) Total interest expense $ 111,358 $ 98,807 $ 12,551 Gain (Loss) on Sale of Hotel Properties, net During the year ended December 31, 2024, we sold two hotel properties for a combined sales price of approximately $20.8 million and recorded a net gain on the sales of approximately $8.3 million.
Contractually Obligated Expenditures We are party to various contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Our material short and long-term cash commitments primarily consist of debt obligations and ground lease payments related to certain of our hotel properties.
These obligations impact our short-term and long-term liquidity and capital resource needs. Our material short and long-term cash commitments primarily consist of debt obligations and ground lease payments related to certain of our hotel properties.
The increase was a result of a $92.6 million increase in room revenue, a $24.6 million increase in food and beverage revenue, and a $14.7 million increase in other revenue. Room Revenue Room revenue increased $92.6 million to $1.1 billion for the year ended December 31, 2023, from $1.0 billion for the year ended December 31, 2022.
The increase was a result of a $26.6 million increase in room revenue, an $11.5 million increase in food and beverage revenue, and a $5.8 million increase in other revenue. Room Revenue Room revenue increased $26.6 million to $1.1 billion for the year ended December 31, 2024, from $1.1 billion for the year ended December 31, 2023.
Changes in ADR typically have a greater impact on operating margins and profitability as they only have a limited effect on variable operating costs. ADR, Occupancy and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel property level and across our entire business.
Changes in ADR typically have a greater impact on operating margins and profitability as they only have a limited effect on variable operating costs. 32 ADR, Occupancy and RevPAR are commonly used measures within the lodging industry to evaluate operating performance.
We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only room revenue.
RevPAR is an important statistic for monitoring operating performance at the individual hotel property level and across our entire business. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only room revenue.
(2) Includes our ownership interest in the depreciation and amortization expense of the unconsolidated joint venture. (3) Represents expenses related to the brand conversions of certain hotel properties prior to opening. (4) Reclassification of interest rate swap gains from accumulated other comprehensive income to earnings for discontinued interest rate hedges.
(2) Includes our ownership interest in the depreciation and amortization expense of the unconsolidated joint venture. (3) Represents expenses related to the brand conversions of certain hotel properties prior to opening.
For details regarding our indebtedness and lease obligations, refer to Note 7, Debt, and Note 10, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 40 Other Essential Cash Requirements Our other short-term cash requirements consist primarily of the funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including: • recurring maintenance and capital expenditures necessary to maintain our hotel properties in accordance with brand standards and capital expenditures required for hotel brand conversions; • distributions, including those necessary to qualify for taxation as a REIT; and • corporate and other general and administrative expenses.
Other Essential Cash Requirements Our other short-term cash requirements consist primarily of the funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including: • recurring maintenance and capital expenditures necessary to maintain our hotel properties in accordance with brand standards and capital expenditures required for hotel brand conversions; • distributions, including those necessary to qualify for taxation as a REIT; and • corporate and other general and administrative expenses.
We believe premium-branded, focused-service and compact full-service hotels with these characteristics generate high levels of RevPAR, strong operating margins and attractive returns. Focused-service and compact full-service hotels typically generate most of their revenue from room rentals, have limited food and beverage outlets and meeting space and require fewer employees than traditional full-service hotels.
Focused-service and compact full-service hotels typically generate most of their revenue from room rentals, have limited food and beverage outlets and meeting space and require fewer employees than traditional full-service hotels.
Interest expense increased due to higher interest rates on our unhedged variable rate debt combined with an increase in the amount of our debt that was unhedged, partially offset by the impact of lower average debt balances.
The increase was attributable to higher base interest rates on our unhedged variable rate debt combined with an increase in the amount of our debt that was unhedged.
We evaluate our estimates, assumptions and judgments on an ongoing basis, based on information that is available to us, our business and industry experience, and various other matters that we believe are reasonable and appropriate for consideration under the circumstances.
We evaluate our estimates, assumptions and judgments on an ongoing basis, based on information that is available to us, our business and industry experience, and various other matters that we believe are reasonable and appropriate for consideration under the circumstances. 41 Impairment We assess the carrying value of our investments in hotel properties whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.
The cost of routine improvements and alterations are paid out of FF&E reserves, which are funded by a portion of each hotel property’s gross revenues. Routine capital expenditures may be administered by the property management companies. However, we have approval rights over the capital expenditures as part of the annual budget process for each of our hotel properties.
Routine capital expenditures may be administered by the property management companies. However, we have approval rights over the capital expenditures as part of the annual budget process for each of our hotel properties.
We believe that Adjusted FFO provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income and FFO, is beneficial to an investor’s understanding of our operating performance. 38 The following table is a reconciliation of our GAAP net income to FFO attributable to common shareholders and unitholders and Adjusted FFO attributable to common shareholders and unitholders for the years ended December 31, 2023 and 2022 (in thousands): For the year ended December 31, 2023 2022 Net income $ 76,617 $ 42,215 Preferred dividends (25,115) (25,115) Depreciation and amortization 179,103 184,875 Loss (gain) on sale of hotel properties, net 34 (1,017) Noncontrolling interest in consolidated joint ventures 35 (210) Adjustments related to consolidated joint venture (1) (175) (187) Adjustments related to unconsolidated joint venture (2) 941 1,070 FFO 231,440 201,631 Transaction costs 223 (345) Pre-opening costs (3) 1,351 2,258 Loss on extinguishment of indebtedness, net 169 39 Amortization of share-based compensation 24,285 21,664 Non-cash income tax benefit (5) (17) Non-cash interest expense related to discontinued interest rate hedges 1,929 680 Derivative gains in accumulated other comprehensive income reclassified to earnings (4) — (5,866) Other expenses (5) 996 1,067 Adjusted FFO $ 260,388 $ 221,111 (1) Includes depreciation and amortization expense allocated to the noncontrolling interest in the consolidated joint venture.
The following table is a reconciliation of our GAAP net income to FFO attributable to common shareholders and unitholders and Adjusted FFO attributable to common shareholders and unitholders for the years ended December 31, 2024 and 2023 (in thousands): For the year ended December 31, 2024 2023 Net income $ 68,191 $ 76,617 Preferred dividends (25,115) (25,115) Depreciation and amortization 179,431 179,103 (Gain) loss on sale of hotel properties, net (8,262) 34 Noncontrolling interest in consolidated joint ventures 45 35 Adjustments related to consolidated joint venture (1) (187) (175) Adjustments related to unconsolidated joint venture (2) 912 941 FFO 215,015 231,440 Transaction costs 320 223 Pre-opening costs (3) 1,335 1,351 Loss on extinguishment of indebtedness, net 129 169 Amortization of share-based compensation 20,804 24,285 Non-cash income tax expense (benefit) 10 (5) Non-cash interest expense related to discontinued interest rate hedges 1,592 1,929 Other expenses (4) 2,641 996 Adjusted FFO $ 241,846 $ 260,388 (1) Includes depreciation and amortization expense allocated to the noncontrolling interest in the consolidated joint venture.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements, the related notes included thereto, and Item 1A., "Risk Factors", all of which appear elsewhere in this Annual Report on Form 10-K.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements, the related notes included thereto, and Item 1A., "Risk Factors", all of which appear elsewhere in this Annual Report on Form 10-K. 31 Overview We are a self-advised and self-administered Maryland REIT that owns primarily premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels located within heart of demand locations.
General and Administrative General and administrative expense increased $2.7 million to $59.0 million for the year ended December 31, 2023, from $56.3 million for the year ended December 31, 2022. The increase in general and administrative expense was primarily attributable to an increase in compensation expense.
The increase was primarily attributable to increases in property tax assessments and property insurance premiums. General and Administrative General and administrative expense decreased $4.2 million to $54.8 million for the year ended December 31, 2024, from $59.0 million for the year ended December 31, 2023.
The increase was the result of a $90.1 million increase in room revenue attributable to the comparable properties and a $2.5 million increase in room revenue attributable to the non-comparable properties.
The increase was the result of a $25.6 million increase in room revenue attributable to the comparable properties and was primarily due to an increase in corporate and group travel.
The following are the key hotel operating statistics for the comparable properties: For the year ended December 31, 2023 2022 Occupancy 71.8 % 68.9 % ADR $ 196.43 $ 187.84 RevPAR $ 141.09 $ 129.46 Food and Beverage Revenue Food and beverage revenue increased $24.6 million to $141.6 million for the year ended December 31, 2023, from $117.0 million for the year ended December 31, 2022.
The following are the key hotel operating statistics for the comparable properties: For the year ended December 31, 2024 2023 Occupancy 72.6 % 71.8 % ADR $ 199.22 $ 197.48 RevPAR $ 144.66 $ 141.83 Food and Beverage Revenue Food and beverage revenue increased $11.5 million to $153.1 million for the year ended December 31, 2024, from $141.6 million for the year ended December 31, 2023.
We believe that Adjusted EBITDA provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income, EBITDA and EBITDA re , is beneficial to an investor’s understanding of our operating performance. 39 The following table is a reconciliation of our GAAP net income to EBITDA, EBITDA re and Adjusted EBITDA for the years ended December 31, 2023 and 2022 (in thousands): For the year ended December 31, 2023 2022 Net income $ 76,617 $ 42,215 Depreciation and amortization 179,103 184,875 Interest expense, net of interest income 79,064 88,596 Income tax expense 1,256 1,518 Adjustments related to unconsolidated joint venture (1) 1,374 1,519 EBITDA 337,414 318,723 Loss (gain) on sale of hotel properties, net 34 (1,017) EBITDA re 337,448 317,706 Transaction costs 223 (345) Pre-opening costs (2) 1,351 2,258 Loss on extinguishment of indebtedness, net 169 39 Amortization of share-based compensation 24,285 21,664 Derivative gains in accumulated other comprehensive income reclassified to earnings (3) — (5,866) Other expenses (4) 996 1,067 Adjusted EBITDA $ 364,472 $ 336,523 (1) Includes our ownership interest in the interest, depreciation, and amortization expense of the unconsolidated joint venture.
The following table is a reconciliation of our GAAP net income to EBITDA, EBITDA re and Adjusted EBITDA for the years ended December 31, 2024 and 2023 (in thousands): For the year ended December 31, 2024 2023 Net income $ 68,191 $ 76,617 Depreciation and amortization 179,431 179,103 Interest expense, net of interest income 94,044 79,064 Income tax expense 1,599 1,256 Adjustments related to unconsolidated joint venture (1) 1,390 1,374 EBITDA 344,655 337,414 (Gain) loss on sale of hotel properties, net (8,262) 34 EBITDA re 336,393 337,448 Transaction costs 320 223 Pre-opening costs (2) 1,335 1,351 Loss on extinguishment of indebtedness, net 129 169 Amortization of share-based compensation 20,804 24,285 Other expenses (3) 2,641 996 Adjusted EBITDA $ 361,622 $ 364,472 (1) Includes our ownership interest in the interest, depreciation, and amortization expense of the unconsolidated joint venture.
In addition, we had $600.0 million available on our Revolver at December 31, 2023. Our principal uses of capital for the year ended December 31, 2023 were capital improvements and additions to hotel properties, the repurchase of common shares under our share repurchase programs, and distributions on common and preferred shares.
Our principal uses of capital for the year ended December 31, 2024 were our acquisition of a fee simple interest in our Wyndham Boston Beacon Hill hotel property, the purchase of a hotel property, capital improvements and additions to hotel properties, repayment of a portion of our Revolver, repayments of a Term Loan and a mortgage loan, the repurchase of common shares under our share repurchase programs, and distributions on common and preferred shares.
Overview We are a self-advised and self-administered Maryland REIT that owns primarily premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels located within heart of demand locations. Our hotels are concentrated in markets that we believe exhibit multiple demand generators and attractive long-term growth prospects.
Our hotels are concentrated in markets that we believe exhibit multiple demand generators and attractive long-term growth prospects. We believe premium-branded, focused-service and compact full-service hotels with these characteristics generate high levels of RevPAR, strong operating margins and attractive returns.
The net cash flow used in investing activities totaled $135.5 million for the year ended December 31, 2022 primarily due to a $59.3 million acquisition of a hotel property and $124.3 million in capital improvements and additions to our hotel properties. These were partially offset by $48.1 million of net cash proceeds from the sale of two hotel properties.
Cash flows from Investing Activities The net cash flow used in investing activities totaled $275.7 million for the year ended December 31, 2024 primarily due to a $122.8 million acquisition of a fee simple interest in our Wyndham Boston Beacon Hill hotel property, a $35.9 million acquisition of a hotel property, and $136.5 million in capital improvements and additions to our hotel properties and other assets.
The increase in food and beverage revenue was primarily due to an increase in banquet and catering revenues from group business and new food and beverage outlets at our recently converted hotels.
The increase in food and beverage revenue was primarily due to increases in outlet revenue and banquet and catering revenue.
Property Operating Expenses Property operating expenses increased $90.3 million to $834.7 million for the year ended December 31, 2023, from $744.4 million for the year ended December 31, 2022.
The increase in other revenue was primarily due to an increase in parking and resort fees. Property Operating Expenses Property operating expenses increased $43.3 million to $877.9 million for the year ended December 31, 2024, from $834.7 million for the year ended December 31, 2023.
The net cash flow used in financing activities was partially offset by $5.0 million in borrowing on a Term Loan. 41 Capital Expenditures and Reserve Funds We maintain each of our hotel properties in good repair and condition and in conformity with applicable laws and regulations, franchise agreements and management agreements.
Capital Expenditures and Reserve Funds We maintain each of our hotel properties in good repair and condition and in conformity with applicable laws and regulations, franchise agreements and management agreements. The cost of routine improvements and alterations are paid out of FF&E reserves, which are funded by a portion of each hotel property’s gross revenues.
The net cash flow used in financing activities totaled $298.5 million for the year ended December 31, 2022 primarily due to $200.0 million in repayment of the outstanding balance on the Revolver, $57.6 million paid to repurchase common shares under a share repurchase program, $38.5 million in distributions to shareholders and unitholders, $2.6 million in distributions to joint venture partners, $3.6 million paid to repurchase common shares to satisfy employee tax withholding requirements, and $1.3 million in deferred financing cost payments.
The uses of cash included $400.0 million in repayment of a Term Loan, $200.0 million in repayment of a maturing mortgage loan, $100.0 million in repayment of our Revolver, $22.0 million paid to repurchase common shares under our share repurchase programs, $95.3 million in distributions to shareholders and unitholders, $9.0 million paid to repurchase common shares to satisfy employee tax withholding requirements, and $5.4 million in deferred financing cost payments.
Our principal source of capital for the year ended December 31, 2023 was cash generated from operations. Material Cash Requirements Our expected material cash requirements for the twelve months ending 2024 and thereafter are comprised of (i) contractually obligated expenditures; and (ii) other essential cash requirements.
Material Cash Requirements Our expected material cash requirements for the twelve months ending 2025 and thereafter are comprised of (i) contractually obligated expenditures; and (ii) other essential cash requirements as follows: Contractually Obligated Expenditures We are party to various contractual obligations involving commitments to make payments to third parties.
The decrease was primarily attributable to the reclassification of unrealized gains from accumulated other comprehensive income due to the discontinuation of certain cash flow hedges during the year ended December 31, 2022. Interest Income Interest income increased $15.2 million to $19.7 million for the year ended December 31, 2023, from $4.6 million for the year ended December 31, 2022.
The increase was primarily attributable to an increase in COVID-19 relief awards during the year ended December 31, 2024. Interest Income Interest income decreased $2.4 million to $17.3 million for the year ended December 31, 2024, from $19.7 million for the year ended December 31, 2023.
For the year ended December 31, 2023, other expenses included one-time management company transition costs of $0.6 million. Liquidity and Capital Resources As of December 31, 2023, we had $555.3 million of cash, cash equivalents, and restricted cash reserves as compared to $536.4 million at December 31, 2022.
(2) Represents expenses related to the brand conversions of certain hotel properties prior to opening. (3) Represents expenses and income outside of the normal course of operations. Liquidity and Capital Resources As of December 31, 2024, we had $433.3 million of cash, cash equivalents, and restricted cash reserves as compared to $555.3 million at December 31, 2023.
The components of our property operating expenses for the comparable properties were as follows (in thousands): For the year ended December 31, 2023 2022 $ Change Room expense $ 274,651 $ 251,909 $ 22,742 Food and beverage expense 107,651 86,315 21,336 Management and franchise fee expense 106,779 94,989 11,790 Other operating expenses 336,263 305,968 30,295 Total property operating expenses $ 825,344 $ 739,181 $ 86,163 The increase in property operating expenses attributable to the comparable properties was primarily due to increases in wages and benefits, sales and marketing expenses, and fees and costs based on revenue, including management fees.
The components of our property operating expenses for the comparable properties were as follows (in thousands): For the year ended December 31, 2024 2023 $ Change Room expense $ 286,586 $ 275,308 $ 11,278 Food and beverage expense 116,840 109,707 7,133 Management and franchise fee expense 107,332 106,585 747 Other operating expenses 360,250 338,420 21,830 Total property operating expenses $ 871,008 $ 830,020 $ 40,988 The increase in property operating expenses attributable to the comparable properties was primarily due to increases in wages and benefits, as well as increases in room and food and beverage expenses, and increases in other operating expenses, primarily due to increases in sales and marketing, utilities, and administrative expenses. 36 Property Tax, Insurance and Other Property tax, insurance and other expense increased $6.8 million to $107.0 million for the year ended December 31, 2024, from $100.2 million for the year ended December 31, 2023.
The increase was attributable to our corporate and hotel-level cash earning higher interest rates due to increases in the federal funds rate. Interest Expense Interest expense increased $5.7 million to $98.8 million for the year ended December 31, 2023, from $93.2 million for the year ended December 31, 2022.
The decrease was attributable to lower average cash balances, partially offset by higher interest rates. Interest Expense Interest expense increased $12.6 million to $111.4 million for the year ended December 31, 2024, from $98.8 million for the year ended December 31, 2023.
During the year ended December 31, 2023, the following significant activities took place: • Successfully launched our hotel conversion of The Pierside Hotel, an independent lifestyle property located in Santa Monica, California. 33 • Exercised one-year extension options on approximately $224.7 million of certain Term Loans to extend the maturities to January 2024 (subsequently refinanced and extended to May 2026, as described below). • Received $95.0 million in borrowings on a Term Loan amended in November 2022 and utilized the proceeds to pay off approximately $94.0 million of maturing Term Loans. • Exercised the final one-year extension option on a mortgage loan to extend the maturity to April 2024. • Entered into $525.0 million in new interest rate swap agreements as $425.0 million in swaps expired. • Approved the 2023 Share Repurchase Program to acquire up to an aggregate of $250.0 million of common and preferred shares from May 9, 2023 to May 8, 2024. • Converted the Hotel Indigo New Orleans Garden District to the Hotel Tonnelle New Orleans, a Tribute Portfolio Hotel. • Refinanced approximately $224.7 million in Term Loans and recast our $600.0 million Revolver to extend the maturity dates to May 2026 and May 2027, respectively. • Converted our 21c Hotel in Nashville, Tennessee to The Bankers Alley Hotel, a Tapestry Collection by Hilton. • Repurchased and retired approximately 7.5 million common shares for approximately $76.0 million.
During the year ended December 31, 2024, the following significant activities took place: • Acquired a fee simple interest in the land at our Wyndham Boston Beacon Hill hotel property for approximately $125.0 million. • Exercised one-year extension options on $181.0 million in mortgage loans to extend the maturities to April 2025. • Fully repaid a $200.0 million maturing mortgage loan with a $200.0 million draw on our Revolver. • Approved the 2024 Share Repurchase Program to acquire up to an aggregate of $250.0 million of common and preferred shares from May 9, 2024 to May 8, 2025. • Sold two hotel properties for a combined sales price of approximately $20.8 million. • Acquired the 110-room Hotel Teatro in Denver, Colorado for $35.5 million. • Entered into a new $500.0 million Term Loan, the proceeds of which were used to repay our $400.0 million Term Loan maturing in 2025 and $100.0 million of borrowings under our Revolver. • Repurchased and retired approximately 2.3 million common shares for approximately $22.0 million.
Removed
The non-comparable properties include two hotel properties that were sold and one acquisition that was completed in 2022.
Added
For a more in depth discussion of Hotel EBITDA, please refer to Note 15, Segment Information, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Removed
The increase in room revenue from the comparable properties was due to an increase in RevPAR resulting from recoveries in business and group travel and the ramping up of our recently converted hotels.
Added
The non-comparable properties include two hotel properties that were sold and one hotel property that was acquired in 2024. 34 For similar operating and financial data and discussion of our results for the year ended December 31, 2023 compared to our results for the year ended December 31, 2022, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our annual report on Form 10-K for the year ended December 31, 2023 , which was filed with the SEC on February 27, 2024 and is incorporated herein by reference.
Removed
The increase in other revenue was primarily due to an increase in parking fees, resort and facility fees (including new resort and facility fees implemented during the prior year), and miscellaneous other sales and fees that corresponded to the increase in demand over the prior period.
Added
The decrease was primarily attributable to a decrease in non-cash compensation expense related to certain share-based awards granted during 2021 that became fully vested during the second quarter of 2024. Other Income, net Other income, net increased $1.0 million to $5.3 million for the year ended December 31, 2024, from $4.4 million for the year ended December 31, 2023.
Removed
Management and franchise fee expense for the year ended December 31, 2022 included a reduction of $4.1 million related to the recognition of the Wyndham termination payments, which were fully recognized as of December 31, 2022. 36 Depreciation and Amortization Depreciation and amortization expense decreased $5.8 million to $179.1 million for the year ended December 31, 2023, from $184.9 million for the year ended December 31, 2022.
Added
We believe that Adjusted FFO provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income and FFO, is beneficial to an investor’s understanding of our operating performance.
Removed
The decrease was primarily attributable to furniture, fixtures and equipment that were fully depreciated in 2022, partially offset by an increase in depreciation and amortization expense related to recently renovated hotels.
Added
We believe that Adjusted EBITDA provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income, EBITDA and EBITDA re , is beneficial to an investor’s understanding of our operating performance.
Removed
Property Tax, Insurance and Other Property tax, insurance and other expense increased $13.2 million to $100.2 million for the year ended December 31, 2023, from $87.0 million for the year ended December 31, 2022. The increase was attributable to an increase in insurance premiums and property taxes.
Added
In addition, we had $500.0 million available on our Revolver at December 31, 2024.
Removed
The increase was also attributable to an increase in ground rent expense primarily due to increases in percentage rent obligations and consumer price index adjustments for certain of our ground leases.
Added
Our principal sources 39 of capital for the year ended December 31, 2024 were cash generated from operations, the sales of two hotel properties, and borrowings under our Revolver and on a new Term Loan.
Removed
Other Income, net Other income, net decreased $5.1 million to $4.4 million for the year ended December 31, 2023, from $9.5 million for the year ended December 31, 2022.
Added
For details regarding our indebtedness and lease obligations, refer to Note 7, Debt, and Note 10, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Removed
FFO, Adjusted FFO, EBITDA, EBITDA re, and Adjusted EBITDA, as calculated by us, may not be comparable to FFO, Adjusted FFO, EBITDA, EBITDA re and Adjusted EBITDA as reported by other companies that do not define such terms exactly as we define such terms.
Added
Cash flows from Financing Activities The net cash flow used in financing activities totaled $131.7 million for the year ended December 31, 2024. The sources of cash included $500.0 million in borrowings on a Term Loan and $200.0 million in borrowings on our Revolver.
Removed
(5) Represents expenses and income outside of the normal course of operations. For the year ended December 31, 2023, other expenses included one-time management company transition costs of $0.6 million.
Removed
(2) Represents expenses related to the brand conversions of certain hotel properties prior to opening. (3) Reclassification of interest rate swap gains from accumulated other comprehensive income to earnings for discontinued interest rate hedges. (4) Represents expenses and income outside of the normal course of operations.
Removed
Impairment We assess the carrying value of our investments in hotel properties whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−1 removed4 unchanged
Biggest changeFor debt obligations outstanding as of December 31, 2023, the following table presents the principal repayments and related weighted-average interest rates by contractual maturity dates, excluding extension options (in thousands): 2024 2025 2026 2027 2028 Thereafter Total Fixed rate debt (1)(2) $ — $ — $ 500,000 $ — $ — $ 525,000 $ 1,025,000 Weighted-average interest rate —% —% 3.75% —% —% 4.05% 3.90% Variable rate debt (1) $ 381,000 $ 400,000 $ 425,000 $ — $ — $ — $ 1,206,000 Weighted-average interest rate (3) 5.67% 3.44% 3.90% —% —% —% 4.30% Total $ 381,000 $ 400,000 $ 925,000 $ — $ — $ 525,000 $ 2,231,000 (1) Excludes $8.3 million, $3.6 million and $0.2 million of net deferred financing costs on the senior notes, Term Loans and mortgage loans, respectively.
Biggest changeFor debt obligations outstanding as of December 31, 2024, the following table presents the principal repayments and related weighted-average interest rates by contractual maturity dates, excluding extension options (in thousands): 2025 2026 2027 2028 2029 Thereafter Total Fixed rate debt (1)(2) $ — $ 500,000 $ — $ — $ 525,000 $ — $ 1,025,000 Weighted-average interest rate —% 3.75% —% —% 4.05% —% 3.90% Variable rate debt (1) $ 181,000 $ 425,000 $ 600,000 $ — $ — $ — $ 1,206,000 Weighted-average interest rate (3) 4.70% 5.66% 4.92% —% —% —% 5.15% Total $ 181,000 $ 925,000 $ 600,000 $ — $ 525,000 $ — $ 2,231,000 (1) Excludes $6.0 million, $6.3 million and $0.1 million of net deferred financing costs on the senior notes, Term Loans and mortgage loans, respectively.
(2) Excludes a $1.8 million fair value adjustment on debt. (3) The weighted-average interest rate gives effect to interest rate swaps, as applicable. Our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during future periods, prevailing interest rates, and our hedging strategies at that time.
(2) Excludes a $1.5 million fair value adjustment on debt. (3) The weighted-average interest rate gives effect to interest rate swaps, as applicable. Our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during future periods, prevailing interest rates, and our hedging strategies at that time.
If interest rates were to rise by 1.00%, or 100 basis points, and our fixed rate debt balance remained constant, we expect the fair value of our debt would decrease by approximately $34.8 million. Item 8. Financial Statements and Supplementary Data Refer to the Index to Financial Statements on page F-1.
If interest rates were to rise by 1.00%, or 100 basis points, and our fixed rate debt balance remained constant, we expect the fair value of our debt would decrease by approximately $26.8 million. Item 8. Financial Statements and Supplementary Data Refer to the Index to Financial Statements on page F-1. Item 9.
After taking into consideration the effect of interest rate swaps, 88.5% of our total indebtedness was fixed or effectively fixed.
After taking into consideration the effect of interest rate swaps, 69.5% of our total indebtedness was fixed or effectively fixed.
As of December 31, 2023, we had approximately $1.2 billion of total variable rate debt outstanding (or 54.1% of total indebtedness) with a weighted-average interest rate of 4.30% per annum. Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs.
As of December 31, 2024, we had approximately $1.2 billion of total variable rate debt outstanding (or 54.1% of total indebtedness) with a weighted-average interest rate of 5.15% per annum. Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs.
As of December 31, 2023, the estimated fair value of our fixed rate debt was $950.1 million, which was based on having the same debt service requirements that could have been borrowed at the date presented, at prevailing current market interest rates.
As of December 31, 2024, the estimated fair value of our fixed rate debt was $962.2 million, which was based on having the same debt service requirements that could have been borrowed at the date presented, at prevailing current market interest rates.
As of December 31, 2023, if market interest rates on our variable rate debt not subject to interest rate swaps were to increase by 1.00%, or 100 basis points, interest expense would decrease future earnings and cash flows by approximately $2.6 million annually, taking into account our existing contractual hedging arrangements.
As of December 31, 2024, if market interest rates on our variable rate debt not subject to interest rate swaps were to increase by 1.00%, or 100 basis points, interest expense would decrease future earnings and cash flows by approximately $6.8 million annually, taking into account our existing contractual hedging arrangements. 42 The following table provides information about our financial instruments that are sensitive to changes in interest rates.
Removed
The following table provides information about our financial instruments that are sensitive to changes in interest rates.
Added
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None.

Other RLJ 10-K year-over-year comparisons