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What changed in RLJ Lodging Trust's 10-K — 2022 vs 2023

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

+176 added−183 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in RLJ Lodging Trust's 2023 10-K

176 paragraphs added · 183 removed · 155 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

17 edited+1 added−0 removed68 unchanged
Biggest changeThe following table sets forth the brand affiliations of our hotel properties as of December 31, 2022: 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 % Subtotal 37 38.1 % 7,590 35.5 % 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 % 920 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 % Subtotal 36 37.2 % 8,877 41.5 % 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 7 7.1 % 1,114 5.2 % Total 97 100.0 % 21,410 100.0 % 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, 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.
As of December 31, 2022, 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, 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.
We are the sole general partner of the Operating Partnership and, as of December 31, 2022, 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, 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.
One of our properties that was converted to an independent brand in Southern California achieved an Energy Star certification, and we have identified additional hotels in the portfolio that are currently eligible for certification.
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.
We are the sole general partner of the Operating Partnership. As of December 31, 2022, 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, 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 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 88% 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. 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 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, 2022, we had 76 employees.
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.
Our hotel properties compete with other participants in the lodging industry for guests in each of their markets on the basis of several factors, including, among others, location, quality of accommodations, convenience, brand affiliation, room rates, service levels, amenities and the availability of lodging and event space.
Competition The U.S. lodging industry is highly competitive. Our hotel properties compete with other participants in the lodging industry for guests in each of their markets on the basis of several factors, including, among others, location, quality of accommodations, convenience, brand affiliation, room rates, service levels, amenities and the availability of lodging and event space.
Through these and our wider initiatives and support from our hotel operators, across our portfolio since 2017, we have reduced our energy usage per square foot by 19% and our greenhouse gas emissions per square foot by 30%. 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 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.
We will continue to seek ways to maximize the positive impact of our business in ways that foster long-term resiliency for both the portfolio and our stakeholders. Corporate Information Our principal executive offices are located at 3 Bethesda Metro Center, Suite 1000, Bethesda, Maryland 20814. Our telephone number is (301) 280-7777. Our website is located at www.rljlodgingtrust.com.
We will continue to seek ways to maximize the positive impact of our business in ways that foster long-term resiliency for both the portfolio and our stakeholders. Corporate Information Our principal executive offices are located at 7373 Wisconsin Avenue, Suite 1500, Bethesda, Maryland 20814. Our telephone number is (301) 280-7777. Our website is located at www.rljlodgingtrust.com.
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 asset and to ensure the safety of our customers, and that our management companies are maximizing revenues, profits and operating margins. 5 Table of Contents Competition The U.S. lodging industry is highly competitive.
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.
Our hotel properties are subject to various federal, state, and local environmental, health and safety laws and regulations. Our hotel properties incur costs to comply with these laws and regulations and could be subject to fines and penalties for non-compliance.
Our hotel properties are subject to various federal, state, and local environmental, health and safety laws and regulations. Certain of our hotel properties may also be subject to various climate disclosure laws and regulations. Our hotel properties incur costs to comply with these laws and regulations and could be subject to fines and penalties for non-compliance.
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 2017, we have invested in over 130 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. Throughout 2021 and 2022, we invested in over 300 efficiency projects.
We are committed to setting specific and quantifiable targets including reducing our carbon emissions by 35% by 2030. With respect to social causes, we continue to show our commitment to making an impact in the communities we serve. In 2022, for example, we sponsored a volunteer day with Habitat for Humanity’s Maryland chapter.
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.
In addition, our board, via the Nominating and Corporate Governance Committee (the "NCG Committee") of the board, has the overall responsibility for overseeing ESG-related issues, policies and programs for the Company. In 2022, we established an internal ESG committee that reports ESG matters directly through our CEO to the board’s NCG Committee.
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.
The 8 Table of Contents 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 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.
RLJ associates spent the day helping to build housing at one of Habitat for Humanity’s Maryland locations, not too far from our corporate headquarters in Bethesda, MD.
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.
Added
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

53 edited+6 added−6 removed162 unchanged
Biggest changeIn 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. 17 Table of Contents Our declaration of trust and bylaws obligate us, to the fullest extent permitted by Maryland law in effect from time to time, to indemnify and to pay or reimburse reasonable expenses in advance of the final disposition of a proceeding to any present or former trustee or officer who is made or threatened to be made a party to the proceeding by reason of his or her service to us in that capacity.
Biggest changeIn 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, unless we can purchase a fee simple interest in the underlying land and improvements or extend the terms of these leases before their expiration, as to which no assurance can be given, we will lose our right to own these hotel properties and our interest in the improvements upon expiration of the leases.
In addition, unless we can purchase a fee simple interest in the underlying land or extend the terms of these leases before their expiration, as to which no assurance can be given, we will lose our right to own these hotel properties and our interest in the improvements upon expiration of the leases.
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; • we may be at a competitive disadvantage compared to our competitors that have less debt; 13 Table of Contents • 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; 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.
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; • 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; 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.
Furthermore, if our relationship with Marriott, Hilton or Hyatt were to deteriorate or terminate as a result of disputes regarding the management of our hotels or for other reasons, Marriott and/or Hilton and/or Hyatt could, under certain circumstances, terminate our current franchise licenses with them or decline to provide franchise licenses for hotels that we may acquire in the future.
Furthermore, if our relationship with Marriott, Hilton or Hyatt were to deteriorate or terminate as a result of disputes regarding the management of our hotels or for other reasons, Marriott, Hilton or Hyatt could, under certain circumstances, terminate our current franchise licenses with them or decline to provide franchise licenses for hotels that we may acquire in the future.
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; 14 Table of Contents • 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: • 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.
Inflation poses a risk to us due to the recent 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.
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.
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; • 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.
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.
As a result, our success is dependent in part on the continued success of Marriott, Hilton or Hyatt and their respective brands. We believe that building brand value is critical to increasing demand and building customer loyalty.
As a result, our success is dependent in part on the continued success of Marriott, Hilton and Hyatt and their respective brands. We believe that building brand value is critical to increasing demand and building customer loyalty.
As of the date hereof, we believe the management companies operate qualified lodging facilities for certain persons who are not related to us or our TRS. As of the date hereof, we believe that all of the hotels leased to our TRS lessees will be qualified lodging facilities.
As of the date hereof, we believe the management companies operate qualified lodging facilities for certain persons who are not related to us or our TRSs. As of the date hereof, we believe that all of the hotels leased to our TRS lessees will be qualified lodging facilities.
Even if the U.S. economy and the global economy remain stable or grow in 2023, 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. 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.
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, 2022.
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.
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. 16 Table of Contents 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.
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.
At December 31, 2022, 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, 2022, we had approximately $2.2 billion of outstanding debt.
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.
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. Uninsured and underinsured losses at our hotel properties could materially and adversely affect us.
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.
Although we intend to monitor future acquisitions and improvements of hotels, the REIT provisions of the Code provide only limited 20 Table of Contents 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 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.
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.
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.
Should an uninsured loss or a loss in excess of insured limits occur, or should we be unsuccessful in obtaining coverage from an insurance carrier, we could lose all or a portion of the capital we have invested in a hotel property, as well as the anticipated future revenue from the hotel 18 Table of Contents property.
Should an uninsured loss or a loss in excess of insured limits occur, or should we be unsuccessful in obtaining coverage from an insurance carrier, we could lose all or a portion of the capital we have invested in a hotel property, as well as the anticipated future revenue from the hotel property.
The occurrence of any of the foregoing could materially and adversely affect us. 15 Table of Contents The cyclical nature of the lodging industry may cause fluctuations in our operating performance, which could have a material and adverse effect on us. The lodging industry historically has been highly cyclical in nature.
The occurrence of any of the foregoing could materially and adversely affect us. The cyclical nature of the lodging industry may cause fluctuations in our operating performance, which could have a material and adverse effect on us. The lodging industry historically has been highly cyclical in nature.
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.
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.
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.
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.
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.
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.
However, if the COVID-19 pandemic worsens, or if we experience another pandemic or epidemic in the future, any increases in unemployment, decreased capital spending, declines in consumer confidence, increases in inflation, supply-chain issues, or economic slowdowns or recessions that may result therefrom could cause sustained negative consumer or business sentiment and reduced demand for travel and lodging, which would materially and adversely affect our business, financial performance and condition, operating results and cash flows.
If we experience a pandemic or epidemic in the future, any increases in unemployment, decreased capital spending, declines in consumer confidence, increases in inflation, supply-chain issues, or economic slowdowns or recessions that may result therefrom could cause sustained negative consumer or business sentiment and reduced demand for travel and lodging, which would materially and adversely affect our business, financial performance and condition, operating results and cash flows.
The integration of such acquisitions, especially acquisitions of portfolios of hotel properties, may cause disruptions 12 Table of Contents 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 to our business, strain management time and resources and materially and adversely affect our operating results and financial condition.
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 our business.
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.
As of December 31, 2022, all of our hotel properties had individual management agreements, 31 of which were with Aimbridge Hospitality ("Aimbridge") and 20 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.
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.
In addition, we may incur substantial additional debt, including secured debt, in the future. After taking into consideration the effect of interest rate swaps, 98.7% 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, 88.5% of our payments are fixed or effectively fixed.
Consequently, if market recognition or the positive perception of Marriott and/or Hilton and/or Hyatt is reduced or compromised, the goodwill associated with the Marriott-, Hilton-, or Hyatt-branded hotels in our portfolio may be adversely affected.
Consequently, if market recognition or the positive perception of Marriott, Hilton or Hyatt is reduced or compromised, the brand value associated with the Marriott-, Hilton-, or Hyatt-branded hotels in our portfolio may be adversely affected.
As a result, we are particularly susceptible to adverse market conditions in these areas, including industry downturns, relocation of businesses, any oversupply of hotel rooms, political unrest, supply-chain issues and inflationary pressures, or a reduction in lodging demand.
As a result, we are particularly susceptible to adverse market conditions in these areas, including industry downturns, relocation of businesses, constrained municipal budgets, any oversupply of hotel rooms, criminal activity, political and societal unrest, supply-chain issues and inflationary pressures, or a reduction in lodging demand.
Substantially all 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. 85 of the 97 hotel properties that we owned as of December 31, 2022 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. 87 of the 97 hotel properties that we owned as of December 31, 2023 utilize brands owned by Marriott, Hilton or Hyatt.
There can be no assurance that any share repurchases will enhance shareholder value because the market price of our common shares may decline below the levels at which we repurchased the common shares.
There can be no assurance that any share repurchases will enhance shareholder value because the market price of our common shares may decline below the levels at which we repurchased the common shares. Item 1B. Unresolved Staff Comments None.
That deficiency dividend procedure could require us to make significant distributions to our shareholders and pay significant interest to the IRS. 21 Table of Contents 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.
Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could adversely affect the value of our shares. 19 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.
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.
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.
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.
The failure to make and integrate acquisitions of additional hotels could materially and adversely impede our growth We can provide no assurances that we will be successful in identifying attractive hotel properties or portfolios of hotel properties or that, once identified, we will be successful in consummating an acquisition or integrating the acquired property or portfolio into our business.
We can provide no assurances that we will be successful in identifying attractive hotel properties or portfolios of hotel properties or that, once identified, we will be successful in consummating an acquisition or integrating the acquired property or portfolio into our business.
Interest rates are expected to continue to increase as the Federal Reserve acts to address rising inflation; such increases would increase our interest expense on any future fixed and variable rate debt, as well as existing variable rate debt, which could adversely affect our cash flows and our ability to pay distributions to shareholders.
Interest rates could increase, and this would increase our interest expense on any future fixed and variable rate debt, as well as existing variable rate debt, which could adversely affect our cash flows and our ability to pay distributions to shareholders.
Increased inflation may also have an adverse effect on our operating expenses, including, but not limited to, labor, supplies, repairs and maintenance, as these costs could increase at a rate higher than our revenues.
Inflation may also have an adverse effect on our operating expenses, including, but not limited to, labor, supplies, repairs and maintenance, as these costs could increase at a rate higher than our revenues. 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.
These events also may make it more 9 Table of Contents 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.
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.
We 10 Table of Contents 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.
We 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.
Our business strategy depends on achieving revenue and net income growth from demand for hotel rooms as part of a strong U.S. and global economy. Any economic slowdown or recession or weaker-than-anticipated growth could negatively impact demand for our hotel rooms, which in turn could materially and adversely affect our business, financial performance and condition, operating results and cash flows.
Any economic slowdown or recession or weaker-than-anticipated growth could negatively impact demand for our hotel rooms, which in turn could materially and adversely affect our business, financial performance and condition, operating results and cash flows.
These provisions may impact our ability to sell our hotel properties which, in turn, could adversely impact the price realized from any such sale.
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 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.
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.
We have entered into interest rate swaps to limit our exposure to interest rate fluctuations related to a portion of our variable rate debt. However, in an increasing interest rate environment, the fixed rates we can obtain with such replacement fixed-rate cap and swap agreements, and the fixed-rate on any new debt we may incur, will also continue to increase.
However, in a high interest rate environment, the fixed rates we can obtain with such replacement fixed rate swap agreements, and the fixed rate on any new debt we may incur, will also continue to be high.
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.
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.
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.
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.
If any of the foregoing were to occur, it could have a material adverse effect on us.
If any of the foregoing were to occur, it could have a material adverse effect on us. The failure to make and integrate acquisitions of additional hotels could materially and adversely impede our growth.
Any of the above might subject a hotel property to liabilities in excess of those contemplated and adversely affect the value of our current and future joint venture investments.
Any of the above might subject a hotel property to liabilities in excess of those contemplated and adversely affect the value of our current and future joint venture investments. The future outbreak of highly infectious or contagious diseases could significantly impact and disrupt our business, financial performance and condition, operating results and cash flows.
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.
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.
As of December 31, 2022, 13 of our consolidated hotel properties and our unconsolidated hotel property were on land subject to ground leases. Accordingly, we only own a leasehold or similar interest in those 14 hotel properties.
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.
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.
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.
Risks Related to Our Business and Hotel Properties Economic volatility, high rates of inflation and risks associated with the ongoing COVID-19 pandemic could significantly impact and disrupt our business, financial performance and condition, operating results and cash flows.
Risks Related to Our Business and Hotel Properties Economic volatility and high rates of inflation could significantly impact and disrupt our business, financial performance and condition, operating results and cash flows. Our business strategy depends on achieving revenue and net income growth from demand for hotel rooms as part of a strong U.S. and global economy.
Our ground leases at Wyndham Boston Beacon Hill and Wyndham San Diego Bayside expire in 2028 and 2029, respectively, and if these leases are not extended, the hotel properties 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.
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.
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.
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.
Removed
In addition to market volatility, the United States and the rest of the world are currently experiencing a significant increase in inflation.
Added
We have entered into interest rate swaps to limit our exposure to interest rate fluctuations related to a portion of our variable rate debt.
Removed
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. Finally, as a result of the COVID-19 pandemic, we have, in the past, faced decreased operating revenues, the delay of planned capital expenditures, disruptions in our supply chains, and labor shortages.
Added
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.
Removed
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.
Added
We have entered into interest rate swaps to limit our exposure to interest rate fluctuations related to a portion of our variable rate debt. However, if our interest rate swaps expire in a high interest rate environment, the fixed rates we can obtain with new interest rate swap agreements would be higher than the interest rates of the expired swaps.
Removed
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.
Added
As a result, we could become subject to significant losses and/or repair costs that may or may not be fully covered by insurance.
Removed
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.
Added
Our declaration of trust and bylaws obligate us, to the fullest extent permitted by Maryland law in effect from time to time, to indemnify and to pay or reimburse reasonable expenses in advance of the final disposition of a proceeding to any present or former trustee or officer who is made or threatened to be made a party to the proceeding by reason of his or her service to us in that capacity.
Removed
These alternatives could increase our costs or reduce our shareholders' equity.
Added
That deficiency dividend procedure could require us to make significant distributions to our shareholders and pay significant interest to the IRS.

Item 2. Properties

Properties — owned and leased real estate

15 edited+2 added−2 removed21 unchanged
Biggest changeThe 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 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.
Biggest changeThe 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).
For the hotels that are acquired in the future, we intend for the leases to contain substantially similar provisions as to those described below; however, we may, in our discretion, alter any of these provisions with respect to any particular lease.
For the hotels that are acquired in the future, we intend for the leases to contain substantially similar provisions as those described below; however, we may, in our discretion, alter any of these provisions with respect to any particular lease.
The TRS leases require our TRS lessees to pay rent, all costs and expenses, management fees, franchise fees, personal property taxes where applicable, certain insurance policies and all utility and other charges incurred in the operation of the hotels.
The TRS leases require our TRS lessees to pay rent, management fees, franchise fees, personal property taxes where applicable, certain insurance policies, and all other costs and expenses, including utility and other charges, incurred in the operation of the hotels.
Properties Our Hotel Properties The following table provides a comprehensive list of our hotel properties as of December 31, 2022: 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 Indigo New Orleans Garden District 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 DoubleTree Suites by Hilton Orlando - Lake Buena Vista 229 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 21c Hotel Nashville 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 23 Table of Contents State Hotel Property Name Rooms State Hotel Property Name Rooms 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.
Properties 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.
Franchise Agreements As of December 31, 2022, 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, 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.
Certain management agreements also stipulate that in the event that a management company elects to terminate a management agreement due to an event of 24 Table of Contents 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.
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.
The percentage rent is calculated based on the revenues generated from the rental of guest rooms, food and beverage sales, and certain other sources, including meeting room rentals.
The percentage rent is generally calculated based on the revenues generated from the rental of guest rooms. Certain TRS lessees also pay percentage rent on food and beverage sales and certain other sources, including meeting room rentals.
In addition, certain management agreements give us the right to terminate the management agreement upon the sale of the hotel property or for any reason upon payment of a stipulated termination fee.
Certain management agreements also provide us with a right to terminate the management agreement in our sole and absolute discretion. In addition, certain management agreements give us the right to terminate the management agreement upon the sale of the hotel property or for any reason upon payment of a stipulated termination fee.
All of our hotel properties are operated pursuant to a management agreement with one of 18 independent management companies. 36 of our hotel properties receive the benefits of a franchise agreement pursuant to a management agreement with Hilton, Hyatt, Marriott, or other management companies. As of December 31, 2022, Aimbridge was the management company for 31 of our hotel properties.
All of our hotel properties are operated pursuant to a management agreement with one of 16 independent management companies. 36 of our hotel properties receive the benefits of a franchise agreement pursuant to a management agreement with Hilton, Hyatt, Marriott, or other management companies.
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. 25 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.
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.
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.
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.
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.
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.
Our remaining 66 hotel properties were managed by 17 other management companies, including Hilton, Hyatt and Marriott. The management agreements have initial terms that range from one to 25 years, and some provide for one or two automatic extension periods ranging from one to 10 years each.
The management agreements have initial terms that range from three to 25 years, and some provide for one or two automatic extension periods ranging from one to 10 years each. Each management company receives a base management fee between 1.5% and 3.5% of hotel revenues.
Ground Leases As of December 31, 2022, 13 of our consolidated hotel properties and our 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.
Additional information on the ground leases can be found in Note 10 to our accompanying consolidated financial statements.
Each management company receives a base management fee between 1.75% and 3.5% of hotel revenues. The management agreements that include the benefits of a franchise agreement incur a base management fee between 2.0% and 7.0% of hotel revenues.
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.
Removed
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). Certain management agreements also provide us with a right to terminate the management agreement in our sole and absolute discretion.
Added
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.
Removed
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
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+2 added−2 removed9 unchanged
Biggest changeShare Return Performance The graph and the table set forth below assume $100.00 was invested on December 31, 2017 in RLJ Lodging Trust's common shares. 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.
Biggest changeThe 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.
(2) The maximum number of shares that may yet be repurchased under a 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 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
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 21, 2023, there were 12 holders (other than our company) of our OP units.
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.
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, 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.
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.
Name Initial Investment at December 31, 2017 Value of 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 RLJ Lodging Trust $ 100.00 $ 79.79 $ 92.88 $ 74.48 $ 73.51 $ 56.53 S&P 500 Index $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.88 Dow Jones US REIT Hotels Index $ 100.00 $ 87.51 $ 101.46 $ 75.17 $ 86.49 $ 73.20 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. 27 Shareholder Information At February 21, 2023, we had 181 holders of record of our common shares.
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.
Select Real Estate Hotels Index ("Dow Jones US REIT Hotels Index") between December 31, 2017 and December 31, 2022. The graph assumes an initial investment of $100.00 in our common shares and in each of the indices, and it also assumes the reinvestment of dividends.
The graph assumes an initial investment of $100.00 in our common shares and in each of the indices, and it also assumes the reinvestment of dividends.
For each quarterly period during the year ended December 31, 2021, we paid a cash dividend of $0.01 per common share. On December 31, 2022 and February 21, 2023, the closing price of our common shares as reported on the NYSE was $10.59 and $11.29, respectively.
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.
Removed
Unregistered Sales of Equity Securities The Company did not sell any securities during the fiscal year ended December 31, 2022 that were not registered under the Securities Act.
Added
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.
Removed
Issuer Purchases of Equity Securities The following table summarizes all of the share repurchases during the quarter ended December 31, 2022: Period Total number of shares purchased (1) 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 (2) October 1, 2022 through October 31, 2022 672,689 $ 10.62 672,689 15,847,102 November 1, 2022 through November 30, 2022 44,046 $ 11.35 44,046 15,871,225 December 1, 2022 through December 31, 2022 — $ — — 18,164,235 Total 716,735 716,735 28 (1) Includes surrendered common shares owned by certain employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common shares of beneficial interest issued under the RLJ Lodging Trust 2021 Equity Incentive Plan ("2021 Plan").
Added
Unregistered 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").

Item 7. Management's Discussion & Analysis

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

56 edited+8 added−16 removed55 unchanged
Biggest changeFor similar operating and financial data and discussion of our results for the year ended December 31, 2021 compared to our results for the year ended December 31, 2020, 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, 2021 , which was filed with the SEC on February 24, 2022 and is incorporated herein by reference. 32 Comparison of the year ended December 31, 2022 to the year ended December 31, 2021 For the year ended December 31, 2022 2021 $ Change (amounts in thousands) Revenues Operating revenues Room revenue $ 1,002,454 $ 667,853 $ 334,601 Food and beverage revenue 117,027 58,994 58,033 Other revenue 74,181 58,817 15,364 Total revenues 1,193,662 785,664 407,998 Expenses Operating expenses Room expense 253,441 177,365 76,076 Food and beverage expense 87,402 41,790 45,612 Management and franchise fee expense 95,565 53,276 42,289 Other operating expense 308,000 239,092 68,908 Total property operating expenses 744,408 511,523 232,885 Depreciation and amortization 184,875 187,778 (2,903) Impairment losses — 144,845 (144,845) Property tax, insurance and other 86,996 88,852 (1,856) General and administrative 56,330 47,526 8,804 Transaction costs (345) 94 (439) Total operating expenses 1,072,264 980,618 91,646 Other income (expense), net 9,496 (7,614) 17,110 Interest income 4,559 996 3,563 Interest expense (93,155) (106,366) 13,211 Gain (loss) on sale of hotel properties, net 1,017 (2,378) 3,395 (Loss) gain on extinguishment of indebtedness, net (39) 893 (932) Income (loss) before equity in income (loss) from unconsolidated joint ventures 43,276 (309,423) 352,699 Equity in income (loss) from unconsolidated joint ventures 457 (477) 934 Income (loss) before income tax expense 43,733 (309,900) 353,633 Income tax expense (1,518) (1,188) (330) Net income (loss) 42,215 (311,088) 353,303 Net (income) loss attributable to noncontrolling interests: Noncontrolling interest in consolidated joint ventures (210) 4,384 (4,594) Noncontrolling interest in the Operating Partnership (80) 1,536 (1,616) Net income (loss) attributable to RLJ 41,925 (305,168) 347,093 Preferred dividends (25,115) (25,115) — Net income (loss) attributable to common shareholders $ 16,810 $ (330,283) $ 347,093 33 Revenues Total revenues increased $408.0 million to $1.2 billion for the year ended December 31, 2022, from $785.7 million for the year ended December 31, 2021.
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.
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. ◦ 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. 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.
Some hotels, due to the limited focus of the services offered and size or space limitations at the hotel, may not have the type of facilities that generate other revenue. 30 • Property Operating Expenses — The components of our property operating expenses are as follows: ◦ Room expense — These expenses include housekeeping and front office wages and payroll taxes, reservation systems, room supplies, laundry services and other room-related costs.
Some hotels, due to the limited focus of the services offered and size or space limitations at the hotel, may not have the type of facilities that generate other revenue. • Property Operating Expenses — The components of our property operating expenses are as follows: ◦ Room expense — These expenses include housekeeping and front office wages and payroll taxes, reservation systems, room supplies, laundry services and other room-related costs.
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.
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.
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.
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.
For a more in depth discussion of the management and franchise fees, please refer to the "Our Hotel Properties — Management Agreements" and "Our Hotel Properties — Franchise Agreements" sections. ◦ Other operating expense — These expenses include labor and other costs associated with the sources of our other revenue, as well as the labor and other costs associated with the administrative departments, sales and marketing, repairs and maintenance, and utility costs at the hotel properties.
For a more in depth discussion of the management and franchise fees, please refer to the "Our Hotel Properties — Management Agreements" and "Our Hotel Properties — Franchise Agreements" sections. ◦ Other operating expenses — These expenses include labor and other costs associated with the sources of our other revenue, as well as the labor and other costs associated with the administrative departments, sales and marketing, repairs and maintenance, and utility costs at the hotel properties.
We use ADR to assess the pricing levels that we are able to generate, as changes in rates have a greater impact on operating margins and profitability than changes in occupancy. 29 • Occupancy — Occupancy represents the total number of hotel rooms sold in a given period divided by the total number of rooms available.
We use ADR to assess the pricing levels that we are able to generate, as changes in rates have a greater impact on operating margins and profitability than changes in Occupancy. • Occupancy — Occupancy represents the total number of hotel rooms sold in a given period divided by the total number of rooms available.
Accordingly, business travelers represent the majority of the transient demand at our hotels. As a result, factors impacting business travel have a greater effect on our business than factors impacting leisure travel. Group business is typically defined as a minimum of 10 guestrooms booked together as part of the same piece of business.
Accordingly, business travelers represent the majority of the transient demand at our hotels. As a result, macroeconomic factors impacting business travel have a greater effect on our business than factors impacting leisure travel. Group business is typically defined as a minimum of 10 guestrooms booked together as part of the same piece of business.
Cash flows from Financing Activities 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 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.
Increased inflation may also have an adverse effect on our operating expenses, including, but not limited to, labor, supplies, repairs and maintenance, as these costs could increase at a faster rate than any increase in our revenues.
High inflation may also have an adverse effect on our operating expenses, including, but not limited to, labor, supplies, repairs and maintenance, as these costs could increase at a faster rate than any increase in our revenues.
We further adjust FFO for certain additional items that are not in NAREIT’s definition of FFO, such as transaction costs, pre-opening costs, gains or losses on extinguishment of indebtedness, amortization of share-based compensation, non-cash income tax expense or benefit, non-cash interest expense related to discontinued interest rate hedges, corporate and property-level severance, derivative gains or losses in accumulated other comprehensive income (loss) reclassified to earnings, and certain other income or expenses that we consider outside the normal course of operations.
We further adjust FFO for certain additional items that are not in NAREIT’s definition of FFO, such as transaction costs, pre-opening costs, gains or losses on extinguishment of indebtedness, amortization of share-based compensation, non-cash income tax expense or benefit, non-cash interest expense related to discontinued interest rate hedges, derivative gains or losses in accumulated other comprehensive income reclassified to earnings, and certain other income or expenses that we consider outside the normal course of operations.
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. 2022 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 flexible 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. 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.
The cost of all such 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 are 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.
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.
We also present Adjusted EBITDA, which includes additional adjustments for items such as transaction costs, pre-opening costs, gains or losses on extinguishment of indebtedness, amortization of share-based compensation, corporate and property-level severance, derivative gains or losses in accumulated other comprehensive income (loss) reclassified to earnings, and certain other income or expenses that we consider outside the normal course of operations.
We also present Adjusted EBITDA, which includes additional adjustments for items such as transaction costs, pre-opening costs, gains or losses on extinguishment of indebtedness, amortization of share-based compensation, derivative gains or losses in accumulated other comprehensive income reclassified to earnings, and certain other income or expenses that we consider outside the normal course of operations.
Room revenue comprised approximately 84.0% of our total revenues for the year ended December 31, 2022, 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 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.
Sources and Uses of Cash Cash flows from Operating Activities The net cash flow provided by operating activities totaled $256.5 million and $43.0 million for the years ended December 31, 2022 and 2021, respectively.
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.
The increase in other revenue attributable to the comparable properties 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 current year), and gift shop sales that corresponded to the increase in demand over the prior period.
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.
Results of Operations At December 31, 2022 and 2021, we owned 97 and 98 hotel properties, respectively. Based on when a hotel property is acquired, sold, or otherwise disposed, the operating results for certain hotel properties are not comparable for the years ended December 31, 2022 and 2021.
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.
Our principal sources of capital for the year ended December 31, 2022 were cash generated from operations and the sale of two hotel properties. Material Cash Requirements Our expected material cash requirements for the twelve months ending 2023 and thereafter are comprised of (i) contractually obligated expenditures; and (ii) other essential cash requirements.
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.
We consider EBITDA useful to an investor in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results. In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and disposals.
We consider EBITDA useful to an investor in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization expense) from our operating results.
The increase was the result of a $323.4 million increase in room revenue attributable to the comparable properties and a $11.2 million increase in room revenue attributable to the non-comparable properties.
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.
In addition, we had $600.0 million available on our Revolver at December 31, 2022. Our principal uses of capital for the year ended December 31, 2022 were our purchase of one hotel property, repayment of the outstanding balance on our Revolver, capital improvements and additions to hotel properties, and the repurchase of common shares under our share repurchase program.
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.
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 $15.4 million to $74.2 million for the year ended December 31, 2022, from $58.8 million for the year ended December 31, 2021.
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.
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. 36 The following table is a reconciliation of our GAAP net income (loss) to FFO attributable to common shareholders and unitholders and Adjusted FFO attributable to common shareholders and unitholders for the years ended December 31, 2022 and 2021 (in thousands): For the year ended December 31, 2022 2021 Net income (loss) $ 42,215 $ (311,088) Preferred dividends (25,115) (25,115) Depreciation and amortization 184,875 187,778 Impairment losses — 144,845 (Gain) loss on sale of hotel properties, net (1,017) 2,378 Noncontrolling interest in consolidated joint ventures (210) 4,384 Adjustments related to consolidated joint ventures (1) (187) (2,780) Adjustments related to unconsolidated joint ventures (2) 1,070 1,168 FFO 201,631 1,570 Transaction costs (345) 94 Pre-opening costs 2,258 144 Loss (gain) on extinguishment of indebtedness, net 39 (893) Amortization of share-based compensation 21,664 17,054 Non-cash income tax benefit (17) (40) Non-cash interest expense related to discontinued interest rate hedges 680 — Corporate and property-level severance (3) — 904 Derivative (gains) losses in accumulated other comprehensive income (loss) reclassified to earnings (4) (5,866) 10,658 Other expenses (5) 1,067 1,942 Adjusted FFO $ 221,111 $ 31,433 (1) Includes depreciation and amortization expense, impairment loss and loss on sale of hotel allocated to the noncontrolling interest in the consolidated joint ventures.
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.
These were partially offset by $48.1 million of net cash proceeds from the sale of two hotel properties. The net cash flow used in investing activities totaled $24.6 million for the year ended December 31, 2021 primarily due to $174.7 million used to purchase three hotel properties and $48.3 million in routine capital improvements and additions to our hotel properties.
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.
As of December 31, 2022, our total future minimum lease payments were $586.3 million, of which $11.6 million is scheduled to become due in the succeeding 12 months .
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.
The increase was a result of a $334.6 million increase in room revenue, a $58.0 million increase in food and beverage revenue, and a $15.4 million increase in other revenue. Room Revenue Room revenue increased $334.6 million to $1.0 billion for the year ended December 31, 2022, from $667.9 million for the year ended December 31, 2021.
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 net cash flow used in financing activities was partially offset by $1.0 billion in gross proceeds from the issuances of the senior notes. 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 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.
We consider our accounting policies over investment in hotel properties and revenue recognition to be our critical accounting estimates. See Note 2 to our consolidated financial statements for further descriptions of such accounting policies.
We consider our accounting policies over impairment and purchase price allocation to be our critical accounting estimates. See Note 2 to our consolidated financial statements for further descriptions of such accounting policies.
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.
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.
As of December 31, 2022, we had approximately $2.2 billion in debt outstanding with a weighted average interest rate of 3.57%, of which $294.0 million is scheduled to become due in the succeeding 12 months, excluding the Term Loans for which we exercised our one year extension option in January 2023.
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.
The components of our interest expense for the years ended December 31, 2022 and 2021 were as follows (in thousands): For the year ended December 31, 2022 2021 $ Change Senior Notes $ 38,820 $ 34,079 $ 4,741 Revolver and Term Loans 34,126 54,733 (20,607) Mortgage loans 13,563 13,306 257 Amortization of deferred financing costs 5,967 5,884 83 Non-cash interest expense related to interest rate hedges 679 (1,636) 2,315 Total interest expense $ 93,155 $ 106,366 $ (13,211) Gain (Loss) on Sale of Hotel Properties, net During the year ended December 31, 2022, we sold two hotel properties for an aggregate sales price of approximately $49.9 million and recorded a net gain on the sales of approximately $1.0 million.
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.
As of December 31, 2022, approximately $22.1 million was held in FF&E reserve accounts for future capital expenditures. 40 Critical Accounting Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period.
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; • distributions, including those necessary to qualify for taxation as a REIT; and • corporate and other general and administrative expenses.
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.
Property Operating Expenses Property operating expenses increased $232.9 million to $744.4 million for the year ended December 31, 2022, from $511.5 million for the year ended December 31, 2021.
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.
Other Income (Expense), net Other income (expense), net increased $17.1 million to income of $9.5 million for the year ended December 31, 2022, from expense of $7.6 million for the year ended December 31, 2021.
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.
The increase in food and beverage revenue attributable to the comparable properties was primarily due to an increase in banquet and catering revenues from group business and the reopening of certain food and beverage outlets.
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 decrease in depreciation and amortization expense attributable to the comparable properties was primarily related to furniture, fixtures and equipment that were fully depreciated in 2021, partially offset by an increase in depreciation and amortization expense related to recently acquired and recently renovated hotels. Impairment Losses During the year ended December 31, 2021, we recorded impairment losses of $144.8 million.
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.
The increase was primarily attributable to the reclassification of unrealized gains and losses from accumulated other comprehensive income (loss) due to the discontinuation of certain cash flow hedges in each of the periods. 35 Interest Expense Interest expense decreased $13.2 million to $93.2 million for the year ended December 31, 2022, from $106.4 million for the year ended December 31, 2021.
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 following are the key hotel operating statistics for the comparable properties: For the year ended December 31, 2022 2021 Occupancy 69.0 % 57.8 % ADR $ 187.25 $ 149.08 RevPAR $ 129.13 $ 86.11 Food and Beverage Revenue Food and beverage revenue increased $58.0 million to $117.0 million for the year ended December 31, 2022, from $59.0 million for the year ended December 31, 2021.
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.
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. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income as a measure of our operating performance.
These non-GAAP financial measures should be considered along with, but not as alternatives to, net income as a measure of our operating performance.
The increase was due to a $234.8 million increase in property operating expenses attributable to the comparable properties, which was partially offset by a $1.9 million decrease in property operating expenses attributable to the non-comparable properties.
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.
(5) Represents expenses and income outside of the normal course of operations including debt modification costs, legal and other costs, and hurricane-related costs that were not reimbursed by insurance. 37 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.
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.
The following table is a reconciliation of our GAAP net income (loss) to EBITDA, EBITDA re and Adjusted EBITDA for the years ended December 31, 2022 and 2021 (in thousands): For the year ended December 31, 2022 2021 Net income (loss) $ 42,215 $ (311,088) Depreciation and amortization 184,875 187,778 Interest expense, net 88,596 105,370 Income tax expense 1,518 1,188 Adjustments related to unconsolidated joint ventures (1) 1,519 1,633 EBITDA 318,723 (15,119) (Gain) loss on sale of hotel properties, net (1,017) 2,378 Impairment losses — 144,845 EBITDA re 317,706 132,104 Transaction costs (345) 94 Pre-opening costs 2,258 144 Loss (gain) on extinguishment of indebtedness, net 39 (893) Amortization of share-based compensation 21,664 17,054 Corporate and property-level severance (2) — 904 Derivative (gains) losses in accumulated other comprehensive income (loss) reclassified to earnings (3) (5,866) 10,658 Other expenses (4) 1,067 1,942 Adjusted EBITDA $ 336,523 $ 162,007 (1) Includes our ownership interest in the interest, depreciation, and amortization expense of the unconsolidated joint ventures.
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.
Additionally, the increase was attributable to an increase in property insurance premiums and an increase in ground rent expense due to rent owed as a percentage of revenue and the impact of ground rent increases due to annual consumer price index adjustments.
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.
Refer to the "Results of Operations" section for further discussion of our operating results for the years ended December 31, 2022 and 2021. 39 Cash flows from Investing Activities 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.
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 decrease in the recognition of the Wyndham termination payment was due to certain Wyndham agreements expiring in 2021. The termination payments were fully recognized as of December 31, 2022. Depreciation and Amortization Depreciation and amortization expense decreased $2.9 million to $184.9 million for the year ended December 31, 2022, from $187.8 million for the year ended December 31, 2021.
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.
(2) Includes our ownership interest in the depreciation and amortization expense of the unconsolidated joint ventures. (3) The year ended December 31, 2021 includes severance for associates at hotels operating under collective bargaining agreements. (4) Reclassification of interest rate swap (gains) losses from accumulated other comprehensive income (loss) 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. (4) Reclassification of interest rate swap gains from accumulated other comprehensive income to earnings for discontinued interest rate hedges.
General and Administrative General and administrative expense increased $8.8 million to $56.3 million for the year ended December 31, 2022, from $47.5 million for the year ended December 31, 2021.
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.
Property Tax, Insurance and Other Property tax, insurance and other expense decreased $1.9 million to $87.0 million for the year ended December 31, 2022, from $88.9 million for the year ended December 31, 2021.
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.
The non-comparable properties include ten hotels that were sold or otherwise disposed in 2022 and 2021 and four hotels that were acquired in 2022 and 2021.
The non-comparable properties include two hotel properties that were sold and one acquisition that was completed in 2022.
The net cash flow used in financing activities totaled $239.3 million for the year ended December 31, 2021 primarily due to the redemption of the $475.0 million senior notes due 2025 with a redemption premium of $9.5 million, $356.3 million in repayment of Term Loans, $200.0 million in repayment of the Revolver, $149.2 million in repayment of mortgage loans, $31.8 million in distributions to shareholders and unitholders, $14.8 million in deferred financing cost payments, $2.5 million paid to repurchase common shares, and $1.5 million in scheduled mortgage loan principal payments.
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.
(4) Represents expenses and income outside of the normal course of operations including debt modification costs, legal and other costs, and hurricane-related costs that were not reimbursed by insurance. 38 Liquidity and Capital Resources As of December 31, 2022, we had $536.4 million of cash, cash equivalents, and restricted cash reserves as compared to $713.9 million at December 31, 2021.
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.
The increase in room revenue from the comparable properties was attributable to an increase in RevPAR, including a significant increase in ADR, resulting from an increase in leisure travel, as well as some recoveries in business and group bookings, as compared to the prior period. Though RevPAR increased compared to 2021, it remained below pre-pandemic levels.
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.
(2) The year ended December 31, 2021 includes severance for associates at hotels operating under collective bargaining agreements. (3) Reclassification of interest rate swap (gains) losses from accumulated other comprehensive income (loss) to earnings for discontinued interest rate hedges.
(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
During the year ended December 31, 2022, the following significant activities took place: • Paid off the $200.0 million outstanding balance on our Revolver using cash on hand. • Sold two hotel properties for a combined sales price of approximately $49.9 million. • Exercised a one-year extension option on a mortgage loan extending the maturity to April 2023, with a second one-year extension option still remaining. • Purchased and retired approximately 4.9 million shares for $57.6 million under a new share repurchase program. • Acquired the 124-room 21c Hotel in Nashville, Tennessee for $59.0 million. • Satisfied the requirements to exit all COVID-related restrictions under our Revolver and Term Loan agreements. 31 • Amended a Term Loan agreement to increase the amount of the Term Loan up to $200.0 million and extend the maturity to January 2026. • Provided notice to the lenders that we would be exercising our one-year extension option on approximately $225.0 million of the principal balances on certain Term Loans, extending the maturities to January 2024.
Added
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.
Removed
The increase was the result of a $56.2 million increase in food and beverage revenue attributable to the comparable properties and a $1.9 million increase in food and beverage revenue attributable to the non-comparable properties.
Added
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.
Removed
The increase was the result of a $14.3 million increase in other revenue attributable to the comparable properties and a $1.1 million increase in other revenue attributable to the non-comparable properties.
Added
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.
Removed
The components of our property operating expenses for the comparable properties were as follows (in thousands): For the year ended December 31, 2022 2021 $ Change Room expense $ 246,615 $ 170,136 $ 76,479 Food and beverage expense 85,128 40,937 44,191 Management and franchise fee expense 91,534 50,748 40,786 Other operating expense 298,671 225,366 73,305 Total property operating expenses $ 721,948 $ 487,187 $ 234,761 34 The increase in property operating expenses attributable to the comparable properties corresponded to an increase in demand over the prior period.
Added
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.
Removed
Management and franchise fee expense for the years ended December 31, 2022 and 2021 included a reduction in management and franchise fee expense of $4.1 million and $14.1 million, respectively, related to the recognition of the $36.0 million Wyndham termination payment received in 2019.
Added
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.
Removed
The decrease was the result of a $1.3 million decrease in depreciation and amortization expense attributable to the comparable properties and a $1.6 million decrease in depreciation and amortization expense attributable to the non-comparable properties.
Added
(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
The impairment losses included $5.9 million related to two hotel properties that were sold in May 2021 and $138.9 million related to the DoubleTree Metropolitan New York City that was sold in December 2021. There was no impairment loss recorded during the year ended December 31, 2022.
Added
In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and disposals.
Removed
The decrease was attributable to a $5.7 million decrease in property tax, insurance and other expense attributable to the non-comparable properties, which was partially offset by a $3.8 million increase in property tax, insurance and other expense attributable to the comparable properties.
Added
As of December 31, 2023, approximately $32.0 million was held in FF&E reserve accounts for future capital expenditures.
Removed
The increase in property tax, insurance and other expense attributable to the comparable properties was attributable to recognizing a larger benefit during the year ended December 31, 2021 than during the year ended December 31, 2022 related to the reversal of accrued real estate tax liabilities in excess of the amounts owed for certain of our California hotels acquired in our merger with FelCor Lodging Trust.
Removed
The increase in general and administrative expense was primarily attributable to an increase in share-based compensation expense, as well as an increase in payroll tax expense due to payroll tax credits in the prior year that did not recur in the current year.
Removed
Interest expense decreased due to lower average debt balances and lower effective interest rates due to financing transactions that closed during the year ended December 31, 2021, as well as the impact of exiting the covenant relief period during 2022 under our Revolver and Term Loan agreements.
Removed
During the year ended December 31, 2021, we sold seven hotel properties for an aggregate sales price of approximately $208.5 million and recorded a net loss on the sales of approximately $2.4 million.
Removed
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
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
These were partially offset by $198.6 million of net cash proceeds from the sale of seven hotel properties.
Removed
The net cash flow used in financing activities was partially offset by $5.0 million in borrowing on a Term Loan.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+2 added−2 removed3 unchanged
Biggest changeOur 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. Changes in market interest rates on our fixed rate debt impact the fair value of our debt, but such changes have no impact on our consolidated financial statements.
Biggest change(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.
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 $38.4 million. Item 8. Financial Statements and Supplementary Data Refer to the Index to Financial Statements on page F-1. Item 9.
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.
As of December 31, 2022, we had approximately $1.2 billion of total variable rate debt outstanding (or 54.0% of total indebtedness) with a weighted-average interest rate of 3.28% 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, 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, 2022, the estimated fair value of our fixed rate debt was $875.6 million, which is 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, 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.
After taking into consideration the effect of interest rate swaps, 98.7% of our total indebtedness was fixed or effectively fixed.
After taking into consideration the effect of interest rate swaps, 88.5% of our total indebtedness was fixed or effectively fixed.
For debt obligations outstanding as of December 31, 2022, the following table presents the principal repayments and related weighted-average interest rates by contractual maturity dates (in thousands): 2023 2024 2025 2026 2027 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)(3) $ 294,005 $ 405,657 $ 400,000 $ 105,000 $ — $ — $1,204,662 Weighted-average interest rate (3)(4) 3.44% 3.32% 3.24% 2.85% —% —% 3.28% Total $294,005 $405,657 $400,000 $605,000 $— $525,000 $2,229,662 (1) Excludes $10.7 million, $3.1 million and $0.5 million of net deferred financing costs on the senior notes, Term Loans and mortgage loans, respectively.
For 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.
As of December 31, 2022, 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 $0.3 million annually, taking into account our existing contractual hedging arrangements. 41 The following table provides information about our financial instruments that are sensitive to changes in 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.
Removed
(2) Excludes a $2.2 million fair value adjustment on debt. (3) The principal repayments and weighted-average interest rate for 2023 exclude the Term Loans for which we exercised our one year extension option in January 2023. (4) The weighted-average interest rate gives effect to interest rate swaps, as applicable.
Added
The following table provides information about our financial instruments that are sensitive to changes in interest rates.
Removed
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None.
Added
Changes in market interest rates on our fixed rate debt impact the fair value of our debt, but such changes have no impact on our consolidated financial statements.

Other RLJ 10-K year-over-year comparisons