DiamondRock Hospitality Company Annual Report 2021

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FY2021 Annual Report · DiamondRock Hospitality Company

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2021
ANNUAL
REPORT

OUR
VISION

TO CREATE OPPORTUNITIES FOR OUR SHAREHOLDERS AND ASSOCIATES

TO BETTER THEIR LIVES THROUGH SUCCESSFUL HOTEL INVESTMENTS.

Luxury Resort

▲▲ Lifestyle Resort

Urban Lifestyle

Key Gateway Markets

LO C AT I O N S I N K E Y G AT E WAY C I T I E S A N D D E S T I N AT I O N R E S O RT S

COVER: TOP, TRANQUILITY BAY, MARATHON, FLORIDA. BOTTOM, HENDERSON BEACH RESORT, DESTIN, FLORIDA. THIS PAGE: CAVALLO POINT, SAUSALITO, CALIFORNIA.

DEAR
SHAREHOLDERS

DiamondRock had a successful year as travel demand continued to recover

from the historic downturn caused by the global pandemic. During 2021,

DiamondRock benefited from its strategic pivot made over the last decade to

build a leading portfolio of leisure-oriented, lifestyle hotels and resorts. In many

ways, the roughly $500 million in transactions completed during this past year

mark a major milestone in the evolution of the Company. This success was

reflected in our total shareholder return, which increased 16.5% in 2021 and

ranks in the top quartile of our peer set for the trailing 3-year period.

WHAT WE HAVE ACCOMPLISHED
DURING COVID-19

The following highlight a few of DiamondRock’s

major achievements since the onset of the

COVID-19 pandemic:

value and distinguishes DiamondRock

from its peers. No other full-service public

lodging REIT has as high percentage of

short-term agreements.

n Unencumbering the Portfolio

Today only two of the Company’s 33 hotels

THE TRANSACTIONS COMPLETED

are subject to long-term management agree-

DURING THIS PAST YEAR MARK

ments. We converted six long-term brand

management agreements to terminable-

at-will agreements with third-party opera-

tors during the last two years alone. This

increased flexibility enhances net asset

A MAJOR MILESTONE IN THE

EVOLUTION OF THE COMPANY.

DIAMONDROCK HOSPITALITY 2021

D I A M O N D R O C K H O S P I T A L I T Y 2 0 2 1

n Dispositions

pandemic, which had essentially brought travel

The Company sold two of its most problem-

to a standstill in March 2020. Resorts led the

atic and under-performing hotels, freeing

way with many resorts reaching pre-pandemic

up more than $300 million of investment

highs. Urban hotels remained well below prior

capacity for the acquisition of on-strategy

levels of revenues and profits because of con-

and higher return hotels.

tinuing suppressed business travel demand

n Acquisitions

despite the challenging environment our

The Company acquired three resorts and one

operators, working closely with our asset man-

boutique hotel for a total of $220 million.

agers, were able to beat the competitive hotel

and restrictions on group meetings. However,

set market share on an aggregate basis by an

impressive 15.7 percentage points and end the

year with a market share of 126.1 percent.

IDENTIFYING AND EXECUTING ON

MAJOR RETURN-ON-INVESTMENT

PROJECTS IS A CORNERSTONE OF

DIAMONDROCK’S STRATEGY TO

The recovery of demand and innovative sales

strategies led to revenue per available room

(“RevPAR”) increasing by 100.8% over 2020

for our portfolio. Due to tight cost controls,

CREATE SHAREHOLDER VALUE.

the profit flow-through was strong with Hotel

Adjusted EBITDA increasing more than $144

million over 2020.

n Portfolio Enhancing ROI Projects

RETURN-ON-INVESTMENT PROJECTS

The Company fundamentally repositioned

several of its most important hotels in key

markets, including Vail, Sonoma, and the

Florida Keys.

2021 OPERATING RESULTS

Hotel operations continued to rebound in

2021 from the dramatic impact of the global

Identifying and executing on major return-on-

investment projects is a cornerstone of

DiamondRock’s strategy to create shareholder

value. The following projects were completed

in 2021:

n The Lodge at Sonoma

This luxury resort was reimagined into a

special lifestyle experience, converting to

DIAMONDROCK HOSPITALITY 2021

D I A M O N D R O C K H O S P I T A L I T Y 2 0 2 1

an Autograph Collection brand in July 2021.

resort occupies an irreplaceable location on

The resort is expected to break records for

one of the premier beaches in Florida.

top and bottom-line results in 2022.

n Bourbon Orleans Hotel

n The Hythe Vail

This 220-room independent boutique hotel,

The conversion to a Luxury Collection brand

located in the heart of the French Quarter,

in November 2021 was the culmination of

was acquired in July 2021 for $89.9 million.

a four-year, $40 million repositioning and

rebranding of this resort. The resort showed

promising results in December 2021 and into

2022 and is expected to exceed all of its out-

standing results from pre-pandemic years.

n Margaritaville Beach House Key West

This lifestyle resort was transformed into

a Margaritaville in November 2021, which

included two new bar outlets, a retail store,

IN 2021 DIAMONDROCK RANKED #1 AS

GLOBAL LISTED HOTEL SECTOR LEADER

BY GRESB REAL ESTATE ASSESSMENT.

an enhanced pool experience and new

n Henderson Beach Resort

arrival upgrade. The resort is expected to

This recently built 170-room independent

achieve record revenue and profits in 2022.

luxury resort in Destin, Florida was pur-

chased in December 2021 for $112.5 million.

ACQUISITIONS

n Tranquility Bay Beachfront Resort

The Company acquired four hotels and resorts

This is a unique deal for a luxury resort

over the last year. The properties were all on-

with 103 units (231 bedrooms) that gives

strategy and continued the major evolution of

DiamondRock fee simple ownership of

the DiamondRock portfolio:

16 units and material long-term revenue

participation from the remaining condomin-

n Henderson Park Inn

ium units without any capital expenditure

This 37-room independent beachfront resort

obligation for these residential units. The

in Destin, Florida was acquired in July 2021

resort was acquired in January 2022 for the

for $27.5 million. The fee simple, boutique

purchase price of $63 million.

iii

DIAMONDROCK HOSPITALITY 2021

D I A M O N D R O C K H O S P I T A L I T Y 2 0 2 1

ESG EXCELLENCE

LOOKING FORWARD

The Company is driven to remain a leader

As we look forward, DiamondRock has numer-

on environmental, social, and governance

ous advantages: a high-quality portfolio

(“ESG”) areas. 2021 marked the 8th year that

well-suited for the post-pandemic consumer,

we issued an annual Corporate Responsibility

significant return-on-investment projects

Report. In 2021 DiamondRock ranked #1 as

underway that will enhance future returns, and

Global Listed Hotel Sector Leader by GRESB

a balance sheet with capacity to facilitate new

Real Estate Assessment, a global organiza-

acquisitions. With the travel industry likely to

tion that sets the standard for evaluating ESG

continue its recovery from the impact of the

excellence within the real estate industry.

global pandemic, DiamondRock is well posi-

ISS, a prominent proxy advisor, also awarded

tioned among its peers to excel. With that set

the Company its coveted ISS ESG Corporate

up, the Company’s entire management team

Rating Prime Status, which is a designation

is excited for what comes next and to seize

only held by the top 10% of the real estate

on opportunities in order to generate leading

industry worldwide.

shareholder returns.

Thank you for your continued support.

MARK W. BRUGGER

President and Chief Executive Officer

DIAMONDROCK HOSPITALITY 2021

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended December 31, 2021
OR

Commission file number 001-32514
DIAMONDROCK HOSPITALITY COMPANY
(Exact Name of Registrant as Specified in Its Charter)

Maryland
(State of Incorporation)

2 Bethesda Metro Center, Suite 1400,
Bethesda, Maryland
(Address of Principal Executive Offices)

20-1180098
(I.R.S. Employer Identification No.)

20814
(Zip Code)

Title of Each Class
Common Stock, $0.01 par value
8.250% Series A Cumulative Redeemable Preferred
Stock, $0.01 par value per share

(240) 744-1150
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Trading symbol(s)
DRH
DRH Pr A

Name of Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act ☑ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☑ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange

Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant

to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer

Large Accelerated Filer

Non-accelerated filer

☐

☑

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of

its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
The aggregate market value of the common equity held by non-affiliates of the Registrant (assuming for these purposes, but without
conceding, that all executive officers and Directors are “affiliates” of the Registrant) as of June 30, 2021, the last business day of the Registrant’s
most recently completed second fiscal quarter, was $2.0 billion (based on the closing sale price of the Registrant’s Common Stock on that
date as reported on the New York Stock Exchange).

The registrant had 210,746,895 shares of its $0.01 par value Common Stock outstanding as of February 22, 2022.

Portions of the registrant’s Proxy Statement for its 2022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange

Commission not later than 120 days after December 31, 2021, are incorporated by reference in Part III herein.

Documents Incorporated by Reference

INDEX

PART I

Page No.

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 6. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . .

Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . .

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . .

Item 14. Principal Accounting Fees and Services

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

68
72

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K, other than purely historical information,
including estimates, projections, statements relating to our business plans, objectives and expected operating
results, and the assumptions upon which those statements are based, are “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements
generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,”
“strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” “strive,” “endeavor,”
“mission,” “goal,” and similar expressions. Forward-looking statements are based on current expectations
and assumptions that are subject to risks and uncertainties which may cause actual results to differ
materially from the forward-looking statements.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to
differ materially from those expressed or implied by forward-looking statements include, among others, the
following:

• negative developments in the economy, including, but not limited to, job loss or growth trends, a

continued increase in unemployment or a decrease in corporate earnings and investment;

• increased competition in the lodging industry and from alternative lodging channels or third party

internet intermediaries in the markets in which we own properties;

• failure to effectively execute our long-term business strategy and successfully identify and complete

acquisitions;

• risks and uncertainties affecting hotel management, operations and renovations (including, without
limitation, construction delays, increased construction costs, disruption in hotel operations and the
risks associated with our management and franchise agreements);

• risks associated with the availability and terms of financing and the use of debt to fund acquisitions
and renovations or refinance existing indebtedness, including the impact of higher interest rates on
the cost and/or availability of financing;

• risks associated with our level of indebtedness and our ability to satisfy our obligations under our

debt agreements;

• risks associated with the lodging industry overall, including, without limitation, decreases in the

frequency of travel and increases in operating costs;

• risks and uncertainties associated with our obligations under our management agreements;

• risks associated with natural disasters and other unforeseen catastrophic events, including the

emergence of a pandemic or other widespread health emergency;

• the adverse impact of COVID-19 on the U.S., regional and global economies, travel, the hospitality

industry, and on our financial condition and results of operations and our hotels;

• costs of compliance with government regulations, including, without limitation, the Americans with

Disabilities Act;

• potential liability for uninsured losses and environmental contamination;

• risks associated with security breaches through cyber-attacks or otherwise, as well as other significant
disruptions of our and our hotel managers’ information technologies and systems, which support
our operations and those of our hotel managers;

• risks associated with our potential failure to qualify as a real estate investment trust (“REIT”) under

the Internal Revenue Code of 1986, as amended (the “Code”);

• possible adverse changes in tax and environmental laws; and

• risks associated with our dependence on key personnel whose continued service is not guaranteed.

The risks and uncertainties set forth above are not exhaustive. Other sections of this Annual Report on

Form 10-K, including Item 1A “Risk Factors” and Item 7 “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” discuss these and other risks and uncertainties that could
cause actual results and events to differ materially from such forward-looking statements.

Except as required by law, we undertake no obligation to update or revise publicly any forward-looking

statements, whether as a result of new information, future events or otherwise.

References in this Annual Report on Form 10-K to “we,” “our,” “us” and “the Company” refer to
DiamondRock Hospitality Company, including as the context requires, DiamondRock Hospitality Limited
Partnership, as well as our other direct and indirect subsidiaries.

SUMMARY OF RISK FACTORS

The risk factors detailed in Item 1A entitled “Risk Factors” in this Annual Report on Form 10-K, are

the risks that we believe are material to our investors and a reader should carefully consider them. Those
risks are not all of the risks we face and other factors not presently known to us or that we currently believe
are immaterial may also affect our business if they occur. The following is a summary of the risk factors
detailed in Item 1A:

• The novel coronavirus (COVID-19) pandemic has caused, and could continue to cause, severe

disruption in the U.S., regional and global economies, travel and the hospitality industry and has
impacted, and could continue to materially and adversely impact, our financial condition and results
of operations.

• Our hotels are subject to significant competition and our business model, especially our concentration

in premium full-service hotels, can be highly volatile, which may make it difficult to execute our
long-term business strategy.

• Unfavorable market and economic conditions in the U.S. and in the specific markets where our
hotels are located and other factors beyond our control, including effects on macroeconomic
indicators such as such as U.S. gross domestic product (“GDP”) growth, employment, personal
discretionary spending levels, corporate earnings and investment, foreign exchange rates and travel
demand, may adversely affect the lodging industry.

• We may be unable to comply with financial covenants, obtain additional waivers, or renegotiate such
covenants under our senior unsecured credit facility and unsecured term loans, which could result
in a default and potential acceleration of our indebtedness and impact our ability to make additional
borrowings.

• The increase in the use of third-party internet travel intermediaries and the increase in alternative

lodging channels, such as Airbnb, both generally and as a result of the COVID-19 pandemic, could
adversely affect our profitability.

• The decrease in business-related travel, both generally and as a result of the COVID-19 pandemic,

could adversely affect our profitability.

• Due to restrictions in our hotel management agreements, franchise agreements, mortgage agreements

and ground leases, we may not be able to sell our hotels at the highest possible price, or at all.

• We may be subject to unknown or contingent liabilities related to hotels we currently own, as well as

hotels that we have sold or may acquire in the future, for, among other things, uninsured losses
and environmental contamination.

• We are susceptible to delays in completing ongoing or future renovations and capital improvements
due to potential lack of funding for such expenditures, disruptions in the supply of materials or
products and the inability of contractors to perform on a timely basis, or at all.

• Several of our hotels are operated under franchise agreements and we are subject to the risks

associated with the franchise brand and the costs associated with maintaining the franchise license,
as well as risks associated with concentrating the majority of our portfolio under the Marriott and
Hilton brands.

• Our results of operations are highly dependent on the management of our hotel properties by

third-party hotel management companies.

• High interest rates and/or the unavailability of certain types of financing could make it difficult for
us to finance or refinance properties and adversely impact the amounts, sources and costs of capital
available to us in the future.

• The terms of the agreements governing our outstanding indebtedness may limit our financial and

operating activities and our ability to make distributions to our stockholders and may also adversely
affect our ability to incur additional debt to fund future needs.

• Failure to maintain our qualification as a REIT would have significant adverse consequences to the

value of our common stock.

• Natural disasters caused by climate change or otherwise, terrorist attacks, active shooter attacks,
significant military actions, outbreaks of contagious diseases, pandemics, such as the COVID-19
pandemic, or other widespread health emergencies may adversely impact our financial condition and
results of operations.

• We depend on senior executive officers whose continued service is not guaranteed, and changes in

our senior executive officers may adversely affect the operation of our business.

• We and our hotel managers rely on information technology in our operations and any material

failures, inadequacies, interruptions, security failures, social engineering attacks or cyber-attacks of
our or our hotel managers’ information technologies and systems could harm our business.

• Even if we maintain our status as a REIT, in certain circumstances, we may be subject to federal and

state income taxes, which would reduce our cash available for distribution to our stockholders.

• We may be subject to litigation, which could have a material adverse effect on our financial condition,
results of operations, cash flow and trading price of our common stock and our 8.250% Series A
Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”).

• We must comply with applicable governmental regulations, including, without limitation, the

Americans with Disabilities Act, which could be costly.

• The ability of our stockholders to control our policies and effect a change of control of our
company is limited by certain provisions of our charter, our bylaws and by Maryland law.

• We may be unable to generate sufficient cash flows from our operations to make distributions to our
stockholders at expected levels, and we cannot assure you of our ability to make distributions in
the future.

This section contains forward-looking statements. You should refer to the explanation of the

qualifications and limitations on forward-looking statements beginning on page 4.

PART I

Item 1. Business

Overview

DiamondRock Hospitality Company is a lodging-focused Maryland corporation operating as a REIT
for federal income tax purposes. As of December 31, 2021, we owned a portfolio of 32 premium hotels and
resorts that contain 9,349 guest rooms located in 22 different markets in North America. On January 6,
2022, we acquired the Tranquility Bay Beachfront Resort in Marathon, Florida.

As an owner, rather than an operator, of lodging properties, we receive all of the operating profits or

losses generated by our hotels after the payment of fees due to hotel managers and hotel brands, which are
calculated based on the revenues and profitability of each hotel.

Our strategy is to apply aggressive asset management, prudent financial strategy, and disciplined
capital allocation to high quality lodging properties in North American urban and resort markets with
superior growth prospects and high barriers-to-entry. Our goal is to deliver long-term stockholder returns
that exceed those generated by our peers through a combination of dividends and enduring capital
appreciation.

Our primary business is to acquire, own, asset manage and renovate premium hotel properties in the
United States. Our portfolio is concentrated in major urban market cities and destination resort locations.
Each of our hotels is managed by a third party — either an independent operator or a brand operator, such
as Marriott International, Inc. (“Marriott”).

We critically evaluate each of our hotels to ensure that we own a portfolio of hotels that conforms to

our vision, supports our mission and corresponds with our strategy. On a regular basis, we analyze our
portfolio to identify opportunities to invest capital in certain projects or market non-core assets for sale in
order to increase our portfolio quality. We are committed to a conservative capital structure with prudent
leverage. We regularly assess the availability and affordability of capital in order to maximize stockholder
value and minimize enterprise risk. In addition, we are committed to following sound corporate governance
practices and to being open and transparent in our communications with our stockholders.

The COVID-19 pandemic has adversely affected the hospitality industry in general. For additional

information regarding the impact of COVID-19 on the Company and the measures we have taken to
address such impact, see “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operation.”

Our Company

We commenced operations in July 2004 and became a public reporting company in May 2005. Our
common stock and Series A Preferred Stock are traded on the New York Stock Exchange (the “NYSE”)
under the symbols “DRH” and “DRH Pr A”, respectively. We have been successful in acquiring, financing
and asset managing our hotels.

Our Business Strategy

Our strategy is to apply aggressive asset management, conservative leverage, and disciplined capital
allocation to high quality lodging properties in North American urban and resort markets with superior
growth prospects and high barriers-to-entry.

We plan to strategically allocate capital in order to create value depending on our cost of capital. If our

cost of capital is attractive, we expect to:

• pursue strategic acquisitions;

• consider opportunistically raising equity; and

• evaluate opportunities to dispose of non-core hotels.

If we believe our cost of capital is elevated, we expect to create value over the long term to stockholders

by deploying investment capacity into share repurchases.

We prefer a relatively efficient capital structure. We structure our hotel investments to be straightforward

and to fit within our conservative capital structure; however, we will consider a more complex transaction
(e.g. the issuance of operating partnership units to limited partners or entry into a joint venture) if we believe
that the projected returns to our stockholders will significantly exceed the returns that would otherwise be
available.

High-Quality Urban and Destination Resort Hotels

As of December 31, 2021, we owned 32 premium hotels and resorts throughout North America. Our

hotels and resorts are primarily categorized as luxury and upper upscale as defined by STR, Inc. and are
generally located in high barrier-to-entry markets with multiple demand generators. Our portfolio is composed
primarily of hotels and resorts located in popular leisure destinations and major urban markets. We
consider lodging properties located in major urban markets and resort destinations to be the most capable
of generating dynamic cash flow growth and achieving superior long-term capital appreciation.

We have enhanced our hotel portfolio over the past several years by recycling capital from non-core
hotels, located in slower growth markets, to higher quality hotels located primarily in urban and destination
resort markets. We have repositioned our portfolio through the acquisition of urban and resort hotels that
align with our strategic goals while disposing of non-core hotels. Our exposure to resorts and urban lifestyle
hotels increased with acquisitions in locations such as Key West, Fort Lauderdale and Destin, Florida,
Sedona, Arizona, New Orleans, Louisiana, and Sausalito, Huntington Beach and South Lake Tahoe,
California. Ten of our last 12 acquisitions have been resort destination hotels. Over 90% of our portfolio
EBITDA for the year ended December 31, 2021 is derived from core urban and resort destination hotels. Our
capital recycling program has also achieved several other important strategic portfolio goals that include
improving our portfolio’s geographic, operator and brand diversity.

We are highly sensitive to our cost of capital and may pursue acquisitions that create value in the near
term. We will continue to evaluate our portfolio for opportunities to continue to upgrade our portfolio by
considering strategic acquisitions and opportunistic non-core hotel dispositions.

Our acquisition strategy focuses primarily on hotels that we believe present unique value-add
opportunities. In addition, we have repositioned certain of our hotels through a change in brand,
comprehensive renovation and/or change in third-party hotel manager to a more efficient operator. This
focus has helped us achieve the strategic goals of improving our portfolio’s brand and management diversity.

We evaluate each hotel in our portfolio to assess the optimal brand and management strategy for the
individual hotel and market. We leverage the leading global hotel brands at many of our hotels, which are
flagged under a brand owned by Marriott or Hilton Worldwide Holdings, Inc. (“Hilton”). We also maintain
a portion of our hotels as independent lifestyle hotels. We believe that premier global hotel brands create
significant value as a result of each brand’s ability to produce incremental revenue through their strong
reservation and rewards systems and sales organizations. We are also interested in owning non-branded hotels
located in premier or unique markets where we believe that the returns on such a hotel may be higher than
if the hotel were operated under a globally-recognized brand.

Innovative Asset Management

We believe that we can create significant value in our portfolio through innovative asset management
strategies such as rebranding, renovating and repositioning our hotels. We regularly evaluate our portfolio
to determine if there are opportunities to employ these value-add strategies.

Our asset management team is focused on improving hotel profit margins through revenue management

strategies and cost control programs. Our asset management team also focuses on identifying new and
potential value creation opportunities across our portfolio, including implementing resort or amenity fees,
creating incremental guest rooms, leasing out restaurants to more profitable third-party operators, converting
under-utilized space to revenue-generating meeting space and implementing programs to reduce energy
consumption and increase labor efficiency.

Our senior management team has established a broad network of hotel industry contacts and
relationships, including relationships with hotel owners, financiers, operators, project managers and
contractors and other key industry participants. We use our broad network of hotel industry contacts and
relationships to maximize the value of our hotels. We strive to negotiate management agreements that give us
the right to exert influence over the management of our properties, annual budgets and all capital
expenditures (all, to the extent permitted under the REIT rules), and then to use those rights to continually
monitor and improve the performance of our properties. We cooperatively partner with our hotel managers in
an attempt to increase operating results and long-term asset values at our hotels. In addition to working
directly with the personnel at our hotels, our senior management team also has long-standing professional
relationships with our hotel managers’ senior executives, and we work directly with these senior executives to
improve the performance of our hotels.

Conservative Capital Structure

We believe that a conservative capital structure maximizes investment capacity while reducing enterprise

risk. We currently employ a conservative debt profile with prudent leverage. We maintain balance sheet
flexibility with our existing corporate cash, limited near-term debt maturities, capacity under our senior
unsecured credit facility and 24 of our 32 hotels unencumbered by mortgage debt as of December 31, 2021.
We are well positioned for potential credit market volatility and uncertainty in the lodging cycle given that
we have limited near-term debt maturities and the majority of our debt is financed with long-term, fixed-rate
mortgages with a well-laddered maturity schedule. We believe it is prudent to reduce the inherent risk of
highly cyclical lodging fundamentals through a low leverage capital structure. Over time, we intend to finance
our long-term growth with issuances of common and preferred equity securities and debt financings
having staggered maturities. We may also consider entering into joint ventures or alliances with one or more
third parties to pursue attractive investment opportunities.

We believe that our strategically designed capital structure is a value creation tool that can be used over

the entire lodging cycle. Specifically, we believe that lower leverage benefits us in the following ways:

• provides capacity to fund attractive acquisitions;

• enhances our ability to maintain a sustainable dividend, to the extent we have REIT taxable income;

• enables us to opportunistically repurchase shares during periods of stock price dislocation; and

• provides capacity to fund late-cycle capital needs.

As of December 31, 2021, our outstanding debt consists of a combination of property-specific
mortgage debt, all but one of which bears interest at a fixed rate, unsecured term loans, and outstanding
borrowings on our senior unsecured credit facility. We prefer that a significant portion of our portfolio remain
unencumbered by debt in order to provide maximum balance sheet flexibility. We expect that our strategy
will enable us to maintain a balance sheet with an appropriate amount of debt throughout all phases of the
lodging cycle.

Corporate Responsibility

We incorporate governance, environmental, and social initiatives in our overall business strategy,
investment decisions, and asset management strategies. Our corporate responsibility platform was created in
2014. In 2021, as a result of our commitment to sustainability, we were ranked first in sustainability
performance as the Global Listed / Hotel Sector Leader by the GRESB Real Estate Assessment.

We are committed to transparent reporting of our environmental, social, and governance (“ESG”)

initiatives. In December 2021, we published our most recent annual Sustainability Report, which includes
ESG policies, environmental and social programs, historic results, and performance targets. The annual
Sustainability Report is prepared in accordance with relevant international standards and best practices,
specifically the Sustainable Accounting Standards Board (“SASB”) for the Real Estate Sector.

Accounting metrics and disclosures for the real estate industry are provided by the SASB, which
publishes the Real Estate Sustainability Accounting Standard. This standard advises that total energy
consumed (“Total Energy Consumption”) and total water withdrawn (“Total Water Consumption”) are the

metrics that best correspond with the real estate industry. The water and energy data we use is first gathered
from utility statements and then reviewed, aggregated, and analyzed by third-parties.

In 2021, we engaged an independent third party to verify our energy and water consumption data. The

following charts display our Total Energy Consumption and Total Water Consumption for 2020, the last
fiscal year for which data is available. These metrics relate to our hotels owned for the entire year presented.

We display key metrics, documents, programs and policies through the Global Reporting Initiative
(“GRI”) Index, and in accordance with the GRI framework. We also display disclosures in accordance with
the framework established by the Task Force on Climate-Related Financial Disclosures (“TCFD”).

Annually, we submit a response to the GRESB survey (the “GRESB Report”), which benchmarks our

approach and performance on ESG indicators against other real estate companies. The GRESB Report is
accessible on our website. The information included in, referenced to, or otherwise accessible through the
GRESB Report, is not incorporated by reference in, or considered to be a part of, this report or any document
unless expressly incorporated by reference therein.

For more information on our corporate responsibility platform, as well as our enterprise-wide policies,
please see our current Sustainability Report available at https://investor.drhc.com/sustainability-report. The
information included in, referenced to, or otherwise accessible through our website, is not incorporated by
reference in, or considered to be part of, this report or any document unless expressly incorporated by reference
therein.

Our Corporate Structure

We conduct our business through a traditional umbrella partnership REIT, or UPREIT, in which our

hotels are owned by subsidiaries of our operating partnership, DiamondRock Hospitality Limited Partnership.
We are the sole general partner of our operating partnership and own either directly or indirectly 99.7% of
the limited partnership units (“common OP units”) of our operating partnership. The remaining 0.3% of the
common OP units are held by third parties and executive officers of the Company. The majority of our
common OP units were issued in connection with our acquisition of Cavallo Point, The Lodge at the Golden
Gate (“Cavallo Point”) in December 2018. Each common OP unit currently owned by holders other than
us is redeemable, at the option of the holder, for an amount of cash equal to the market value of one share
of our common stock or, at our election, one share of our common stock, in each case subject to adjustment
upon the occurrence of stock splits, mergers, consolidations or similar pro-rata share transactions. As of
December 31, 2021, limited partners held 639,622 common OP units. In the future, we may issue additional
common OP units from time to time in connection with acquiring hotel properties, financing, compensation,
or other reasons.

In order for the income from our hotel investments to constitute “rents from real property” for
purposes of the gross income tests required for REIT qualification, we must lease each of our hotels to a
wholly-owned subsidiary of our taxable REIT subsidiary, or TRS (each, a TRS lessee), or to an unrelated
third party. As of December 31, 2021, we leased all of our hotels to TRS lessees. In turn, our TRS lessees must
engage a third-party management company to manage the hotels.

The following chart shows our corporate structure as of the date of this report:

Competition

The hotel industry is highly competitive and our hotels are subject to competition from other hotels for

guests. Competition is based on a number of factors, including convenience of location, reputation, brand
affiliation, price, range of services, guest amenities, and quality of customer service. Competition is specific to
the individual markets in which our properties are located and will include competition from existing and
new hotels operated under brands in the full-service, select-service and extended-stay segments. We believe
that properties flagged with a Marriott or Hilton brand will enjoy the competitive advantages associated with
their operations under such brand. These global brands’ reservation systems and national advertising,
marketing and promotional services combined with strong management by third-party operators enable our
properties to perform favorably in terms of both occupancy and room rates relative to other brands and non-
branded hotels. The guest loyalty programs operated by these global brands generate repeat guest business
that might otherwise go to competing hotels. Increased competition may have a material adverse effect on
occupancy, Average Daily Rate (or ADR) and Revenue per Available Room (or RevPAR), or may require us
to make capital improvements that we otherwise would not undertake, which may result in decreases in the
profitability of our hotels.

In addition to competing with traditional hotels and lodging facilities, we compete with alternative

lodging, including third-party providers of short-term rental properties and serviced apartments. We
compete based on a number of factors, including room rates, quality of accommodations, service levels,
convenience of location, reputation, reservation systems, brand recognition and supply and availability of
alternative lodging.

We face competition for the acquisition of hotels from institutional pension funds, private equity
funds, REITs, hotel companies and others who are engaged in hotel acquisitions and investments. Some of

these competitors have substantially greater financial and operational resources than we have and may have
greater knowledge of the markets in which we seek to invest. This competition may reduce the number of
suitable investment opportunities offered to us and increase the cost of acquiring our targeted hotel
investments.

Seasonality

The periods during which our hotels experience higher revenues vary from property to property,

depending principally upon location and the customer base served. Accordingly, we expect some seasonality
in our business. Volatility in our financial performance from the seasonality of the lodging industry could
adversely affect our financial condition and results of operations.

Regulatory Matters

Governmental Regulations

Compliance with various governmental regulations has an impact on our business, including our
capital expenditures, earnings and competitive position, which can be material. We incur costs to monitor
and take actions to comply with governmental regulations that are applicable to our business, which include,
among others, federal securities laws and regulations, applicable stock exchange requirements, REIT and
other tax laws and regulations, environmental and health and safety laws and regulations, local zoning, usage
and other regulations relating to real property and the Americans with Disabilities Act of 1990.

See “Item 1A — Risk Factors” for a discussion of material risks to us, including, to the extent material,
to our competitive position, relating to governmental regulations, and see “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations” together with our consolidated financial
statements, including the related notes included therein, for a discussion of material information relevant to
an assessment of our financial condition and results of operations, including, to the extent material, the
effects that compliance with governmental regulations may have upon our capital expenditures and earnings.

Employees and Human Capital

As of December 31, 2021, we employed 28 full-time employees. We believe that our relations with our

employees are good. None of our employees is a member of any union. During 2021, all employees involved
in the day-to-day operation of the Company’s hotels were employed by third-party management companies
engaged pursuant to hotel management agreements. The employees of our hotel managers at the Courtyard
New York Manhattan/Fifth Avenue, Courtyard New York Manhattan/Midtown East, Hilton Garden Inn
New York/Times Square Central, Westin Boston Seaport District, and Hilton Boston Downtown/Faneuil
Hall are currently represented by labor unions and are subject to collective bargaining agreements.

We believe prioritizing employee well-being is a key element for attracting and retaining the best and
most talented associates. Our key human capital management objectives are to attract, recruit, hire, develop
and promote a deep and diverse bench of talent that translates into a strong and successful workforce. To
support these objectives, our human resources programs are designed to develop talent to prepare them for
the critical roles and leadership positions for the future; reward and support employees through competitive
pay and benefit programs; enhance our culture through efforts to foster, promote, and preserve a culture
of diversity and inclusion; and evolve and invest in technology, tools, and resources to enable employees at
work.

Insurance

We carry comprehensive liability, fire, extended coverage, earthquake, windstorm, business interruption
and rental loss insurance covering all of the properties in our portfolio. In addition, we carry earthquake and
terrorism insurance on our properties in an amount and with deductibles which we believe are commercially
reasonable. We do not carry insurance for generally uninsured losses such as loss from riots, war or acts
of God. Certain of the properties in our portfolio are located in areas known to be seismically active or subject
to hurricanes and we believe that we have appropriate insurance for those risks, although they are subject
to higher deductibles than ordinary property insurance.

Most of our hotel management agreements and mortgage agreements require that we obtain and

maintain property insurance, business interruption insurance (including interruption as a result of
COVID-19), flood insurance, earthquake insurance (if the hotel is located in an “earthquake prone zone” as
determined by the U.S. Geological Survey) and other customary types of insurance related to hotels. We
comply with all such requirements. In addition, either we or the hotel manager are responsible for obtaining
general liability insurance, workers’ compensation and employer’s liability insurance.

Available Information

We maintain a website at the following address: www.drhc.com. We make our proxy statements, annual

reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), available on our website free of charge as soon as reasonably practicable
after such reports and amendments are electronically filed with, or furnished to, the Securities and Exchange
Commission (the “SEC”). Such reports are also available by accessing the EDGAR database on the SEC’s
website at www.sec.gov.

Our website is also a key source of important information about us. We post to the Investor Relations

section of our website important information about our business, our operating results and our financial
condition and prospects, including, for example, information about material acquisitions and dispositions,
our earnings releases and certain supplemental financial information related or complimentary thereto. The
website also has a Corporate Governance page that includes, among other things, copies of our charter,
our bylaws, our Code of Business Conduct and Ethics and the charters for each standing committee of our
Board of Directors: currently, the Audit Committee, the Compensation Committee and the Nominating
and Corporate Governance Committee. We intend to disclose on our website any amendment to, or waiver
of, any provisions of our Code of Business Conduct and Ethics that apply to any of our directors, executive
officers or senior financial officers that would otherwise be required to be disclosed under the rules of the
SEC or the NYSE. Copies of our charter, our bylaws, our Code of Business Conduct and Ethics and our SEC
reports are also available in print to stockholders upon request addressed to Investor Relations,
DiamondRock Hospitality Company, 2 Bethesda Metro Center, Suite 1400, Bethesda, Maryland 20814 or
through the “Information Request” section on the Investor Relations page of our website.

The information included in, referenced to, or otherwise accessible through our website, is not
incorporated by reference in, or considered to be a part of, this report or any document unless expressly
incorporated by reference therein.

DiamondRock Hospitality Company is traded on the NYSE under the symbols “DRH” and

“DRH Pr A”.

Item 1A. Risk Factors

Set forth below are the risks that we believe are material to our investors and should be carefully
considered. Those risks are not all of the risks we face and other factors not presently known to us or that
we currently believe are immaterial may also affect our business if they occur. This section contains forward-
looking statements. You should refer to the explanation of the qualifications and limitations on forward-
looking statements beginning on page 4.

Risks Related to Our Business and Operations

The outbreak of the novel coronavirus (COVID-19) has caused, and could continue to cause, severe disruptions
in the U.S., regional and global economies, travel and the hospitality industry and has impacted, and could
continue to materially and adversely impact, our financial condition and results of operations.

COVID-19, including the emergence of various variants, has caused, and could continue to cause,
widespread disruptions to the U.S. and global economy and has contributed to significant volatility and
negative pressure in financial markets.

The full extent to which COVID-19, or any future pandemic, epidemic or outbreak of any other highly

infectious disease, impacts our operations will depend on future developments, which are highly uncertain

and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the
emergence and characteristics of new variants, the actions taken to contain the pandemic or mitigate its
impact, including the adoption, administration and effectiveness of available COVID-19 vaccines, and the
direct and indirect economic effects of the pandemic and containment measures, among others. The rapid
development and fluidity of this situation precludes any prediction as to the full adverse impact of
COVID-19. Nevertheless, COVID-19 has materially and adversely affected, and COVID-19 or any future
pandemic, epidemic or outbreak of any other highly infectious disease may continue to materially and
adversely affect, our business, financial condition and results of operations, and our ability to pay dividends,
and may also have the effect of heightening many of the risks described below and within this “Risk
Factors” section, including:

• a complete or partial closure or re-closure of, or other operational issues at, one or more of our

hotels resulting from government, third-party hotel manager or franchisor action, which has materially
adversely affected, and could continue to materially adversely affect, our operations;

• the postponement or cancellation of conferences, conventions, festivals, sporting events, public

events and other group business that would have otherwise brought individuals to the cities in which
our hotels are located, which has caused, and could continue to cause, a decrease in occupancy
rates over a prolonged period of time and exacerbated the seasonal volatility at our hotels;

• a general decline of in-person business meetings and an increase in the use of teleconferencing and

video-conference technology, which could cause a sustained shift away from business-related travel and
have a material adverse effect on the overall demand for hotel rooms;

• a decrease in individuals’ willingness to travel as a result of the public health risks and social impacts
of such outbreak or a decrease in consumer spending, which could affect the ability of our hotels
to generate sufficient revenues to meet operating and other expenses in the short- and long-term;

• reduced economic activity impacting our businesses, financial condition and liquidity or that of our
third-party hotel managers or franchisors, which could result in us, the third-party hotel manager or
the franchisor being unable to comply with operational and performance standards under the
applicable management and franchise agreements;

• reduced economic activity impacting the businesses, financial condition and liquidity of our retail

and restaurant tenants located at our hotels, which has caused, and could continue to cause, one or
more of such tenants to be unable to meet their obligations to us in full, or at all, to otherwise seek
modifications of such obligations or to declare bankruptcy;

• severe disruption and instability in the global financial markets or deteriorations in credit and

financing conditions, which could make it difficult for us to access debt and equity capital on attractive
terms, or at all, and may impact our ability to fund business activities and repay debt on a timely
basis;

• the potential that we are unable to comply with financial covenants or obtain further waivers under

the agreements governing our senior unsecured credit facility, unsecured term loans and other debt, or
the inability to renegotiate such covenants, which could result in a default and potential acceleration
of indebtedness and impact our ability to make additional borrowings under our senior unsecured
credit facility or otherwise in the future;

• the lack of funding, disruptions in the supply of materials or products or the inability of contractors

to perform on a timely basis or at all, which has caused, and could continue to cause, delays in
completion of ongoing or future hotel renovations and capital improvements at our hotels;

• difficulties in sourcing and transporting materials or products necessary to operate our hotels, such

as linens or cleaning supplies, and a decrease in the availability of adequate staffing at our hotels, which
could impact our ability to provide our guests with the customary level of service provided at our
hotels, including our premium full-service hotels;

• the inability of our TRS lessees to renew or enter into new management agreements for our hotels
on favorable terms, or at all, which could cause interruptions in the operations at certain hotels;

• a general decline in business activity and demand for real estate transactions, and more specifically,
demand for hotel properties, which could adversely affect our ability or desire to make strategic
acquisitions or dispositions;

• the negative impact on the health of our personnel, particularly if a significant number of our senior

executive officers are impacted, which could result in a deterioration in our ability to ensure
business continuity during a disruption;

• increased operating costs at our hotels due to enhanced cleaning and hygiene protocols required or
recommended by major hotel brands, the Centers for Disease Control and Prevention, unions and
state and local governments; and

• increased labor costs due to demands for higher wages due to health risks associated with working in

hotels and requirements for more staff to implement cleaning protocols.

Our business model, especially our concentration in premium full-service hotels, can be highly volatile.

We solely own hotels, a very different asset class from many other REITs. A typical office REIT, for
example, has long-term leases with third-party tenants, which provide a relatively stable long-term stream of
revenue. Our TRS lessees, on the other hand, do not enter into leases with hotel managers. Instead, the
TRS lessee engages the hotel manager pursuant to a management agreement and pays the manager a fee for
managing the hotel. The TRS lessee receives all of the operating profit or losses at the hotel. Moreover,
virtually all hotel guests stay at the hotel for only a few nights, so the rate and occupancy at each of our hotels
changes every day. As a result, our earnings may be highly volatile.

In addition to fluctuations related to our business model, our hotels are, and will continue to be,
subject to various long-term operating risks common to the hotel industry, many of which are beyond our
control, including:

• dependence on business and commercial travelers and tourism, both of which vary with consumer

and business confidence in the strength of the economy;

• decreases in the frequency of business travel that may result from alternatives to in-person meetings,

particularly in light of the continuing impact of COVID-19;

• competition from other hotels and alternative lodging channels located in the markets in which we

own properties;

• competition from third-party internet travel intermediaries;

• an over-supply or over-building of hotels in the markets in which we own properties, which could

adversely affect occupancy rates, revenues and profits at our hotels;

• increases in energy and transportation costs and other expenses affecting travel, which may affect

travel patterns and reduce the number of business and commercial travelers and tourists;

• increases in operating costs due to inflation and other factors that may not be offset by increased

room rates; and

• changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related

costs of compliance.

In addition, our hotels are mostly in the premium full-service segment of the hotel business, which,
historically, tends to have the strongest operating results in a growing economy and the weakest results in a
contracting or slow growth economy when many travelers might curtail travel or choose lower cost hotels. In
periods of weak demand, profitability is negatively affected by the relatively high fixed costs of operating
premium full-service hotels as compared to other classes of hotels.

The occurrence of any of the foregoing factors could have a material adverse effect on our business,

financial condition, results of operations and our ability to make distributions to our stockholders.

Economic conditions and other factors beyond our control may adversely affect the lodging industry.

Our entire business is related to the lodging industry. The performance of the lodging industry is highly

cyclical and has historically been linked to key macroeconomic indicators, such as U.S. GDP growth,

employment, personal discretionary spending levels, corporate earnings and investment, foreign exchange
rates and travel demand.Given that our hotels are concentrated in major urban market cities and destination
resort locations in the U.S., our business may be particularly sensitive to changes in foreign exchange rates
or a negative international perception of the U.S. arising from its political or other positions. A substantial
part of our business strategy is based on the belief that the lodging markets in which we own properties
will experience, or continue to experience, improving economic fundamentals, but we cannot assure you such
improvement will occur, or continue to occur.However, in the event conditions in the industry deteriorate
or do not see sustained improvement for an extended period of time as a result of COVID-19, or other factors,
or there is an extended period of economic weakness in the lodging markets in which we own properties,
our occupancy rates, revenues and profitability could be adversely affected.Furthermore, other
macroeconomic factors, such as consumer confidence and conditions which negatively shape public
perception of travel, including the scope, severity and duration of the COVID-19 pandemic in the U.S., may
have a negative effect on the lodging industry and may adversely impact our revenues and profitability.

Our hotels are subject to significant competition.

Currently, the markets where our hotels are located are very competitive. However, a material increase

in the supply of new hotel rooms to a market can quickly destabilize that market and existing hotels can
experience rapidly decreasing RevPAR and profitability. If such over-building occurs in one or more of our
major markets, our business, financial condition, results of operations and our ability to make distributions
to our stockholders may be materially adversely affected.

Our hotels are subject to seasonal volatility, which is expected to contribute to fluctuations in our financial
condition and results of operations.

The periods during which our hotels experience higher revenues vary from property to property,

depending principally upon location and the customer base served. This seasonality can be expected to
cause periodic fluctuations in a hotel’s room revenues, occupancy levels, room rates and operating expenses.We
can provide no assurances that our cash flows will be sufficient to offset any shortfalls that occur as a
result of these fluctuations.Volatility in our financial performance resulting from the seasonality of our
hotels could have a material adverse effect on our business, financial condition, results of operations and
our ability to make distributions to our stockholders.

The increase in the use of third-party internet travel intermediaries and the increase in alternative lodging
channels, such as Airbnb, could adversely affect our profitability.

Many of our managers and franchisors contract with third-party internet travel intermediaries,
including, but not limited to Expedia.com and Priceline.com and their subsidiaries. These internet
intermediaries are generally paid commissions and transaction fees by our managers and franchisors for
sales of our rooms through such agencies. These intermediaries initially focused on leisure travel, but have
grown to focus on corporate travel and group meetings as well. If bookings through these intermediaries
increase, these internet intermediaries may be able to negotiate higher commissions, reduced room rates or
other contract concessions from us, our managers or our franchisors. In addition, internet intermediaries
use extensive marketing, which could result in hotel consumers developing brand loyalties to the offered
brands and such internet intermediary instead of our management or franchise brands. Further, internet
intermediaries emphasize pricing and quality indicators, such as a star rating system, at the expense of
brand identification. In response to these intermediaries, the brand operators and franchisors have launched
initiatives to offer discounted rates for booking on their sites, which could put downward pressure on rates
and revenue. In addition, an increasing number of companies have entered various aspects of the online travel
market. Google, for example, has established a hotel meta-search business (“Hotel Ads”), as well as its
“Book on Google” reservation functionality. An increase in hotel reservations made through Google or its
competitors, such as Apple, Amazon or Facebook, may reduce the value of our franchise brands, which may
negatively affect our average rates and revenues.

In addition to competing with traditional hotels and lodging facilities, we compete with alternative

lodging, including third-party providers of short-term rental properties and serviced apartments, such as
Airbnb, as well as alternative meeting and event space platforms, such as Convene. We compete based on a

number of factors, including room rates, quality of accommodations, service levels, convenience of location,
reputation, reservation systems, brand recognition and supply and availability of alternative lodging and
event space.Increasing use of these alternative facilities could materially adversely affect the occupancy at our
hotels and could put downward pressure on average rates and revenues.

The rise of social media review platforms, including, but not limited to Tripadvisor.com, could impact

our occupancy levels and operating results as people might be more inclined to write about their dissatisfaction
rather than satisfaction with a hotel stay.

The need for business-related travel, and, therefore, demand for rooms in some of our hotels may be materially
and adversely affected by the increased use of business-related technology.

The increased use of teleconferencing and video-conference technology by businesses could result in

decreased business travel as companies increase the use of technologies that allow multiple parties from
different locations to participate in meetings without traveling to a centralized meeting location, such as our
hotels. To the extent that such technologies, or new technologies, play an increased role in day-to-day
business interactions and the necessity for business-related travel decreases, demand for hotel rooms may
decrease and our hotels could be materially and adversely affected.

Investments in hotels are illiquid and we may not be able to respond in a timely fashion to adverse changes in
the performance of our properties.

Because real estate investments are relatively illiquid, our ability to promptly sell one or more hotel

properties or investments in our portfolio in response to changing economic, financial and investment
conditions may be limited.Moreover, the Code imposes restrictions on a REIT’s ability to dispose of
properties that are not applicable to other types of real estate companies.In particular, the tax laws applicable
to REITs require that we hold our hotels for investment, rather than primarily for sale in the ordinary
course of business, which may cause us to forego or defer sales of hotels that would otherwise be in our best
interests.

In addition, the real estate market is affected by many factors that are beyond our control, including:

• adverse changes in international, national, regional and local economic and market conditions;

• changes in supply of competitive hotels;

• changes in interest rates and in the availability, cost and terms of debt financing;

• changes in tax laws and property tax rates, or an increase in the assessed valuation of a property for

real estate tax purposes;

• changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related

costs of compliance with laws and regulations, fiscal policies and ordinances;

• fluctuations in foreign currency exchange rates;

• the ongoing need for capital improvements, particularly in older structures;

• changes in operating expenses; and

• pandemics and the outbreak of diseases, federal, state and local government shutdowns, airline
strikes, civil unrest, active shooter attacks, acts of God, including earthquakes, floods, wildfires,
hurricanes and other natural disasters and acts of war or terrorism, including the consequences of
terrorist acts such as those that occurred on September 11, 2001, which may result in uninsured losses.

It may be in the best interest of our stockholders to sell one or more of our hotels in the future. We cannot

predict whether we will be able to sell any hotel property or investment at an acceptable price or otherwise
on reasonable terms and conditions. We also cannot predict the length of time that will be necessary to find
a willing purchaser and to close the sale of a hotel property or loan.

These facts and any others that would impede our ability to respond to adverse changes in the
performance of our hotel properties could have a material adverse effect on our operating results and
financial condition, as well as our ability to make distributions to our stockholders.

Due to restrictions in our hotel management agreements, franchise agreements, mortgage agreements and
ground leases, we may not be able to sell our hotels at the highest possible price, or at all.

Certain of our current hotel management and franchise agreements are long-term.

All but four of our hotel management agreements are terminable at our option. The remaining four

hotel management agreements have remaining terms ranging from approximately six years to 37 years,
inclusive of renewal periods that are exercisable at the option of the property manager. We are subject to
franchise agreements at certain of our properties, with remaining terms of up to 29 years, inclusive of renewal
periods that are exercisable at the option of the franchisor. See Item 2, Properties, for hotel management
and franchise agreement details. Because some of our hotels would have to be sold subject to the applicable
agreement, the term length of an agreement may deter some potential purchasers and could adversely
impact the price realized from any such sale. To the extent that we receive lower sale proceeds, our business,
financial condition, results of operations and our ability to make distributions to stockholders could be
materially adversely affected.

Our mortgage agreements contain certain provisions that may limit our ability to sell our hotels.

In order to assign or transfer our rights and obligations under certain of our mortgage agreements, we

generally must obtain the consent of the lender, pay a fee equal to a fixed percentage of the outstanding
loan balance, and pay any costs incurred by the lender in connection with any such assignment or transfer.
These provisions of our mortgage agreements may limit our ability to sell our hotels which, in turn, could
adversely impact the price realized from any such sale. To the extent that we receive lower sale proceeds,
our business, financial condition, results of operations and our ability to make distributions to stockholders
could be materially adversely affected.

Our ground leases contain certain provisions that may limit our ability to sell our hotels.

Our ground lease agreements with respect to the Bethesda Marriott Suites, the Salt Lake City Marriott

Downtown at City Creek, the Westin Boston Seaport District, the Hotel Palomar Phoenix, the Courtyard
New York Manhattan/Fifth Avenue and Cavallo Point, as well as the ground lease underlying our annex
sublease at the Orchards Inn Sedona, require the consent of the lessor for assignment or transfer. These
provisions of our ground leases may limit our ability to sell our hotels which, in turn, could adversely
impact the price realized from any such sale. In addition, at any given time, investors may be disinterested in
buying properties subject to a ground lease and may pay a lower price for such properties than for a
comparable property owned in fee simple or they may not purchase such properties at any price. Accordingly,
we may find it difficult to sell a property subject to a ground lease or may receive lower proceeds from any
such sale. To the extent that we receive lower sale proceeds or are unable to sell the hotel at an opportune time
or at all, our business, financial condition, results of operations and our ability to make distributions to
stockholders could be materially adversely affected.

Some of our hotels are subject to rights of first offer that may limit our ability to sell our hotels.

We are subject to a franchisor’s or operator’s right of first offer, in some instances under our franchise

agreements or management agreements. Such provisions may limit our ability to sell our hotels which, in
turn, could adversely impact the price realized from any such sale. To the extent that we receive lower sale
proceeds, our business, financial condition, results of operations and our ability to make distributions to
stockholders could be materially adversely affected.

We may be subject to unknown or contingent liabilities related to recently sold or acquired hotels, as well as
hotels that we may sell or acquire in the future.

Our recently sold or acquired hotels, as well as hotels we may sell or acquire in the future, may be
subject to unknown or contingent liabilities for which we may be liable to the buyers or for which we may
have no recourse, or only limited recourse, against the sellers. In general, the representations and warranties
provided under our transaction agreements related to the sale or purchase of a hotel may survive for a
defined period of time after the completion of the transaction.

Furthermore, indemnification under such agreements may be limited and subject to various materiality

thresholds, a significant deductible, or an aggregate cap on losses. As a result, there is no guaranty that we
will not be obligated to reimburse buyers for their losses or that we will be able to recover any amounts with
respect to losses due to breaches by sellers of their representations and warranties.

In addition, the total amount of costs and expenses that may be incurred with respect to the unknown

or contingent liabilities may exceed our expectations, and we may experience other unanticipated adverse
effects, all of which could materially and adversely affect our operating results and cash flows.

We are subject to risks associated with our ongoing need for renovations and capital improvements as well as
financing for such expenditures.

In order to remain competitive, our hotels have an ongoing need for renovations and other capital
improvements, including replacements, from time to time, of furniture, fixtures and equipment. These
capital improvements may give rise to the following risks:

• construction cost overruns and delays;

• a possible shortage of available cash to fund capital improvements and the related possibility that

financing for these capital improvements may not be available to us on affordable terms;

• the renovation investment failing to produce the returns on investment that we expect;

• disruptions in the operations of the hotel as well as in demand for the hotel while capital improvements

are underway; and

• disputes with franchisors/hotel managers regarding compliance with relevant franchise/management

agreements.

The costs of these capital improvements or profit displacements during the completion of these capital
improvements could have a material adverse effect on our business, financial condition, results of operations
and our ability to make distributions to our stockholders.

In addition, we may not be able to fund capital improvements or acquisitions solely from cash provided
from our operating activities because we generally must distribute at least 90% of our REIT taxable income,
determined without regard to the dividends paid deduction and excluding net capital gains, each year to
maintain our REIT tax status. As a result, our ability to fund capital expenditures or investments through
retained earnings is very limited. Consequently, we rely upon the availability of debt or equity capital to fund
our investments and capital improvements. These sources of funds may not be available on reasonable
terms or conditions.

In the event of natural disasters caused by climate change or otherwise, terrorist attacks, active shooter
attacks, significant military actions, outbreaks of contagious diseases or other events for which we may not
have adequate insurance, our operations may suffer.

Seven of our hotels (The Lodge at Sonoma Resort, Westin San Diego Downtown, Hotel Emblem San

Francisco, Renaissance Charleston Historic District Hotel, Kimpton Shorebreak Resort, The Landing Lake
Tahoe Resort & Spa, and Cavallo Point) are located in areas that are seismically active. Eight of our hotels
(Havana Cabana Key West, Margaritaville Beach House Key West, Westin Fort Lauderdale Beach Resort,
Henderson Park Inn, Henderson Beach Resort, Bourbon Orleans Hotel, Renaissance Charleston Historic
District Hotel, and Tranquility Bay Beachfront Resort) are located in areas that have experienced, and will
continue to experience, many hurricanes. Eleven of our hotels are located in metropolitan markets that
have been, or may in the future be, targets of actual or threatened terrorist attacks or active shooter attacks,
including New York City, Chicago, Boston, San Francisco and Washington, D.C. These hotels are material
to our financial results, having constituted 69% of our total revenues in 2021. In addition, to the extent that
climate change causes an increase in storm intensity or rising sea levels, our hotels, which are concentrated
in coastal areas and other areas that may be impacted by climate change, may be susceptible to an increase in
weather-related damage. Additionally, even in the absence of direct physical damage to our hotels, the
occurrence of any natural disasters, terrorist attacks, significant military actions, a changing climate in the
area of any of our hotels, outbreaks of pandemics or diseases, such as Zika, Ebola, COVID-19, H1N1 or

other similar viruses, or other casualty events, will likely have a material adverse effect on business and
commercial travelers and tourists, the economy generally and the hotel and tourism industries in particular.
While we cannot predict the impact of the occurrence of any of these events, such events may result in
decreases in consumer discretionary spending, including the frequency with which our customers choose to
stay at hotels or the amount they spend on hotels, which could result in a material adverse effect on our
business, financial condition, results of operations and our ability to make distributions to our stockholders.

We have acquired and intend to maintain comprehensive insurance on each of our hotels, including

liability, terrorism, fire and extended coverage, of the type and amount that we believe are customarily
obtained for or by hotel owners. We cannot guarantee that such coverage will continue to be available at
reasonable rates or with reasonable deductibles. Our Florida hotels (Havana Cabana Key West, Margaritaville
Beach House Key West, Westin Fort Lauderdale Beach Resort, Henderson Park Inn, Henderson Beach
Resort, and Tranquility Bay Beachfront Resort) each have a deductible of 5% of total insured value for a
named storm and the Renaissance Charleston Historic District Hotel and Bourbon Orleans Hotel each has
a deductible of 2% of total insured value. In addition, each of our California hotels (Westin San Diego
Downtown, Hotel Emblem San Francisco, Kimpton Shorebreak Resort, The Lodge at Sonoma Resort, and
Cavallo Point) have a deductible of 5% of total insured value for damage due to an earthquake. We have
submitted insurance claims relating to natural disasters at our hotels before and may need to submit similar
claims in the future. The prior claims and the increased incidence of substantial claims due to future
natural disasters may adversely impact the availability or pricing of insurance available to us.

Various types of catastrophic losses, like earthquakes, floods, wildfires, losses from foreign terrorist

activities, or losses from domestic terrorist activities may not be insurable or are generally not insured
because of economic infeasibility, legal restrictions or the policies of insurers. Future lenders may require
such insurance, and our failure to obtain such insurance could constitute a default under loan agreements.
Depending on our access to capital, liquidity and the value of the properties securing the affected loan in
relation to the balance of the loan, a default could have a material adverse effect on our results of operations
and ability to obtain future financing.

In the event of a substantial loss, our insurance coverage may not be sufficient to cover the full current

market value or replacement cost of our lost investment. Should an uninsured loss or a loss in excess of
insured limits occur, we could lose all or a portion of the capital we have invested in a hotel, as well as the
anticipated future revenue from that particular hotel. In that event, we might nevertheless remain obligated
for any mortgage debt or other financial obligations secured by or related to the property. Inflation, changes
in building codes and ordinances, environmental considerations and other factors might also prevent us
from using insurance proceeds to replace or renovate a hotel after it has been damaged or destroyed. Under
those circumstances, the insurance proceeds we receive might be inadequate to restore our economic
position with regard to the damaged or destroyed property.

Our results of operations are highly dependent on the management of our hotel properties by third-party hotel
management companies.

In order to qualify as a REIT, we cannot operate our hotel properties or control the daily operations of
our hotel properties. Our TRS lessees may not operate these hotel properties and, therefore, they must enter
into third-party hotel management agreements with one or more eligible independent contractors. Thus,
third-party hotel management companies that enter into management contracts with our TRS lessees control
the daily operations of our hotel properties.

Under the terms of the hotel management agreements that we have entered into, or that we will enter
into in the future, our ability to participate in operating decisions regarding our hotel properties is limited
to certain matters, including approval of the annual operating budget. We currently rely, and will continue to
rely, on these hotel management companies to adequately operate our hotel properties under the terms of
the hotel management agreements. While we and our TRS lessees closely monitor the performance of our
hotel managers, we do not have the authority to require any hotel property to be operated in a particular
manner or to govern any particular aspect of its operations (for instance, setting room rates and cost
structures). Thus, even if we believe that our hotel properties are being operated inefficiently or in a manner
that does not result in satisfactory occupancy rates, ADRs and operating profits, we may not have sufficient
rights under our hotel management agreements to enable us to force the hotel management company to

change its method of operation. We can only seek redress if a hotel management company violates the
terms of the applicable hotel management agreement with the TRS lessee, and then only to the extent of the
remedies provided for under the terms of the hotel management agreement. Four of our current
management agreements are non-terminable, subject to certain exceptions for cause or failure to achieve
certain performance targets. In the event that we need to replace any of our hotel management companies
pursuant to termination for cause or performance, we may experience significant disruptions at the affected
properties and the new management companies may not meet our performance expectations, which may
have a material adverse effect on our business, financial condition, results of operations and our ability to
make distributions to our stockholders.

We may be unable to maintain good relationships with third-party hotel managers and franchisors.

The success of our respective hotel investments and the value of our franchised properties largely
depend on our ability to establish and maintain good relationships with the third-party hotel managers and
franchisors of our respective hotel management and franchise agreements. If we are unable to maintain
good relationships with third-party hotel managers or franchisors, we may be unable to renew existing
management or franchise agreements or expand relationships with them. Additionally, opportunities for
developing new relationships with additional third-party hotel managers or franchisors may be adversely
affected. This, in turn, could have an adverse effect on our results of operations and our ability to execute our
repositioning strategy through a change in brand or change in third-party hotel manager.

A substantial number of our hotels operate under a brand owned by Marriott or Hilton; therefore, we are
subject to risks associated with concentrating our portfolio in two brands.

As of February 22, 2022, 16 of our 33 hotels operate under brands owned by Marriott and four of our
hotels operate under brands owned by Hilton. As a result, our success is dependent in part on the continued
success of Marriott and Hilton and their respective brands. Consequently, if market recognition or the
positive perception of Marriott or Hilton is reduced or compromised, the goodwill associated with the
Marriott- and Hilton-branded hotels in our portfolio may be adversely affected, which may have a material
adverse effect on our business, financial condition, results of operations and our ability to make distributions
to our stockholders.

Several of our hotels are operated under franchise agreements and we are subject to the risks associated with
the franchise brand and the costs associated with maintaining the franchise license.

As of February 22, 2022, 18 of our 33 hotels operate under Marriott or Hilton franchise agreements.
The maintenance of the franchise licenses for branded hotel properties is subject to the franchisors’ operating
standards and other terms and conditions set forth in the applicable franchise agreement. Franchisors
periodically inspect hotel properties to ensure that we, our TRS lessees and management companies follow
their brand standards.

If we fail to maintain these required standards, then the brand may terminate its agreement with us
and assert a claim for damages for any liability we may have caused, which could include liquidated damages.
Moreover, from time to time, we may receive notices from franchisors or the hotel brands regarding alleged
non-compliance with the franchise agreements or brand standards, and we may disagree with these claims
that we are not in compliance. Any disputes arising under these agreements could also lead to a termination
of a franchise or management agreement and a payment of liquidated damages. If we were to lose a franchise
or hotel brand for a particular hotel, it could harm the operation, financing, or value of that hotel due to
the loss of the franchise or hotel brand name, marketing support and centralized reservation system, all or
any of which could have a material adverse effect on our business, financial condition, results of operations
and our ability to make distributions to stockholders.

Contractual and other disagreements with third-party hotel managers and franchisors could make us liable to
them or result in litigation costs or other expenses.

Our management and franchise agreements with third-party hotel managers require us and the

applicable third-party hotel manager to comply with operational and performance conditions that are
subject to interpretation and could result in disagreements, and we expect this will be true of any management

and franchise agreements that we enter into with future third-party hotel managers or franchisors. At any
given time, we may be in disputes with one or more third-party hotel managers or franchisors.

Any such dispute could be very expensive for us, even if the outcome is ultimately in our favor. We
cannot predict the outcome of any arbitration or litigation, the effect of any negative judgment against us
or the amount of any settlement that we may enter into with any franchisor other third-party hotel manager.In
the event we terminate a management or franchise agreement early and the hotel manager or franchisor
considers such termination to have been wrongful, they may seek damages.Additionally, we may be required
to indemnify our third-party hotel managers and franchisors against disputes with third parties, pursuant
to our management and franchise agreements. An adverse result in any of these proceedings could materially
and adversely affect our revenues and profitability.

If we were to lose a brand license at one or more of our hotels, the value of the affected hotels could decline
significantly and we could incur significant costs to obtain new franchise licenses, which could materially and
adversely affect our results of operations and profitability as well as limit or slow our future growth.

If we were to lose a brand license, the underlying value of a particular hotel could decline significantly

from the loss of associated name recognition, marketing support, participation in guest loyalty programs
and the centralized reservation system provided by the franchisor or brand manager, which could require us
to recognize an impairment on the hotel. Furthermore, the loss of a franchise license at a particular hotel
could harm our relationship with the franchisor or brand manager, which could impede our ability to operate
other hotels under the same brand, limit our ability to obtain new franchise licenses or brand management
agreements from the franchisor or brand in the future on favorable terms, or at all, and cause us to incur
significant costs to obtain a new franchise license or brand management agreement for the particular
hotel. Accordingly, if we lose one or more franchise licenses or brand management agreements, it could
materially and adversely affect our results of operations and profitability as well as limit or slow our future
growth.

Our business may be adversely affected by consolidation in the lodging industry.

Consolidation among companies in the lodging industry may reduce our bargaining power in negotiating

management agreements and franchise agreements due to decreased competition among major brand
companies.For instance, in 2016, Marriott acquired Starwood Hotels & Resorts, resulting in the increased
portfolio concentration in the Marriott brand family (16 of our 33 hotels as of February 22, 2022). We believe
Marriott may use this leverage when negotiating for property improvement plans upon the acquisition of a
hotel in cases where the franchisor or hotel brand requires renovations to bring the physical condition of a
hotel into compliance with the specifications and standards each franchisor or hotel brand has developed.

Industry consolidation could also result in the lack of differentiation among the brands, which could
impact the ability to drive higher rates in those brands.In addition, to the extent that consolidation among
hotel brand companies adversely affects the loyalty reward program offered by one or more of our hotels,
customer loyalty to those hotels may suffer and demand for guestrooms may decrease. Furthermore,
because each hotel brand company relies on its own network of reservation systems, hotel management
systems and customer databases, the integration of two or more networks may result in a disruption to
operations of these systems, such as disruptions in processing guest reservations, delayed bookings or sales,
or lost guest reservations, which could adversely affect our financial condition and results of operations.
Additionally, following the completion of a merger of companies, the costs to integrate the companies may
be absorbed by our impacted hotel or hotels and adversely affect our financial condition and results of
operations.

Our ownership of properties through ground leases exposes us to the risks that we may have difficulty financing
such properties, be forced to sell such properties for a lower price, are unable to extend the ground leases at
maturity or lose such properties upon breach or termination of the ground leases.

We hold a leasehold or subleasehold interest in all or a portion of the land underlying eight of our
hotels owned as of December 31, 2021 (Bethesda Marriott Suites, Courtyard New York Manhattan/Fifth
Avenue, Salt Lake City Marriott Downtown at City Creek, Westin Boston Seaport District, JW Marriott
Denver Cherry Creek, Orchards Inn Sedona, Hotel Palomar Phoenix, and Cavallo Point), and the parking

areas at two of our hotels (Worthington Renaissance Fort Worth Hotel and Bourbon Orleans Hotel). We
may acquire additional hotels in the future subject to ground leases. In the past, from time to time, secured
lenders have been unwilling to lend, or otherwise charged higher interest rates, for loans secured by a leasehold
mortgage compared to loans secured by a fee simple mortgage. For this reason, we may have a difficult
time selling a property subject to a ground lease or may receive lower proceeds from a sale. Finally, as the
lessee under our ground leases, we are exposed to the possibility of losing the hotel, or a portion of the hotel,
upon termination, or an earlier breach by us, of the ground lease, which could result in a material adverse
effect on our business, financial condition, results of operations and our ability to make distributions to our
stockholders.

Furthermore, unless we purchase a fee simple interest in the land and improvements subject to our
ground leases, we will not have any economic interest in the land or improvements at the expiration of our
ground leases and therefore we generally will not share in any increase in value of the land or improvements
beyond the term of a ground lease, notwithstanding our capital outlay to purchase our interest in the
hotel or fund improvements thereon, and will lose our right to use the hotel.

The failure of tenants to make rent payments under our retail and restaurant leases may adversely affect our
results of operation.

On occasion, retail and restaurant tenants at our hotel properties may fail to make rent payments when

due.Generally, we hold security deposits in connection with each lease which may be applied in the event
that the tenant under the lease fails or is unable to make payments; however, these security deposits do not
provide us with sustained cash flow to pay distributions or for other purposes. In the event that a tenant
continually fails to make rent payments, the security deposits may be applied in full to the non-payment of
rents, but we face the risk of being able to recover only a portion of the rents due to us or being unable to
recover any amounts whatsoever. If we evict a tenant, we also face the risk of delay or inability to find a
suitable tenant or replacement tenant that suits the needs of our hotel.

We face competition for hotel acquisitions and investments and we may not be successful in identifying or
completing hotel acquisitions and investments that meet our criteria, which may impede our growth.

One component of our long-term business strategy is expansion through hotel acquisitions and

investments. However, we may not be successful in identifying or completing acquisitions or investments
that are consistent with our strategy. We compete with institutional pension funds, private equity funds,
REITs, hotel companies and others who are engaged in hotel acquisitions and investments. This competition
for hotel investments may increase the price we pay for hotels and these competitors may succeed in
acquiring those hotels that we seek to purchase. In addition, the number of entities competing for suitable
hotels may increase in the future, which would increase demand for these hotels and the prices we must pay to
acquire them. If we pay higher prices for hotels, our returns on investment and profitability may be
reduced. Also, future acquisitions of hotels, hotel companies or hotel investments may not yield the returns
we expect, especially if we cannot obtain financing without paying higher borrowing costs, and may result
in stockholder dilution.

Even if we successfully complete hotel acquisitions, there can be no assurance that we will be able to
successfully integrate the hotels we acquire into our existing operations or otherwise realize the expected
benefits of these acquisitions. In addition, the acquisition and subsequent integration of the additional hotels
into our existing portfolio may require significant time and focus from our management team and may
divert attention from the day-to-day operations of our business, which could delay the achievement of our
strategic objectives. Acquired properties may be located in markets where we may face risks associated with a
lack of market knowledge or understanding of the local economy, lack of business relationships in the
area and unfamiliarity with local governmental and permitting procedures. Further, the acquired properties
may present other unique risks due to the nature of the assets acquired. Any delay or failure on our part

to operate acquired properties to meet our financial expectations could impede our growth and have an
adverse effect on us, including our financial condition, results of operations, cash flow.

Actions by organized labor could have a material adverse effect on our business.

We believe that unions are generally becoming more aggressive about organizing workers at hotels in

certain geographic locations.Potential labor activities at these hotels could significantly increase the
administrative, labor and legal expenses and reduce the profits that we receive.If hotels in our portfolio are
organized, this could have a material adverse effect on our business, financial condition, results of operation
and our ability to make distributions to our stockholders.

We have entered into management agreements with third-party managers to operate our hotels.Our

hotel managers are responsible for hiring and maintaining the labor force at each of our hotels. From time
to time, strikes, lockouts, public demonstrations or other negative actions and publicity may disrupt hotel
operations at any of our hotels, negatively impact our reputation or the reputation of our brands, or
harm relationships with the labor forces at our hotels. We also may incur increased legal costs and indirect
labor costs as a result of contract disputes or other events. Additionally, hotels where our managers have
collective bargaining agreements with employees are more highly affected by labor force activities than
others. The resolution of labor disputes or new or re-negotiated labor contracts could lead to increased labor
costs, either by increases in wages or benefits or by changes in work rules that raise hotel operating costs.
Furthermore, labor agreements may limit the ability of our hotel managers to reduce the size of hotel
workforces during an economic downturn because collective bargaining agreements are negotiated between
the hotel managers and labor unions. We do not have the ability to control the outcome of these
negotiations.

Actions by federal, state or local jurisdictions could have a material adverse effect on our business.

Several local jurisdictions in the U.S. have enacted, or considered, legislation increasing the minimum

wage for workers in the jurisdiction. Some of this legislation applies to hotels only. If a jurisdiction in which
the Company owns a hotel adopts such legislation, then the cost to operate the hotel may increase
significantly and could have a material adverse effect on our business, financial condition, results of
operations and our ability to make distributions to our stockholders.

The Department of Labor has adopted regulations, effective as of January 1, 2020, that have the effect

of increasing the number of workers entitled to overtime. We expect these regulations may result in higher
operating costs and could have a material adverse effect on our business, financial condition, results of
operations and our ability to make distributions to our stockholders.

Risks Related to the Economy and Credit Markets

The lack of availability and terms of financing could adversely impact the amounts, sources and costs of
capital available to us.

The ownership of hotels is very capital intensive. We finance the acquisition of our hotels with a
mixture of equity and long-term debt, while we traditionally finance renovations and operating needs with
cash provided from operations or with borrowings from our corporate credit facility. Our mortgage loans
typically have a large balloon payment due at their maturity. Generally, we find it more efficient to place a
significant amount of debt on a small number of our hotels while we try to maintain a significant number of
our hotels unencumbered.

During periods of economic recession, it could be difficult for us to borrow money. In recent years, a
significant percentage of hotel loans were made by lenders who sold such loans to securitized lending vehicles,
such as commercial mortgage backed security (“CMBS”) pools. If the market for new CMBS issuances
results in CMBS lenders making fewer loans, there is a risk that the debt capital available to us could be
reduced.

An uncertain environment in the lodging industry and the economy generally could result in declines in our
average daily room rates, occupancy and RevPAR, and thereby have a material adverse effect on our results of
operations.

The performance of the lodging industry has traditionally been closely linked with the general economy.

A stall in economic growth or an economic recession could have a material adverse effect on our results of
operations. When a property’s occupancy or room rates drop to the point where its revenues are less than its
operating expenses, we are required to spend additional funds in order to cover that property’s operating
expenses.

In addition, if the operating results decline at our hotels that are secured by mortgage debt, there may

not be sufficient operating profits from the hotel to fund the debt service on the mortgage. In such a case,
we may be forced to choose from a number of unfavorable options, including using corporate cash, drawing
on our corporate credit facility, selling a hotel on disadvantageous terms, including an unattractive price,
or defaulting on the mortgage debt and permitting the lender to foreclose. Any one of these options could
have a material adverse effect on our business, results of operations, financial condition and ability to pay
distributions to our stockholders.

Risks Related to Our Debt and Financing

The instruments governing our existing indebtedness contain, and instruments governing our future indebtedness
may contain, financial covenants that could limit our operations and our ability to make distributions to our
stockholders.

Our existing property-level debt instruments contain, and instruments governing property-level debt we

incur in the future may contain, restrictions (including cash management provisions) that may, under
circumstances specified in the loan agreements, prohibit our subsidiaries that own our hotels from making
distributions or paying dividends, repaying loans to us or other subsidiaries or transferring any of their assets
to us or another subsidiary. Failure to meet our financial covenants could result from, among other things,
changes in our results of operations, the incurrence of additional debt or changes in general economic
conditions. In addition, this could cause one or more of our lenders to accelerate the timing of payments
and could have a material adverse effect on our business, financial condition, results of operations and our
ability to make distributions to our stockholders. The terms of our debt may restrict our ability to engage in
transactions that we believe would otherwise be in the best interests of our stockholders.

Our credit facility and term loans contain financial covenants that may constrain our ability to sell assets and
make distributions to our stockholders.

Our corporate credit facility and term loans contain several financial covenants, the most constraining

of which limits the amount of debt that we may incur compared to the value of our hotels (our leverage
covenant) and the amount of debt service we pay compared to our cash flow (our debt service coverage
covenant). If we were to default under either of these covenants or were unable to obtain a waiver of such
default, the lenders may require us to repay all amounts then outstanding under our credit facility and term
loans and may terminate our credit facility and term loans. These and our other financial covenants
constrain us from incurring material amounts of additional debt or from selling properties that generate a
material amount of income. In addition, our credit facility requires that we maintain a minimum number of
our hotels as unencumbered assets.

On each of June 9, 2020, August 14, 2020, January 20, 2021 and February 4, 2022, we executed
amendments to the credit agreements for our corporate credit facility and term loans. These amendments
provided for a waiver of the quarterly tested financial covenants beginning with the second quarter of 2020
through the first quarter of 2022 and allow for certain other modifications to the covenants thereafter
through the second quarter of 2023. The third amendment to the credit agreements for our corporate credit
facility and term loans also permits us to pay dividends on our Series A Preferred Stock in an amount up
to $25.0 million annually. Due to the negative impact of the COVID-19 pandemic on our operations in 2020
and 2021 and the uncertainty regarding its impact on our operations in 2022, there can be no assurance
that we will be able to meet our modified financial covenants in the future or that we will be able to obtain
additional waivers from our lenders, if needed.

Many of our existing mortgage debt agreements contain, and future mortgage debt agreements may contain,
“cash trap” provisions that could limit our ability to make distributions to our stockholders.

Certain of our loan agreements contain, and future mortgage debt agreements may contain, cash trap

provisions that may be triggered if the performance of the affected hotel or hotels declines. If the provisions
in one or more of these loan agreements are triggered, substantially all of the cash flow generated by the
hotel or hotels affected will be deposited directly into lockbox accounts and then swept into cash management
accounts for the benefit of the lenders. Cash will be distributed to us only after certain items are paid,
including deposits into leasing and maintenance reserves and the payment of debt service, insurance, taxes,
operating expenses, and extraordinary capital expenditures and leasing expenses. These “cash trap” provisions
do not provide the lender the right to accelerate repayment of the underlying debt. As of December 31,
2021, the debt service coverage ratios or debt yields for all of our mortgage loans, except for the mortgage
loan secured by the Salt Lake Marriott Downtown at City Creek, were below the minimum thresholds such
that the cash trap provision of each respective loan was triggered. We do not expect that such cash traps
will affect our ability to satisfy our short-term liquidity requirements. However, the triggering of cash traps
in the future could affect our liquidity and our ability to make distributions to our stockholders.

There is refinancing risk associated with our debt.

Our typical debt contains limited principal amortization; therefore, the vast majority of the principal

must be repaid at the maturity of the loan in a so-called “balloon payment.” In the event that we do not
have sufficient funds to repay the debt at the maturity of these loans, we will need to refinance this debt. If
the credit environment is constrained at the time of our debt maturities, we would have a very difficult time
refinancing debt. When we refinance our debt, prevailing interest rates and other factors may result in
paying a greater amount of debt service, which will adversely affect our cash flow, and, consequently, our
cash available for distribution to our stockholders. If we are unable to refinance our debt on acceptable terms,
we may be forced to choose from a number of unfavorable options. These options include agreeing to
otherwise unfavorable financing terms on one or more of our unencumbered assets, selling one or more
hotels on disadvantageous terms, including unattractive prices or defaulting on the mortgage and permitting
the lender to foreclose. Any one of these options could have a material adverse effect on our business,
financial condition, results of operations and our ability to make distributions to our stockholders.

If we default on our secured debt in the future, the lenders may foreclose on our hotels.

All of our indebtedness, except our credit facility and term loan, is secured by single property first

mortgages on the applicable property. If we default on any of the secured loans, the lender will be able to
foreclose on the property pledged to the relevant lender under that loan. While we have maintained certain
of our hotels unencumbered by mortgage debt, we have a relatively high loan-to-value on a number of our
hotels which are subject to mortgage loans and, as a result, those mortgaged hotels may be at an increased
risk of default and foreclosure. In addition, to the extent that we cannot meet any future debt service
obligations, we will risk losing some or all of our hotels that are pledged to secure our obligations to
foreclosure. This could affect our ability to make distributions to our stockholders.

In addition to losing the property, a foreclosure may result in recognition of taxable income. Under the

Code, a foreclosure of property securing non-recourse debt would be treated as a sale of the property for a
purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding
balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize
taxable income on foreclosure even though we did not receive any cash proceeds. As a result, we may be
required to identify and utilize other sources of cash for distributions to our stockholders. If this occurs, our
financial condition, cash flow and ability to satisfy our other debt obligations or ability to pay distributions
may be adversely affected.

Future debt service obligations may adversely affect our operating results, require us to liquidate our properties,
jeopardize our ability to make cash distributions necessary to maintain our tax status as a REIT and limit our
ability to make distributions to our stockholders.

In the future, we and our subsidiaries may incur substantial additional debt, including secured
debt.Although borrowing costs have been historically low, they are expected to rise in the near-term and

borrowing costs on new and refinanced debt may be more expensive. Our existing debt, and any additional
debt borrowed in the future could subject us to many risks, including the risks that:

• our cash flow from operations will be insufficient to make required payments of principal and

interest or to make cash distributions necessary to maintain our tax status as a REIT;

• we may be vulnerable to adverse economic and industry conditions;

• we may be required to dedicate a substantial portion of our cash flow from operations to the

repayment of our debt, thereby reducing the cash available for distribution to our stockholders,
operations and capital expenditures, future investment opportunities or other purposes;

• the terms of any refinancing might not be as favorable as the terms of the debt being refinanced; and

• the use of leverage could adversely affect our stock price and our ability to make distributions to our

stockholders.

If we violate covenants in our future indebtedness agreements, we could be required to repay all or a
portion of our indebtedness before maturity at a time when we might be unable to arrange financing for
such repayment on favorable terms, if at all.

Refinanced debt could reduce the amounts available for distribution to our stockholders, as well as

reduce funds available for our operations, future investment opportunities or other purposes.

Increases in interest rates may increase our interest expense.

Higher interest rates could increase debt service requirements on any of our floating rate debt,
including our unsecured term loans and any outstanding balance on our senior unsecured credit facility,
and could reduce the amounts available for distribution to our stockholders, as well as reduce funds available
for our operations, future business opportunities or other purposes.

Hedging against interest rate exposure may adversely affect us.

We manage certain exposure to interest rate volatility by using interest rate hedging, such as swap
agreements, to “hedge” against the possible negative effects of interest rate fluctuations. We may continue to
do so in the future. However, hedging can be expensive, particularly during periods of volatile interest
rates, available interest rate hedges may not correspond directly with the interest rate risk for which protection
is sought, the duration of the interest rate hedge may not match the duration of the related liability, and
we cannot assure you that any hedging will adequately mitigate the adverse effects of interest rate increases
or that counterparties under these agreements will honor their obligations. As a result, our hedging
transactions could have a material and adverse effect on our results of operations.

The discontinuation of LIBOR and the replacement of LIBOR with an alternative reference rate may
adversely affect our borrowing costs and could impact our business and results of operations.

The LIBOR benchmark has been the subject of national, international and other regulatory guidance

and proposals for reform and replacement, with most LIBOR settings not expected to be published after
June 30, 2023. In the U.S., the Alternative Reference Rates Committee (“AARC”), which was convened by
the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended the Secured
Overnight Financing Rate (“SOFR”) plus a recommended spread adjustment as its preferred alternative
to USD-LIBOR. There are significant differences between LIBOR and SOFR, such as LIBOR being an
unsecured lending rate while SOFR is a secured rate, and SOFR is an overnight rate while LIBOR reflects
term rates at different maturities.

be impacted. For some instruments, the method of transitioning to an alternative rate may be challenging,
as they may require substantial negotiation with each respective counterparty. If a contract is not transitioned
to an alternative rate and LIBOR is discontinued, the impact is likely to vary by contract.

The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding
borrowings or swaps, but if our contracts indexed to LIBOR, including contracts governing our variable
rate debt and our interest rate swaps, are converted to SOFR, the differences between LIBOR and SOFR,
plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR
remained available. Additionally, although SOFR is the AARC’s recommended replacement rate, it is also
possible that lenders may instead choose alternative replacements that may differ from LIBOR in ways similar
to SOFR or in ways that would result in higher interest costs for us. It is not yet possible to predict the
magnitude of LIBOR’s end on our borrowing costs given the remaining uncertainty about which rates will
replace LIBOR.

Risks Related to Regulation and the Environment

Noncompliance with governmental regulations could adversely affect our operating results.

Environmental matters.

Our hotels are, and the hotels that we acquire in the future will be, subject to various federal, state and
local environmental laws and regulations relating to environmental protection. Under these laws, courts and
government agencies may have the authority to require us, as owner of a contaminated property, to clean
up the property, even if we did not know of, or were not responsible for, the contamination. These laws apply
to persons who owned a property at the time it became contaminated so we may incur cleanup costs or
other environmental liabilities even after we sell a property. In addition to the costs of cleanup, environmental
contamination can affect the value of a property and, therefore, an owner’s ability to borrow funds using
the property as collateral or to sell the property. Additionally, under certain environmental laws, courts and
government agencies also have the authority to require that (i) a person who sent waste to a waste disposal
facility, such as a landfill or an incinerator, pay for the clean-up of that facility if it becomes contaminated
and threatens human health or the environment and (ii) a person who arranges for the disposal or treatment,
or transports for disposal or treatment, a hazardous substance at a property owned by another person pay
for the costs of removal or remediation of hazardous substances released into the environment at that property.

Our hotels are also subject to various federal, state, and local environmental, health and safety laws and

regulations that address a wide variety of issues, including, but not limited to, storage tanks, air emissions
from emergency generators, storm water and wastewater discharges, asbestos, lead-based paint, mold and
mildew and waste management. Some of our hotels routinely handle and use hazardous or regulated
substances and wastes as part of their operations, which substances and wastes are subject to regulation
(e.g., swimming pool chemicals). Our hotels incur costs to comply with these laws and regulations and could
be subject to fines and penalties for non-compliance. Additionally, various court decisions have established
that third parties may recover damages for injury caused by property contamination. For instance, a person
exposed to asbestos while staying or working in a hotel may seek to recover damages if he or she suffers
injury from the asbestos.

Although we have taken and will take commercially reasonable steps to assess the condition of our
properties, there may be unknown environmental problems associated with our properties. If environmental
contamination exists on our properties, we could become subject to strict, joint and several liability for the
contamination by virtue of our ownership interest. In addition, we are obligated to indemnify our lenders for
any liability they may incur in connection with a contaminated property.

We could be responsible for the costs associated with a contaminated property, including the costs to
clean up a contaminated property or to defend against a claim, and such costs could have a material adverse
effect on our results of operations and financial condition and our ability to pay dividends to our
stockholders. Additionally, we regularly incur costs to comply with environmental laws and we cannot
assure you that future laws or regulations will not impose material environmental liabilities or that the current
environmental condition of our hotels will not be affected by the condition of the properties in the vicinity
of our hotels (such as the presence of leaking underground storage tanks) or by third parties unrelated to us.

Climate change

In recent years, numerous treaties, laws and regulations have been enacted to regulate or limit carbon
emissions and, as a result, we are subject to the risks associated with such transitional effects to a law carbon
scenario. These effects may include, but are not limited to, increased regulation for building efficiency and
equipment specifications, increased regulations or investor requirements for environmental and social
disclosures and increased costs to manage the shift in consumer preferences. For example, in an effort to
mitigate the impact of climate change, our hotels could become subject to increased governmental regulations
mandating energy efficiency standards, the usage of sustainable energy sources and updated equipment
specifications which may require additional capital investments or result in increased operating costs.
Additionally, if there is a shift in consumer preferences for more sustainable travel accommodations, we
may also incur increased costs to manage such consumer expectations for sustainable buildings and hotel
operations. The drive to limit carbon emissions and other climate change related regulations and consumer
preferences may require us to make significant investments in our hotels and could result in increased energy
costs at our properties which could have a material adverse effect on our results of operations and our
ability to make distributions to our stockholders.

Americans with Disabilities Act and other changes in governmental rules and regulations.

Our properties must comply with Title III of the Americans with Disabilities Act of 1990 (the “ADA”),

to the extent that such properties are “public accommodations” as defined by the ADA. Under the ADA,
all public accommodations must meet various federal non-discrimination requirements related to access and
use by individuals with disabilities. Compliance with the ADA’s requirements could require removal of
architectural barriers to access and non-compliance could result in the payment of civil penalties, damages,
and attorneys’ fees and costs. We believe that our properties are in substantial compliance with the ADA;
however, the obligation to comply with the ADA is an ongoing one, and we will continue to assess our
properties and to make alterations as appropriate in this regard. If we are required to make substantial
modifications to our hotels, whether to comply with the ADA or other changes in governmental rules and
regulations, our financial condition, results of operations and ability to make distributions to our stockholders
could be adversely affected.

Our hotel properties may contain or develop harmful mold, which could lead to liability for adverse health
effects and costs of remediating the problem.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur,

particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some
molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing,
as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic reactions.
As a result, the presence of mold to which our hotel guests or employees could be exposed at any of our
properties could require us to undertake a costly remediation program to contain or remove the mold from
the affected property, which would reduce our cash available for distribution. In addition, exposure to mold by
our guests or employees, management company employees or others could expose us to liability if property
damage or adverse health concerns arise.

Risks Related to Our Status as a REIT

We cannot assure you that we will remain qualified as a REIT.

We believe that we are qualified to be taxed as a REIT for U.S. federal income tax purposes for our

taxable year ended December 31, 2021, and we expect to continue to qualify as a REIT for future
taxable years, but we cannot assure you that we have qualified, or will remain qualified, as a REIT. The
REIT qualification requirements are extremely complex and official interpretations of the U.S. federal income
tax laws governing qualification as a REIT are limited. Certain aspects of our REIT qualification are
beyond our control. For example, decreased revenues attributable to the COVID-19 pandemic may make it
more difficult for us to meet the REIT gross income tests. Accordingly, we cannot be certain that we will be
successful in operating so that we can remain qualified as a REIT. At any time, new laws, interpretations
or court decisions may change the U.S. federal tax laws or the federal income tax consequences of our

qualification as a REIT. Moreover, our charter provides that our board of directors may revoke or otherwise
terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer
in our best interest to continue to qualify as a REIT.

If we fail to qualify as a REIT and do not qualify for certain statutory relief provisions, or otherwise

cease to be a REIT, we will be subject to U.S. federal income tax on our taxable income at the corporate
rate. We might need to borrow money or sell assets in order to pay any such tax. Also, we would not be allowed
a deduction for dividends paid to our stockholders in computing our taxable income and we would no
longer be compelled to make distributions under the Code.Unless we were entitled to relief under certain
U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in
which we failed to qualify as a REIT.If we fail to qualify as a REIT but are eligible for certain relief
provisions, then we may retain our status as a REIT, but we may be required to pay a penalty tax, which
could be substantial.

Maintaining our REIT qualification contains certain restrictions and drawbacks.

Complying with REIT requirements may cause us to forgo otherwise attractive opportunities.

To remain qualified as a REIT for U.S. federal income tax purposes, we must continually satisfy tests

concerning, among other things, the sources of our income, the nature and diversification of our assets, the
amounts we distribute to our stockholders and the ownership of our stock. In order to meet these tests,
we may be required to forgo attractive business or investment opportunities. For example, we may not lease
to our TRS any hotel which contains gaming. Thus, compliance with the REIT requirements may hinder
our ability to operate solely to maximize profits.

To qualify as a REIT, we must meet annual distribution requirements.

In order to remain qualified as a REIT, we generally are required to distribute at least 90% of our
REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital
gains, each year to our stockholders. To the extent that we satisfy this distribution requirement, but
distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income
tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise
tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum
amount specified under federal tax laws. As a result of differences between cash flow and the accrual of
income and expenses for tax purposes, or nondeductible expenditures, for example, our REIT taxable income
in any given year could exceed our cash available for distribution. Accordingly, we may be required to
borrow money or sell assets at disadvantageous prices, distribute amounts that would otherwise be invested
in future acquisitions or capital expenditures or used for the repayment of debt, pay dividends in the form
of “taxable stock dividends” or find another alternative source of funds to make distributions sufficient to
enable us to pay out enough of our taxable income to satisfy the distribution requirement and to avoid federal
corporate income tax and the 4% nondeductible excise tax in a particular year.

The formation of our TRSs and TRS lessees increases our overall tax liability.

Overall, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or

more TRSs. Our domestic TRSs are subject to federal and state income tax on their taxable income. The
taxable income of our TRS lessees currently consists and generally will continue to consist of revenues from
the hotels leased by our TRS lessees plus, in certain cases, key money payments (amounts paid to us by a
hotel management company in exchange for the right to manage a hotel we acquire) and yield support
payments, net of the operating expenses for such properties and rent payments to us. Such taxes could be
substantial. Our non-U.S. TRSs also may be subject to tax in jurisdictions where they operate.

We will be subject to a 100% excise tax to the extent that transactions with our TRSs are not conducted
on an arm’s-length basis. For example, to the extent that the rent paid by one of our TRS lessees exceeds an
arm’s-length rental amount, such excess is potentially subject to this excise tax. While we believe that we
structure all of our leases on an arm’s-length basis, upon an audit, the IRS might disagree with our conclusion.

If the leases of our hotels to our TRS lessees are not respected as true leases for U.S. federal income tax
purposes, we will fail to qualify as a REIT.

To qualify as a REIT, we must annually satisfy two gross income tests, under which specified percentages
of our gross income must be derived from certain sources, such as “rents from real property.” Rents paid to
us by our TRS lessees pursuant to the leases of our hotels will constitute substantially all of our gross
income. In order for such rent to qualify as “rents from real property” for purposes of the gross income
tests, the leases must be respected as true leases for U.S. federal income tax purposes and not be treated as
service contracts, financing arrangements, joint ventures or some other type of arrangement. If our leases are
not respected as true leases for U.S. federal income tax purposes, we will fail to qualify as a REIT.

You may be restricted from transferring our common stock and Series A Preferred Stock.

In order to maintain our REIT qualification, among other requirements, no more than 50% in value of

our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the
U.S. federal income tax laws to include certain entities) during the last half of any taxable year. In addition,
the REIT rules generally prohibit a manager of one of our hotels from owning, directly or indirectly,
more than 35% of our stock and a person who holds 35% or more of our stock from also holding, directly
or indirectly, more than 35% of any such hotel management company. To qualify for and preserve REIT
status, our charter contains an aggregate share ownership limit, a common share ownership limit, and a
preferred share ownership limit. Generally, any shares of our stock owned by affiliated owners will be added
together for purposes of the aggregate share ownership limit, and any shares of common stock or preferred
stock, as applicable, owned by affiliated owners will be added together for purposes of the common share
ownership limit and the preferred share ownership limit.

If anyone transfers or owns shares in a way that would violate the aggregate share ownership limit, the

common share ownership limit, or the preferred share ownership limit (unless such ownership limits have
been waived by our board of directors), or would prevent us from continuing to qualify as a REIT under the
U.S. federal income tax laws, those shares instead will be transferred to a trust for the benefit of a charitable
beneficiary and will be either redeemed by us or sold to a person whose ownership of the shares will not
violate the aggregate share ownership limit, the common share ownership limit, or the preferred share
ownership limit. If this transfer to a trust would not be effective to prevent a violation of the ownership
restrictions in our charter, then the initial intended transfer or ownership will be null and void from the outset.
The intended transferee or owner of those shares will be deemed never to have owned the shares. Anyone
who acquires or owns shares in violation of the aggregate share ownership limit, the common share ownership
limit, the preferred share ownership limit (unless such ownership limits have been waived by our board of
directors) or the other restrictions on transfer or ownership in our charter bears the risk of a financial loss
when the shares are redeemed or sold if the market price of our stock falls between the date of purchase and
the date of redemption or sale.

Even if we maintain our status as a REIT, in certain circumstances, we may be subject to U.S. federal and state
income taxes, which would reduce our cash available for distribution to our stockholders.

Even if we qualify and maintain our status as a REIT, we may be subject to U.S. federal income taxes

or state taxes in various circumstances. For example, net income from a “prohibited transaction” will be
subject to a 100% tax. In addition, we may not be able to distribute all of our income in any given year, which
would result in corporate level taxes, and we may not make sufficient distributions to avoid excise taxes.
We may also decide to retain certain gains from the sale or other disposition of our property and pay income
tax directly on such gains. In that event, our stockholders would be required to include such gains in
income and would receive a corresponding credit for their share of taxes paid by us. We may also be subject
to U.S. state and local and non-U.S. taxes on our income or properties, either directly or at the level of
our operating partnership or the other companies through which we indirectly own our assets. In addition,
we may be subject to U.S. federal, state, local or non-U.S. taxes in other various circumstances. Any federal or
state taxes that we pay will reduce our cash available for distribution to our stockholders.

Our property taxes could increase due to property tax rate changes or reassessment, which could impact our
cash flow.

Even if we qualify and maintain our status as a REIT, we are required to pay state and local property
taxes on our properties. The property taxes on our properties may increase as property tax rates change or

as our properties are assessed or reassessed by taxing authorities. Therefore, the amount of property taxes
we pay in the future may increase substantially from what we have paid in the past and such increases may not
be offset by increased room rates at our hotels. If the property taxes we pay increase, our financial condition,
results of operations, cash flow, per share trading price of our common stock and Series A Preferred
Stock and our ability to satisfy our principal and interest obligations and to make distributions to our
stockholders may be negatively impacted.

Dividends payable by REITs generally do not qualify for reduced tax rates.

A maximum 20% tax rate applies to “qualified dividend income” payable to individual U.S. stockholders.

Dividends payable by REITs, however, are generally not eligible for the reduced rates on qualified dividend
income and are taxed at normal ordinary income tax rates (provided that for taxable years beginning after
December 31, 2017 and before January 1, 2026, non-corporate taxpayers generally may deduct up to 20%
of their ordinary REIT dividends that are not “capital gain dividends” or “qualified dividend income”).
However, to the extent that our dividends are attributable to certain dividends that we receive from a TRS,
such dividends generally will be eligible for the reduced rates that apply to qualified dividend income (but
will be ineligible for the 20% deduction). The more favorable rates applicable to regular corporate dividends
could cause investors who are individuals to perceive investments in REITs to be relatively less attractive
than investments in the stocks of non-REIT corporations that pay qualified dividend income, which could
adversely affect the value of the stock of REITs, including our common stock and Series A Preferred Stock.
In addition, non-REIT corporations may begin to pay dividends or increase dividends as a result of the
lower corporate income tax rate that is effective for taxable years beginning after December 31, 2017. As a
result, the trading price of our common stock and Series A Preferred Stock may be negatively impacted.

Failure of our operating partnership to be taxable as a partnership could cause us to fail to qualify as a REIT
and we could suffer other adverse tax consequences.

We believe that our operating partnership will continue to be treated for U.S. federal income tax

purposes as a partnership and not as an association or as a publicly traded partnership taxable as a
corporation. As a partnership, the operating partnership will not be subject to U.S. federal income tax on its
income. Instead, each of its partners, including us, will be allocated that partner’s share of the operating
partnership’s income. No assurance can be provided, however, that the IRS will not challenge the operating
partnership’s status as a partnership for U.S. federal income tax purposes, or that a court would not
sustain such a challenge. If the IRS were to determine that our operating partnership was properly treated
as an association or as a publicly traded partnership taxable as a corporation, our operating partnership
would be required to pay U.S. federal income tax at corporate rates on its net income, its partners would
be treated as stockholders of our operating partnership and distributions to partners would constitute
distributions that would not be deductible in computing the operating partnership’s taxable income. In
addition, we could fail to qualify as a REIT, with the resulting consequences described above.

Our UPREIT structure may result in potential conflicts of interest with limited partners in our operating
partnership whose interests may not be aligned with those of our stockholders.

Limited partners in our operating partnership have the right to vote on certain amendments to the
agreement that governs our operating partnership, as well as on certain other matters. Persons holding such
voting rights may exercise them in a manner that conflicts with our stockholders’ interests. As general
partner of our operating partnership, we are obligated to act in a manner that is in the best interests of all
partners of our operating partnership. Circumstances may arise in the future when the interests of limited
partners in our operating partnership may conflict with the interests of our stockholders. These conflicts may
be resolved in a manner that some stockholders believe is not in their best interests.

Legislative or regulatory action could adversely affect our stockholders.

In recent years, numerous legislative, judicial and administrative changes have been made to the U.S.

federal income tax laws applicable to investments in REITs and similar entities. Additional changes to
applicable tax laws are likely to continue to occur in the future, and we cannot assure our stockholders that
any such changes will not adversely affect the taxation of a stockholder. Any such changes could have an

adverse effect on an investment in our common stock and Series A Preferred Stock. All stockholders are
urged to consult with their tax advisors with respect to the status of legislative, regulatory or administrative
developments and proposals and their potential effect on an investment in our common stock and Series A
Preferred Stock.

Risks Related to Our Organization and Structure

Provisions of our charter may limit the ability of a third party to acquire control of our company.

Our charter provides that no person may beneficially own more than 9.8% of the aggregate outstanding
shares of our common stock, more than 9.8% of the aggregate outstanding shares of our Series A Preferred
Stock, or more than 9.8% of the value of the aggregate outstanding shares of our capital stock, except
certain “look-through entities,” such as mutual funds, which may beneficially own up to 15% of the aggregate
outstanding shares of our common stock, up to 15% of the aggregate outstanding shares of our Series A
Preferred Stock, or up to 15% of the value of the aggregate outstanding shares of our capital stock. Our board
of directors has waived this ownership limitation for certain investors in the past. Our bylaws waive this
ownership limitation for certain other classes of investors. These ownership limitations may prevent an
acquisition of control of our company by a third party without our board of directors’ approval, even if our
stockholders believe the change of control is in their best interests.

Our charter also authorizes our board of directors to issue up to 400,000,000 shares of common stock

and up to 10,000,000 shares of preferred stock, to classify or reclassify any unissued shares of common stock
or preferred stock and to set the preferences, rights and other terms of the classified or reclassified shares.
Furthermore, our board of directors may, without any action by the stockholders, amend our charter from
time to time to increase or decrease the aggregate number of shares of stock of any class or series that we have
authority to issue. Issuances of additional shares of stock may have the effect of delaying, deferring or
preventing a transaction or a change in control of our company that might involve a premium to the market
price of our common stock or otherwise be in our stockholders’ best interests.

Certain advance notice provisions of our bylaws may limit the ability of a third party to acquire control of our
company.

Our bylaws provide that (a) with respect to an annual meeting of stockholders, nominations of
individuals for election to our board of directors and the proposal of other business to be considered by
stockholders may be made only (i) pursuant to our notice of the meeting, (ii) by the board of directors or
(iii) by a stockholder who is entitled to vote at the meeting and has complied with the advance notice
procedures set forth in the bylaws and (b) with respect to special meetings of stockholders, only the business
specified in our notice of meeting may be brought before the meeting of stockholders and nominations of
individuals for election to the board of directors may be made only (A) by the board of directors or
(B) provided that the board of directors has determined that directors shall be elected at such meeting by a
stockholder who is entitled to vote at the meeting and has complied with the advance notice provisions set
forth in the bylaws. These advance notice provisions may have the effect of delaying, deferring or preventing
a transaction or a change in control of our company that might involve a premium to the market price of our
common stock or otherwise be in our stockholders’ best interests.

Provisions of Maryland law may limit the ability of a third party to acquire control of our company.

The Maryland General Corporation Law, or the MGCL, has certain restrictions on a “business
combination” and “control share acquisition” which we have opted out of. If an affirmative majority of
votes cast by a majority of stockholders entitled to vote approve it, our board of directors may opt in to such
provisions of the MGCL. If we opt in, and the stockholders approve it, these provisions may have the
effect of delaying, deferring or preventing a transaction or a change in control of our company that might
involve a premium price for holders of our common stock or otherwise be in their best interests.

In addition, provisions of Maryland law permit the board of a corporation with a class of equity
securities registered under the Exchange Act and at least three independent directors, without stockholder
approval, to implement possible takeover defenses, such as a classified board or a two-thirds vote requirement
for removal of a director. These provisions, if implemented, may make it more difficult for a third party to

affect a takeover. In February 2014, however, we amended our charter to prohibit us from dividing directors
into classes unless such action is first approved by the affirmative vote of a majority of the votes cast on
the matter by stockholders entitled to vote generally in the election of directors.

We have entered into an agreement with each of our senior executive officers that provides each of them
benefits in the event that his or her employment is terminated by us without cause, by him or her for good reason
or under certain circumstances following a change of control of our company.

We have entered into an agreement with each of our senior executive officers that provides each of
them with severance benefits if his or her employment is terminated under certain circumstances following
a change of control of our company. Certain of these benefits and the related tax indemnity in the case of
certain executive officers could prevent or deter a change of control of our company that might involve a
premium price for our common stock or otherwise be in the best interests of our stockholders.

We may be unable to generate sufficient cash flows from our operations to make distributions to our stockholders
at expected levels, and we cannot assure you of our ability to make distributions in the future.

We intend to pay quarterly dividends that represents at least 90% of our REIT taxable income. Our
ability to make these intended distributions may be adversely affected by the factors, risks and uncertainties
described in this Annual Report on Form 10-K and other reports that we file from time to time with the
SEC. For example, in response to the COVID-19 pandemic, our board of directors suspended our quarterly
common dividend commencing with the first quarter dividend that would have been paid in April 2020.In
addition, our board of directors has the sole discretion to determine the timing, form and amount of any
distribution to our stockholders.Our board of directors will make determinations regarding distributions
based upon many facts, including our financial performance, our debt service obligations, our debt
covenants, our capital expenditure requirements, the requirements for qualification as a REIT and other
factors that our board of directors may deem relevant from time to time. As a result, no assurance can be given
that we will be able to make distributions to our stockholders at expected levels, or at all, or that distributions
will increase or even be maintained over time, any of which could materially and adversely affect the
market price of our common stock and Series A Preferred Stock.

Changes in market conditions could adversely affect the market price of our common stock and Series A
Preferred Stock.

As with other publicly traded equity securities, the value of our common stock and Series A Preferred

Stock depends on various market conditions that may change from time to time. Among the market
conditions that may affect the value of our common stock and Series A Preferred Stock are the following:

• the extent of investor interest in our securities;

• the general reputation of REITs and the attractiveness of our equity securities in comparison to

other equity securities, including securities issued by other real estate-based companies;

• the underlying asset value of our hotels;

• investor confidence in the stock and bond markets, generally;

• national and local economic conditions;

• changes in tax laws;

• our financial performance; and

• general stock and bond market conditions.

The market value of our common stock is based primarily upon the market’s perception of our growth
potential and our current and potential future earnings and cash distributions. Consequently, our common
stock may trade at prices that are greater or less than our net asset value per share. If our future earnings or
cash distributions are less than expected, it is likely that the market price of our common stock will
diminish.

In addition, interest rates have been at historically low levels for an extended period of time but are

expected to increase during the year ending December 31, 2022. The market for common shares and
preferred shares of publicly traded REITs may be influenced by the distribution yield on their shares (i.e.,
the amount of annual distributions as a percentage of the market price of their shares) relative to market
interest rates. Although current market interest rates remain low compared to historical levels, interest rates
may increase. If market interest rates increase, prospective purchasers of REIT common shares and
preferred shares may seek to achieve a higher distribution yield, which we may not be able to, or may
choose not to, provide. Thus, higher market interest rates could cause the returns on investment in our
common stock and Series A Preferred Stock to be relatively less attractive to our investors and the market
price of our common stock and Series A Preferred Stock to decline. Additionally, higher market interest rates
may adversely impact the market values of our hotels.

The market price of our common stock has been volatile and could decline, resulting in a substantial or
complete loss on our common stockholders’ investment.

The market price of our common stock has been highly volatile in the past, and investors in our
common stock may experience a decrease in the value of their shares, including decreases unrelated to our
operating performance or prospects. In the past, securities class action litigation has often been instituted
against companies following periods of volatility in their stock price. This type of litigation could result
in substantial costs and divert our management’s attention and resources.

Future issuances of our common stock, Series A Preferred Stock or our operating partnership’s common OP
units, may depress the market price of our common stock and have a dilutive effect on our existing stockholders.

We cannot predict whether future issuances of our common stock or Series A Preferred Stock or the
availability of shares for resale in the open market may depress the market price of our common stock or
Series A Preferred Stock. Future issuances or sales of a substantial number of shares of our common stock
in the public market, or the issuance of our common stock or Series A Preferred Stock in connection with
future property, portfolio or business acquisitions, or the perception that such issuances or sales might occur,
may cause the market price of our shares to decline. In addition, future issuances or sales of our common
stock or Series A Preferred Stock may be dilutive to existing stockholders.

Our December 2018 acquisition of Cavallo Point was partially funded by the issuance by our operating
partnership of common OP units, which became redeemable by the sellers after the one-year anniversary of
such issuance for cash or, at our election, on a one-for-one basis for shares of our common stock. Pursuant
to the terms of the contribution agreement governing our acquisition of Cavallo Point, if any of the common
OP units are outstanding seven years after their issuance, we have the option to redeem them for cash or
shares of our common stock, at our election. In the future, our operating partnership may issue additional
common OP units to acquire additional properties or portfolios.Such common OP unit issuances would
reduce our ownership interest in the operating partnership and may in the future result in dilution of our
shareholders’ equity interests.

Holders of our outstanding Series A Preferred Stock have dividend, liquidation and other rights that are senior
to the rights of the holders of our common stock.

Our board of directors has the authority to designate and issue preferred stock with liquidation,

dividend and other rights that are senior to those of our common stock. As of December 31, 2021,
4,760,000 shares of our Series A Preferred Stock were issued and outstanding. The aggregate liquidation
preference with respect to the outstanding preferred stock is approximately $119.0 million and aggregate
annual dividends on these shares are approximately $9.8 million. Holders of the Series A Preferred Stock are
entitled to cumulative dividends before any dividends may be declared or set aside on our common stock.
Upon our voluntary or involuntary liquidation, dissolution or winding up, before any payment is made to
holders of our common stock, holders of the Series A Preferred Stock are entitled to receive a liquidation
preference of $25.00 per share plus any accrued and unpaid distributions. This will reduce the remaining
amount of our assets, if any, available to distribute to holders of our common stock. In addition, holders of
our Series A Preferred Stock have the right to elect two additional directors to our board of directors
whenever dividends on the preferred shares are in arrears for six or more quarterly dividends, whether or
not consecutive.

The conversion rights of our Series A Preferred Stock may be detrimental to holders of our common stock.

As of December 31, 2021, 4,760,000 shares of our Series A Preferred Stock were outstanding and
could be converted, upon the occurrence of limited specified change in control transactions, into shares of
our common stock. The conversation of the Series A Preferred Stock would dilute the stockholder ownership
in our Company and common OP unit holder ownership in our operating partnership and could adversely
affect the market price of our common stock and could impair our ability to raise capital through the sale of
additional equity securities.

Future offerings of debt securities or preferred stock, which would be senior to our common stock upon
liquidation and for the purpose of distributions, may cause the market price of our common stock to decline.

In the future, we may increase our capital resources by making additional offerings of debt or equity
securities, which may include senior or subordinated notes, classes of preferred stock and/or common stock.
We will be able to issue additional shares of common stock or preferred stock without stockholder approval,
unless stockholder approval is required by applicable law or the rules of any stock exchange or automated
quotation system on which our securities may be listed or traded. Upon liquidation, holders of our debt
securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution
of our available assets prior to the holders of our common stock. Additional equity offerings could
significantly dilute the holdings of our existing stockholders or reduce the market price of our common
stock, or both. Holders of our common stock are not entitled to preemptive rights or other protections
against dilution. Preferred stock and debt, if issued, could have a preference on liquidating distributions or
a preference on dividend or interest payments that could limit our ability to make distributions to the holders
of our common stock. Because our decision to issue securities in any future offering will depend on
market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing
or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the
market price of our common stock and diluting their interest.

We cannot guarantee that we will repurchase our common stock pursuant to a share repurchase program or
that a share repurchase program will enhance long-term stockholder value. Share repurchases could also increase
the volatility of the price of our common stock and could diminish our cash reserves.

We do not currently have a share repurchase program but our board of directors may adopt one in the

future. The timing and amount of repurchases of shares of our common stock, if any, will depend upon
several factors, including market and business conditions, the trading price of our common stock, our cost
of capital and the nature of other investment opportunities. A share repurchase program may be limited,
suspended or discontinued at any time without prior notice. In addition, repurchases of our common
stock pursuant to a share repurchase program could affect our stock price and increase its volatility. The
existence of a share repurchase program could cause our stock price to be higher than it would be in the
absence of such a program and could potentially reduce the market liquidity for our stock. Additionally, a
share repurchase program could diminish our cash reserves, which may impact our ability to finance future
growth and to pursue possible future strategic opportunities and acquisitions. There can be no assurance
that any share repurchases will enhance stockholder value because the market price of our common stock may
decline below the levels at which we repurchased shares of stock. Although a share repurchase program is
intended to enhance long-term stockholder value, there is no assurance that it will do so and short-term stock
price fluctuations could reduce the program’s effectiveness. A share repurchase program may be suspended
or terminated at any time without notice.

Tax protection agreements may limit our ability to sell or otherwise dispose of certain properties and may
require our operating partnership to maintain certain debt levels that otherwise would not be required to operate
our business.

In connection with contributions of properties to our operating partnership, our operating partnership

has entered and may in the future enter into tax protection agreements under which it agrees to minimize
the tax consequences to the contributing partners resulting from the sale or other disposition of the
contributed properties. Tax protection agreements may make it economically prohibitive to sell any properties
that are subject to such agreements. In addition, we may be required to maintain a minimum level of

indebtedness throughout the term of any tax protection agreement regardless of whether such debt levels
are otherwise required to operate our business.

General Risk Factors

Our success depends on senior executive officers whose continued service is not guaranteed, and changes in our
senior executive officers may adversely affect the operation of our business.

We depend on the efforts and expertise of our senior executive officers to manage our day-to-day
operations and strategic business direction. Finding suitable replacements for senior executive officers could
be difficult.The loss of any of their services could have a material adverse effect on our business, financial
condition, results of operations and our ability to make distributions to our stockholders.

We and our hotel managers rely on information technology in our operations and any material failures,
inadequacies, interruptions, security failures, social engineering attacks or cyber-attacks could harm our
business.

We and our hotel managers rely on information technologies and systems, including the Internet, to

access, store, transmit, deliver and manage information and processes. Some of these information
technologies and systems are provided by third-party vendors. We rely on commercially available systems,
software, tools and monitoring to provide security for processing, transmission and storage of certain
confidential customer information, such as individually identifiable information, including information
relating to financial accounts. Recently, a number of hotels and hotel management companies have been
subject to successful cyber-attacks including those seeking guest credit card information. Moreover,
cybersecurity incidents and cyber-attacks have been occurring globally at a more frequent and severe level,
and will likely continue to increase in frequency in the future.

For these reasons, we and our hotel managers are subject to risks associated with security breaches,
whether through cyber-attacks or online fraud schemes, spoofed e-mails and social engineering efforts by
hackers aimed at obtaining confidential information. If unauthorized parties gain access to such information
or our vendor’s technology systems, they may be able to steal, publish, delete or modify private and
sensitive information for proprietary or financial gain. Although we and our hotel managers believe that we
have taken commercially reasonable steps to protect the security of these systems, there can be no assurance
that such security measures will prevent failures, inadequacies or interruptions in system services, or that
system security will not be breached through physical or electronic break-ins, computer viruses, social
engineering attacks and cyber-attacks. Disruptions in service, system shutdowns and security breaches in
either the information technologies and systems of our hotel managers or our own information technologies
and systems, including unauthorized disclosure of confidential information, could have a material adverse
effect on our business operations and results, our financial and compliance reporting and our reputation.

Many of our hotel managers carry cyber insurance policies to protect and offset a portion of potential
costs that may be incurred from a security breach. Additionally, we currently have cyber insurance policies
to provide supplemental coverage above the coverage carried by our third-party managers. Despite various
precautionary steps to protect our hotels from losses resulting from cyber-attacks, however, any occurrence
of a social engineering attack or cyber-attack could still result in losses at our properties, which could affect
our results of operations. We are not aware of any cyber incidents that we believe to be material or that
could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to litigation, which could have a material adverse effect on our financial condition, results of
operations, cash flow and trading price of our common stock and Series A Preferred Stock.

We may be subject to litigation.In addition, we generally indemnify third-party hotel managers for legal
costs resulting from management of our hotels.Some of these claims may result in defense costs, settlements,
fines or judgments against us, some of which are not covered by insurance. The outcome of these legal
proceedings cannot be predicted.Payment of any such costs, settlements, fines or judgments that are not
insured could have a material adverse impact on our financial position and results of operations.In addition,
certain litigation or the resolution of certain litigation may affect the availability or cost of some of our

insurance coverage, which could adversely impact our results of operations and cash flows, expose us to
increased risks that would be uninsured and/or adversely impact our ability to attract officers and directors.

You have limited control as a stockholder regarding any changes that we make to our policies.

Our board of directors determines our major policies, including policies related to our investment

objectives, leverage, financing, growth and distributions to our stockholders. Our board of directors may
amend or revise these policies without a vote of our stockholders. This means that our stockholders will have
limited control over changes in our policies and those changes could adversely affect our business, financial
condition, results of operations and our ability to make distributions to our stockholders.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The following table sets forth certain information for each of our hotels owned as of December 31,

2021.

Hotel

City

State

Chain Scale
Segment(1)

Service
Category

Rooms Manager

Chicago Marriott Downtown
Magnificent Mile . . . . . . . . . . . . Chicago
Westin Boston Seaport District . . . Boston

Illinois
Massachusetts

Upper Upscale Full Service
Upper Upscale Full Service

Salt Lake City Marriott Downtown
at City Creek . . . . . . . . . . . . . . .
Worthington Renaissance Fort
Worth Hotel . . . . . . . . . . . . . . . . Fort Worth
San Diego
Westin San Diego Downtown . . . .

Salt Lake
City

Utah

Upper Upscale Full Service

Texas
California

Upper Upscale Full Service
Upper Upscale Full Service

Fort
Lauderdale

Westin Fort Lauderdale Beach
Resort . . . . . . . . . . . . . . . . . . . .
Westin Washington D.C. City
Center . . . . . . . . . . . . . . . . . . . . Washington
Hilton Boston Downtown/
Faneuil Hall . . . . . . . . . . . . . . . . Boston
The Hythe Vail, a Luxury
Collection Resort(2) . . . . . . . . . . . Vail
Courtyard New York
Manhattan/Midtown East
Atlanta Marriott Alpharetta . . . . . Atlanta

. . . . . . New York

Florida
District of
Columbia

Upper Upscale Full Service

Massachusetts

Upper Upscale Full Service

Colorado

Upper Upscale Full Service

344 Vail Resorts

New York
Georgia

Upscale
Upper Upscale Full Service

Select Service

The Gwen Hotel . . . . . . . . . . . . . Chicago

Illinois

Luxury

Full Service

Hilton Garden Inn New York/
Times Square Central
. . . . . . . . . New York
Bethesda Marriott Suites . . . . . . . Bethesda
Hilton Burlington Lake
Champlain . . . . . . . . . . . . . . . . . Burlington
Hotel Palomar Phoenix . . . . . . . . Phoenix

New York
Maryland

Vermont
Arizona

Upscale
Upper Upscale Full Service

Select Service

Upper Upscale Full Service
Upper Upscale Full Service

Bourbon Orleans Hotel

. . . . . . . . New Orleans

Louisiana

Luxury

Full Service

Henderson Beach Resort

. . . . . . . Destin

Florida

Luxury

Full Service

JW Marriott Denver Cherry
Creek . . . . . . . . . . . . . . . . . . . . Denver
Courtyard New York
Manhattan/Fifth Avenue . . . . . . . New York
Margaritaville Beach House Key
West(5)
The Lodge at Sonoma Resort(6) . . .

. . . . . . . . . . . . . . . . . . . Key West
Sonoma

Colorado

Luxury

Full Service

New York

Upscale

Select Service

Florida
California

Upper Upscale Full Service
Upper Upscale Full Service

Courtyard Denver Downtown . . . . Denver

Colorado

Upscale

Select Service

Renaissance Charleston Historic
District Hotel . . . . . . . . . . . . . . . Charleston
Kimpton Shorebreak Resort . . . . . Huntington

Beach

South Carolina
California

Upper Upscale Full Service
Upper Upscale Full Service

Cavallo Point, The Lodge at the
Golden Gate . . . . . . . . . . . . . . .

Sausalito

California

Luxury

Full Service

1,200 Marriott

793 Aimbridge
Hospitality
HEI Hotels &
Resorts

510

504 Marriott
436 Aimbridge
Hospitality
HEI Hotels &
Resorts
Sage
Hospitality
Aimbridge
Hospitality

433

403

410

HEI Hotels &
Resorts

321
318 Aimbridge
Hospitality

311 HEI Hotels &
Resorts
Highgate
282
Hotels
272 Marriott(3)
Aimbridge
Hospitality

258
242 Kimpton
Hotels &
Restaurants

199

216

189

218 Aimbridge
Hospitality
Salamander
Hotels &
Resorts(4)
Sage
Hospitality
Highgate
Hotels
Ocean
Properties
Sage
Hospitality
Sage
Hospitality
Aimbridge
Hospitality

167
157 Kimpton
Hotels &
Restaurants
Passport
Resorts

186
182

142

177

Hotel

City

State

Chain Scale
Segment(1)

Service
Category

Rooms Manager

Havana Cabana Key West

. . . . . . Key West

Florida

Upscale

Select Service

106 Ocean

Properties

Hotel Emblem San Francisco . . . .

San Francisco California

Upper Upscale Full Service

96 Viceroy

L’Auberge de Sedona . . . . . . . . . .

Sedona

Arizona

Luxury

Full Service

The Landing Lake Tahoe
Resort & Spa . . . . . . . . . . . . . . .
Orchards Inn Sedona . . . . . . . . . .

South Lake
Tahoe
Sedona

California
Arizona

Henderson Park Inn . . . . . . . . . . Destin

Florida

Luxury
Upscale

Upper
Midscale

Full Service
Full Service

Full Service

Total . . . . . . . . . . . . . . . . . . . . .

(1) As defined by STR, Inc.

Hotels &
Resorts

88 Evolution

Hospitality
Evolution
Hospitality

82
70 Evolution

Hospitality
37 Aimbridge
Hospitality

9,349

(2)

In November 2021, the Vail Marriott Mountain Resort was hotel rebranded as The Hythe Vail, a
Luxury Collection Resort.

(3) Effective February 1, 2022, we terminated the management agreement with Marriott and entered into

a franchise agreement with Hilton to brand the hotel as an Embassy Suites.In connection with the brand
conversion, we entered into a management agreement with Sage Hospitality.

(4) Effective January 31, 2022, we terminated the management agreement with Salamander Hotels &

Resorts and entered into a management agreement with Aimbridge Hospitality.

(5)

In November 2021, the Barbary Beach House Key West was rebranded as the Margaritaville Beach
House Key West.

(6)

In July 2021, the hotel converted to The Lodge at Sonoma Resort.

Hotel Management Agreements

We are party to hotel management agreements for each hotel we own. The following table sets forth the

expiration date of the current term, the terms of termination of the manager by the Company, and the
number of remaining renewal terms at the manager’s option under the respective hotel management
agreements for each of our hotels as of December 31, 2021. Generally, the term of the hotel management
agreements, if applicable, renew automatically for a negotiated number of consecutive periods upon the
expiration of the initial term unless the manager gives notice to us of its election not to renew the hotel
management agreement.

Property

Manager

Terminable

Expiration
Date of
Current Term

Number of Remaining
Renewal Terms at
Manager’s Exclusive
Option(1)

Atlanta Marriott
Alpharetta . . . . . . . . . . . . . Aimbridge Hospitality

Bethesda Marriott Suites(2)

. . Marriott(2)

Bourbon Orleans Hotel . . . . . Aimbridge Hospitality

At will with no fee

2022 with no fee

At will with fee until 7/2022; at
will with no fee thereafter

9/2025

12/2025

7/2026

None

Two ten-year periods

Month-to-month

Cavallo Point, The Lodge at
the Golden Gate . . . . . . . . . Ft. Baker Management LLC

At will with fee

6/2023

One five-year period

Chicago Marriott Downtown
Magnificent Mile . . . . . . . . . Marriott

Courtyard Denver
Downtown . . . . . . . . . . . . . Sage Hospitality

Courtyard New York
Manhattan/Fifth Avenue . . . . Highgate Hotels

12/2038

Two ten-year periods

At will with fee

7/2026

One five-year period

At will with no fee

10/2025

None

Property

Manager

Terminable

Courtyard New York
Manhattan/Midtown East . . . HEI Hotels & Resorts

At will with fee

The Gwen Hotel

. . . . . . . . . HEI Hotels & Resorts

At will with fee

Havana Cabana Key West . . . Ocean Properties

At will with no fee

Henderson Beach Resort . . . . Salamander Hotels &

At will with no fee

Resorts(3)

Expiration
Date of
Current Term

Number of Remaining
Renewal Terms at
Manager’s Exclusive
Option(1)

8/2027

6/2026

12/2026

1/2022

None

Two five-year periods

None

Henderson Park Inn . . . . . . . Aimbridge Hospitality

At will with fee until 7/2022; at
will with no fee thereafter

7/2026

Month-to-month

Hilton Boston Downtown/
Faneuil Hall

. . . . . . . . . . . . Aimbridge Hospitality

Hilton Burlington Lake
Champlain . . . . . . . . . . . . . Aimbridge Hospitality

At will with no fee

7/2025

None

At will with no fee

N/A

Month-to-month

Hilton Garden Inn New
York/Times Square Central

. . Highgate Hotels

12/2024

One five-year period(4)

Hotel Emblem San
Francisco . . . . . . . . . . . . . . Viceroy Hotels & Resorts

At will with fee

Hotel Palomar Phoenix . . . . . Kimpton Hotel & Restaurant

2022 upon sale with fee;

Group

2023 upon sale with no fee

12/2027

One five-year period

One five-year period(5)

The Hythe Vail, a Luxury
Collection Resort . . . . . . . . . Vail Resorts

JW Marriott Denver Cherry
Creek . . . . . . . . . . . . . . . . . Sage Hospitality

At will with fee

1/2024

None

At will with fee

5/2026

One five-year period

Kimpton Shorebreak
Resort . . . . . . . . . . . . . . . .

Kimpton Hotel & Restaurant
Group

At will with fee

2/2025

None

The Landing Lake Tahoe
Resort & Spa . . . . . . . . . . . . Evolution Hospitality

At will with fee

L’Auberge de Sedona . . . . . . Evolution Hospitality

At will with fee

9/2024

10/2024

One five-year period

The Lodge at Sonoma
Resort . . . . . . . . . . . . . . . . Sage Hospitality

Margaritaville Beach House
Key West . . . . . . . . . . . . . . Ocean Properties

At will with fee

9/2025

None

Orchards Inn Sedona . . . . . . Evolution Hospitality

At will with fee

7/2027

10/2024

None

One five-year period

Renaissance Charleston
Historic District Hotel

. . . . . Aimbridge Hospitality

At will with no fee

9/2025

None

Salt Lake City Marriott
Downtown at City Creek . . . . HEI Hotels & Resorts

Westin Boston Seaport
District

. . . . . . . . . . . . . . . Aimbridge Hospitality

At will with no fee

9/2025

None

At will with fee

1/2025

None

Westin Fort Lauderdale Beach
Resort . . . . . . . . . . . . . . . . HEI Hotels & Resorts

At will with fee until 1/2022; at
will with no fee thereafter

12/2024

None

Westin San Diego
Downtown . . . . . . . . . . . . . Aimbridge Hospitality

Westin Washington D.C. City
Center . . . . . . . . . . . . . . . . Sage Hospitality

Worthington Renaissance Fort
Worth Hotel

. . . . . . . . . . . . Marriott

At will with no fee

N/A

Month-to-month

At will with fee

11/2026

One five-year period

12/2031

Two ten-year periods

(1) Certain agreements allow for other extension rights that may be only at our option.

(2) Effective February 1, 2022, we terminated the management agreement with Marriott and entered into

a franchise agreement with Hilton to brand the hotel as an Embassy Suites.In connection with the brand

conversion, we entered into a management agreement with Sage Hospitality, which expires in
February 2027 with one five-year renewal period. The management agreement is terminable at will
with a fee.

(3) Effective January 31, 2022, we terminated the management agreement with Salamander Hotels &
Resorts and entered into a management agreement with Aimbridge Hospitality, which expires in
February 2032 with month-to-month extensions thereafter. The management agreement is terminable
at will with fee until February 2023 and at will with no fee thereafter.

(4) Hotel manager is entitled to one five-year extension option upon achievement of a certain level of net

operating income, which is significantly above current net operating income at the hotel.

(5) Hotel manager is entitled to one five-year extension option if the manager earns an incentive

management fee in both 2026 and 2027.The manager did not earn an incentive management fee in
2021.

Under our hotel management agreements, the hotel manager receives a base management fee and, if

certain financial thresholds are met or exceeded, an incentive management fee. The base management fee is
generally payable as a percentage of gross hotel revenues for each fiscal year. The incentive management fee is
generally based on hotel operating profits, but the fee only applies to that portion of hotel operating
profits above a negotiated return on our invested capital, which we refer to as the owner’s priority. We refer
to this excess of operating profits over the owner’s priority as “available cash flow.”

The following table sets forth the base management fee, incentive management fee and furniture,
fixture and equipment (“FF&E”) reserve contribution, generally due and payable each fiscal year, for each
of our hotels as of December 31, 2021:

Base
Management
Fee(1)

Incentive
Management Fee(2)

FF&E Reserve
Contribution(1)

Property

Atlanta Marriott Alpharetta . . . . . . . . . . . . . . . . . . . . . . . . . . .

Bethesda Marriott Suites(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Bourbon Orleans Hotel

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cavallo Point, The Lodge at the Golden Gate . . . . . . . . . . . . . . . . . .

Chicago Marriott Downtown Magnificent Mile . . . . . . . . . . . . . . . . .

Courtyard Denver Downtown . . . . . . . . . . . . . . . . . . . . . . . . . . .

Courtyard New York Manhattan/Fifth Avenue . . . . . . . . . . . . . . . . .

Courtyard New York Manhattan/Midtown East

. . . . . . . . . . . . . . . .

The Gwen Hotel

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Havana Cabana Key West . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Henderson Beach Resort(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Henderson Park Inn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Hilton Boston Downtown/Faneuil Hall

. . . . . . . . . . . . . . . . . . . . .

2.5%(7)

2.5%

1.5%(9)

2.5%(10)

1.75%

2.25%

2.5%

1.25%

Hilton Burlington Lake Champlain . . . . . . . . . . . . . . . . . . . . . . . .

1.5%(12)

Hilton Garden Inn New York/Times Square Central

. . . . . . . . . . . . . .

Hotel Emblem San Francisco . . . . . . . . . . . . . . . . . . . . . . . . . . .

Hotel Palomar Phoenix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Hythe Vail, a Luxury Collection Resort . . . . . . . . . . . . . . . . . . .

JW Marriott Denver Cherry Creek . . . . . . . . . . . . . . . . . . . . . . . .

Kimpton Shorebreak Resort . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Landing Lake Tahoe Resort & Spa . . . . . . . . . . . . . . . . . . . . .

L’Auberge de Sedona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Lodge at Sonoma Resort . . . . . . . . . . . . . . . . . . . . . . . . . . .

Margaritaville Beach House Key West . . . . . . . . . . . . . . . . . . . . . .

Orchards Inn Sedona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Renaissance Charleston Historic District Hotel

. . . . . . . . . . . . . . . . .

2.75%

3.5%

2.5%

1.25%

2.25%

15%(3)

50%(5)

15%(3)

20%

18%(8)

10%

15%(3)

15%

10%

15%(3)

10%

20%

15%

20%

15%(3)

15%

15%(3)

10%

15%

15%(3)

5%(6)

None

Property

Base
Management
Fee(1)

Incentive
Management Fee(2)

FF&E Reserve
Contribution(1)

Salt Lake City Marriott Downtown at City Creek . . . . . . . . . . . . . . . .

Westin Boston Seaport District . . . . . . . . . . . . . . . . . . . . . . . . . .

Westin Fort Lauderdale Beach Resort

. . . . . . . . . . . . . . . . . . . . . .

Westin San Diego Downtown . . . . . . . . . . . . . . . . . . . . . . . . . . .

Westin Washington D.C. City Center . . . . . . . . . . . . . . . . . . . . . . .

Worthington Renaissance Fort Worth Hotel . . . . . . . . . . . . . . . . . . .

1.5%(12)

1.5%(9)

15%(3)

15%

10%

25%

(1) As a percentage of gross revenues.

(2) As a percentage of hotel operating profits above a specified return on our invested capital or specified

operating profit thresholds.

(3) Total incentive management fees are capped at 1% of gross revenues.

(4) Effective February 1, 2022, we terminated the management agreement with Marriott and entered into

a franchise agreement with Hilton to brand the hotel as an Embassy Suites.In connection with the brand
conversion, we entered into a management agreement with Sage Hospitality. Under the new
management agreement, base management fees are the sum of 1.5% of gross revenues and 1.5% gross
operating profit, incentive management fees are 10% of operating profit exceeding owner’s priority, and
the FF&E reserve contribution is 4% of gross revenues. Total management fees are capped at 3% of
gross revenues.

(5) The owner’s priority expires in 2028, after which the manager will receive 50% of the hotel’s operating

profits.

(6) The contribution is reduced to 1% until operating profits exceed an owner’s priority of $4.4 million.

(7) Beginning July 2022, the base management fee decreases to 2% of gross revenues.

(8) Calculated as 18% of net operating income. There is no owner’s priority; however, the Company’s

contribution to the hotel’s recent multi-year property renovation is treated as a deduction in calculating
net operating income.

(9) The base management fee is a sum of 1.5% of gross revenues and 1.5% of gross operating profit. Total

management fees are capped at 3% of gross revenues.

(10) Beginning January 2023, the base management fee decreases to 2.25% of gross revenues.

(11) Effective January 31, 2022, we terminated the management agreement with Salamander Hotels &
Resorts and entered into a management agreement with Aimbridge Hospitality. Under the new
management agreement, base management fees are 2.25% of gross revenues and gross operating profit,
incentive management fees are 15% of operating profit exceeding owner’s priority capped at 1% of
gross revenues, and the FF&E reserve contribution is 4% of gross revenues.

(12) Total management fees are capped at 2.5% of gross revenues.

Additional information regarding fees incurred under hotel management agreements can be found in

Note 12 to our accompanying consolidated financial statements.

Franchise Agreements

The following table sets forth the terms of the hotel franchise agreements for our 18 franchised hotels

as of December 31, 2021:

Franchised Hotels

Atlanta Marriott Alpharetta . . . . . . . . . . . . . . . . . . . .

Expiration
Date of
Agreement

9/2040(1)

Franchise Fee

6% of gross room sales and 3% of gross food and
beverage sales

Courtyard Denver Downtown . . . . . . . . . . . . . . . . . . .

10/2027

5.5% of gross room sales

Courtyard New York Manhattan/Fifth Avenue . . . . . . . .

12/2035

6% of gross room sales

Courtyard New York Manhattan/Midtown East . . . . . . .

8/2042

6% of gross room sales

The Gwen Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9/2035

4.5% of gross room sales

Hilton Boston Downtown/Faneuil Hall . . . . . . . . . . . . .

7/2023

Hilton Burlington Lake Champlain . . . . . . . . . . . . . . .

7/2032

Hilton Garden Inn New York/Times Square Central . . . .

6/2033

The Hythe Vail, a Luxury Collection Resort(2)

. . . . . . . .

12/2041

JW Marriott Denver Cherry Creek(3)

. . . . . . . . . . . . . .

10/2036

5% of gross room sales and 3% of gross food and
beverage sales; program fee of 4% of gross room sales

5% of gross room sales; program fee of 4.3% of gross
room sales

3% of gross room sales plus 1% of gross food and
beverage sales

6% of gross room sales and 3% of gross food and
beverage sales

The Lodge at Sonoma Resort

. . . . . . . . . . . . . . . . . . .

12/2035

5% of gross room sales

Margaritaville Beach House Key West(4)

. . . . . . . . . . . .

4/2041

5% of gross revenues

Renaissance Charleston Historic District Hotel

. . . . . . .

12/2031

5% of gross room sales

Salt Lake City Marriott Downtown at City Creek . . . . . .

9/2040(1)

Westin Boston Seaport District . . . . . . . . . . . . . . . . . .

12/2026

Westin Fort Lauderdale Beach Resort . . . . . . . . . . . . . .

12/2034

Westin San Diego Downtown . . . . . . . . . . . . . . . . . . .

12/2040

Westin Washington D.C. City Center . . . . . . . . . . . . . .

12/2040

6% of gross room sales and 3% of gross food and
beverage sales

5% of gross room sales and 1% of gross food and
beverage sales(5)

6% of gross room sales and 2% of gross food and
beverage sales

7% of gross room sales and 3% of gross food and
beverage sales

(1) The franchise agreement may be extended at Marriott’s option for one 10-year term.

(2) The new franchise agreement was effective in November 2021 upon the completion of an agreed-upon

renovation to convert the brand to a Luxury Collection Hotel. In November 2022, the franchise fees will
increase to 4% of gross room sales and 1% of gross food and beverage sales. In November 2023, the
franchise fees will increase to 5% of gross room sales and 2% of gross food and beverage sales through
the remainder of the term.

(3) The franchise agreement provides us with an option to convert the hotel to a Luxury Collection Hotel,

subject to the completion of a property improvement plan.

(4) The new franchise agreement was effective in November 2021 upon the completion of an agreed-upon

renovation to convert the brand to a Margaritaville.

(5)

In January 2023, the franchise fees will increase to 6% of gross room sales and 2% of gross food and
beverage sales. In January 2026, the franchise fees will increase to 7% of gross room sales and 3% of gross
food and beverage sales through the remainder of the term.

In February 2022, we entered into a franchise agreement with Hilton for the Embassy Suites Bethesda
to rebrand the Bethesda Marriott Suites. The franchise agreement expires in February 2037. The franchise
fees are 3.5% of gross room sales and will increase to 5.5% of gross rooms sales beginning in February 2026
through the remainder of the term. The program fees are 4% of gross room sales.

Mortgage Debt

Eight of our hotels are encumbered by mortgage debt.Additional information regarding such hotels

can be found in Note 8 to our accompanying consolidated financial statements.

Ground Leases

Eight of our hotels and two parking areas are subject to ground lease agreements. Additional
information regarding our hotels that are subject to ground leases can be found in Notes 4 and 13 to our
accompanying consolidated financial statements.

Item 3. Legal Proceedings

Litigation

We are subject to various claims, lawsuits and legal proceedings, including routine litigation arising in

the ordinary course of business, regarding the operation of our hotels and Company matters.While it is not
possible to ascertain the ultimate outcome of such matters, management believes that the aggregate
amount of such liabilities, if any, in excess of amounts covered by insurance, will not have a material adverse
impact on our financial condition or results of operations. The outcome of claims, lawsuits and legal
proceedings brought against the Company, however, is subject to significant uncertainties.

Item 4. Mine Safety Disclosures

Not applicable.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

Market Information

Our common stock trades on the NYSE under the symbol “DRH”. The closing price of our common

stock on the NYSE on December 31, 2021 was $9.61 per share.

Stock Performance Graph

The following graph compares the five-year cumulative total stockholder return on our common stock
against the cumulative total returns of the Standard & Poor’s 500 Index (the “S&P 500 Total Return”) and
the Dow Jones U.S. Hotels & Lodging REITs Index (the “Dow Jones U.S. Hotels Total Return”). We believe
the Dow Jones U.S. Hotels & Lodging REITs Index’s total return provides a relevant industry sector
comparison to our common stock’s total stockholder return given the index is based on REITs that primarily
invest in lodging real estate.

The graph assumes an initial investment on December 31, 2016 of $100 in our common stock in each

of the indices and also assumes the reinvestment of dividends. The total return values do not include dividends
declared, but not paid, during the period.

Year Ended December 31,

2016

2017

2018

2019

2020

2021

DiamondRock Hospitality Company Total

Return . . . . . . . . . . . . . . . . . . . . . . . .

$100.00

$102.37

$ 85.07

$110.30

$ 82.13

$ 95.67

S&P 500 Total Return . . . . . . . . . . . . . . .
Dow Jones U.S. Hotels Total Return . . . . .

$100.00
$100.00

$121.83
$106.73

$116.49
$ 93.40

$153.17
$108.28

$181.35
$ 80.22

$233.41
$ 92.31

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or incorporated by reference into any filing by us under the Securities
Act of 1933, as amended (the “Securities Act”), except as shall be expressly set forth by specific reference in
such filing.

Dividend Information

In order to maintain our qualification as a REIT, we must make distributions to our stockholders each

year in an amount equal to at least:

• 90% of our REIT taxable income, determined without regard to the dividends paid deduction and

excluding net capital gains, plus

• 90% of the excess of our net income from foreclosure property over the tax imposed on such income

by the Code, minus

• any excess non-cash income.

We generally pay quarterly cash dividends to common stockholders at the discretion of our board of

directors. Our board of directors suspended our quarterly common dividend commencing with the first
quarter dividend that would have been paid in April 2020. The resumption in quarterly common dividends
will be determined by our board of directors after considering our projected taxable income, obligations
under our financing agreements, expected capital requirements, and risks affecting our business.

Stockholder Information

As of February 15, 2022, there were 15 record holders of our common stock and we believe we have
more than one thousand beneficial holders. As of February 15, 2022, there were 11 holders of common OP
units (in addition to the Company and executive officers of the Company).

In order to comply with certain requirements related to our qualification as a REIT, our charter,
subject to certain exceptions, limits the number of common shares that may be owned by any single person
or affiliated group to 9.8% of the outstanding common shares.

Equity Compensation Plan Information

The following table provides information as of December 31, 2021 regarding shares of common stock

that may be issued under the Company’s equity compensation plans.

Plan Category

Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights

(a)

Equity compensation plans

approved by security holders . .

2,548,961(1)

Equity compensation plans not

approved by security holders . .

—

Total

. . . . . . . . . . . . . . . . . . . .

2,548,961

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))

(b)

—(2)

—

(c)

1,673,440

—

1,673,440

(1)

Includes 1,579,721 shares of common stock issuable pursuant to our deferred compensation plan and
969,240 shares of common stock issuable upon the achievement of certain performance conditions.

(2) Performance stock units and deferred stock units do not have any exercise price.

Fourth Quarter 2021 Sales of Unregistered Securities

None.

Item 6. Reserved

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and related
notes thereto included elsewhere in this report. This discussion contains forward-looking statements about our
business. These statements are based on current expectations and assumptions that are subject to risks and
uncertainties. Actual results could differ materially because of factors discussed in “Special Note About
Forward-Looking Statements” and “Risk Factors” contained in this Annual Report on Form 10-K and in our
other reports that we file from time to time with the SEC.

Overview

DiamondRock Hospitality Company is a lodging-focused real estate company operating as a REIT for
federal income tax purposes that owns a portfolio of premium hotels and resorts. As of December 31, 2021,
we owned a portfolio of 32 premium hotels and resorts that contain 9,349 guest rooms located in 22
different markets in North America. On January 6, 2022, we acquired the Tranquility Bay Beachfront
Resort in Marathon, Florida.

As an owner, rather than an operator, of lodging properties, we receive all of the operating profits or

losses generated by our hotels after the payment of fees due to hotel managers and hotel brands, which are
calculated based on the revenues and profitability of each hotel.

Key Indicators of Financial Condition and Operating Performance

We use a variety of operating and other information to evaluate the financial condition and operating

performance of our business. These key indicators include financial information that is prepared in accordance
with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), as well as other financial information
that is not prepared in accordance with U.S. GAAP. In addition, we use other information that may not
be financial in nature, including statistical information and comparative data. We use this information to
measure the performance of individual hotels, groups of hotels and/or our business as a whole. We periodically
compare historical information to our internal budgets as well as industry-wide information. These key
indicators include:

• Occupancy percentage;

• Average Daily Rate (or ADR);

• Rooms Revenue per Available Room (or RevPAR);

• Earnings Before Interest, Income Taxes, Depreciation and Amortization (or EBITDA), Earnings
Before Interest, Income Taxes, Depreciation and Amortization for real estate (or EBITDAre), and
Adjusted EBITDA; and

• Funds From Operations (or FFO) and Adjusted FFO.

Occupancy, ADR and RevPAR are commonly used measures within the hotel industry to evaluate
operating performance. RevPAR, which is calculated as the product of ADR and occupancy percentage, is
an important statistic for monitoring operating performance at the individual hotel level and across our
business as a whole. We evaluate individual hotel RevPAR performance on an absolute basis with
comparisons to budget and prior periods, as well as on a company-wide and regional basis. ADR and
RevPAR include only room revenue. Room revenue comprised approximately 70% of our total revenues for
the year ended December 31, 2021 and is dictated by demand, as measured by occupancy percentage,
pricing, as measured by ADR, and our available supply of hotel rooms.

Our ADR, occupancy percentage and RevPAR performance may be impacted by macroeconomic
factors such as U.S. economic conditions generally, regional and local employment growth, personal income
and corporate earnings, office vacancy rates and business relocation decisions, airport and other business
and leisure travel, increased use of lodging alternatives, new hotel construction and the pricing strategies of
competitors. In addition, our ADR, occupancy percentage and RevPAR performance is dependent on the
continued success of our hotels’ global brands.

We also use EBITDA, EBITDAre, Adjusted EBITDA, FFO and Adjusted FFO as measures of the

financial performance of our business. See “Non-GAAP Financial Measures.”

COVID-19 Pandemic

COVID-19 has had and continues to have a significant effect on our industry and our business. The
demand for lodging materially decreased beginning in March 2020 and, as a result of pandemic-induced
government mandates and health official recommendations, twenty of our hotels suspended operations for
a period of time in 2020. Four of our hotels suspended operations for a period of time in 2021. As of
December 31, 2021, all of our hotels were open.

The COVID-19 pandemic showed signs of moderating in the first half of 2021; however, case counts
increased in the second half of 2021 with the emergence of the Delta and Omicron variants. Whereas demand
at our leisure-focused hotels improved in 2021, demand at our other hotels remains at historically low
levels. Therefore, we expect the COVID-19 pandemic will continue to have a material adverse impact on our
results of operations, financial position and cash flow in 2022.

The effectiveness and wide distribution of COVID-19 vaccines have generally reduced the spread and

severity of COVID-19 infections. We believe improved global distribution of the vaccine is likely to positively
impact the timing, pace, and extent of a lodging demand recovery. The emergence of new variant strains
of COVID-19, however, has the potential to slow or reverse these expected positive trends in 2022 and beyond.

See also “Risk Factors” in Part I, Item 1A of this report.

Overview of 2021

Key highlights for 2021 include the following:

Hotel Dispositions. On April 30, 2021, we sold a wholly owned subsidiary of the Company that
owned Frenchman’s Reef for $35.0 million in cash upon closing, as well as a participation right in the future
profits of the hotel once certain return metrics are achieved. On June 30, 2021, we sold The Lexington
Hotel for $185.3 million.

Hotel Acquisitions. On July 29, 2021, we acquired the Bourbon Orleans Hotel located in New
Orleans, Louisiana, for net consideration of $90.1 million, including prorations and transaction costs. On
July 30, 2021, we acquired the Henderson Park Inn located in Destin, Florida, for net consideration of
$26.4 million, including prorations and transaction costs. On December 23, 2021, we acquired the Henderson
Beach Resort located in Destin, Florida, for net consideration of $110.1 million, including prorations and
transaction costs.

Financing Activity. On December 27, 2021, we extended the mortgage loan secured by the Salt Lake

City Marriott Downtown at City Creek. The loan now matures in January 2023.

Outlook for 2022

The U.S. economy continues to recover from a severe global pandemic that disproportionately
impacted hospitality industries. Broad economic measures such as Gross Domestic Product (GDP) and
corporate profits have surpassed their pre-pandemic levels and the unemployment rate is again approaching
a 50-year low. Travel demand, however, has yet to reattain pre-pandemic levels of activity but continues to
show steady improvement. We expect the U.S. will experience RevPAR growth in 2022 from 2021 due to
continued strength in leisure travel and an emerging recovery in corporate travel facilitated by COVID-19
protocols and widespread vaccination of eligible individuals.

Our portfolio is composed primarily of luxury and upper-upscale resorts and hotels located in popular
leisure destinations and major urban markets. We expect our destination hotels will continue to outperform
the broader U.S. market for the foreseeable future. The strong consumer preference for drive-to leisure
destinations is expected to persist into 2022. Longer term, we believe robust secular demand for experiential
leisure travel, low growth in directly competitive supply, and targeted investments to renovate and reposition
destination hotels can extend and intensify our growth. We believe urban hotels should also experience strong

growth in 2022 and could outpace the U.S. overall as employers encourage return-to-office and business
travel for their employees. Business travel activity increased slowly, but steadily, from depressed levels
throughout 2021, and early indications suggest growth will accelerate in mid-2022. Group room nights on
the books at the beginning of 2022 is nearly 40% above group room nights realized in 2021, which is
approximately 75% of our average bookings in a typical, pre-pandemic year. We anticipate industry
profitability will be challenged by a short booking window and guest mix that makes it challenging to
maximize room rates as well as pressure on labor costs due to labor scarcity. We continue to work closely
with our hotel managers to maximize revenue and identify operating efficiencies.

We expect the resumption of corporate travel will enable the industry to materially improve profitability

in 2022 and we enter the year with several favorable factors, including the following: (1) ownership of a
high-quality portfolio, with a meaningful concentration in destination resort locations, (2) internal growth
from five recent or pending hotel upbrandings, (3) internal growth from the continuation of our asset
management initiatives and ROI projects, (4) expense savings from the conversion of six formerly Marriott-
managed contracts to Marriott franchises, (5) conservative debt capital structure with limited near-term
debt maturities, and (6) liquidity of $441.3 million as of December 31, 2021.

Results of Operations

The following table sets forth certain operating information for the year ended December 31, 2021 for

each of the hotels we owned during 2021. The table indicates the operating status of each hotel and the
occupancy percentage, ADR and RevPAR for each hotel for the portion of the year ended December 31,
2021 that the hotel was open and owned by the Company.

Hotels Open Throughout the Year Ended December 31, 2021

Property

Location

Westin Boston Seaport District(1)

. . . . . . . . . . . . . . . Boston, Massachusetts

Salt Lake City Marriott Downtown at City Creek . . . . . . Salt Lake City, Utah

Worthington Renaissance Fort Worth Hotel

. . . . . . . . . Fort Worth, Texas

Westin San Diego Downtown . . . . . . . . . . . . . . . . . San Diego, California

Westin Fort Lauderdale Beach Resort . . . . . . . . . . . . . Fort Lauderdale, Florida

Westin Washington D.C. City Center . . . . . . . . . . . . . Washington, D.C.

Hilton Boston Downtown/Faneuil Hall(1) . . . . . . . . . . . Boston, Massachusetts

The Hythe Vail, a Luxury Collection Resort (formerly the

Vail Marriott Mountain Resort)(1)

. . . . . . . . . . . . . Vail, Colorado

Courtyard New York Manhattan/Midtown East . . . . . . . New York, New York

Atlanta Marriott Alpharetta . . . . . . . . . . . . . . . . . . Atlanta, Georgia

The Gwen Hotel(1)

. . . . . . . . . . . . . . . . . . . . . . . Chicago, Illinois

Bethesda Marriott Suites . . . . . . . . . . . . . . . . . . . . Bethesda, Maryland

Hilton Burlington Lake Champlain(1) . . . . . . . . . . . . . Burlington, Vermont

Hotel Palomar Phoenix(1) . . . . . . . . . . . . . . . . . . . . Phoenix, Arizona

Bourbon Orleans Hotel(2)

. . . . . . . . . . . . . . . . . . . New Orleans, Louisiana

Henderson Beach Resort(3) . . . . . . . . . . . . . . . . . . . Destin, Florida

JW Marriott Denver Cherry Creek(1)

. . . . . . . . . . . . . Denver, Colorado

Margaritaville Beach House Key West (formerly the

Barbary Beach House Key West)(1)

. . . . . . . . . . . . . Key West, Florida

The Lodge at Sonoma Resort(1)

. . . . . . . . . . . . . . . . Sonoma, California

Courtyard Denver Downtown(1) . . . . . . . . . . . . . . . . Denver, Colorado

Renaissance Charleston Historic District Hotel

. . . . . . . Charleston, South Carolina

Number
of
Rooms

Occupancy
(%)

ADR
($)

RevPAR
($)

%
Change
from
2020
RevPAR

793

510

504

436

433

410

403

344

321

318

311

272

258

242

218

216

199

186

182

177

167

44.6% 196.14

87.51

152.0%

43.3% $145.42 $ 63.04

89.1%

53.6% 155.68

83.37

65.7%

52.5% 159.11

83.49

39.1%

60.3% 242.16

146.01

64.1%

29.5% 150.37

44.34

28.0%

60.2% 204.39

122.97

201.2%

45.2% 356.33

161.20

34.9%

76.9% 201.68

155.12

91.6%

44.9% 113.77

51.14

63.7%

54.3% 251.51

136.68

183.0%

34.6% 113.93

39.37

26.0%

60.8% 236.55

143.78

327.3%

58.8% 169.73

99.73

58.4%

55.3% 219.19

121.25 N/A

55.9% 437.94

244.88

264.3%

63.9% 261.17

166.79

126.5%

84.6% 384.58

325.51

173.8%

59.2% 360.12

213.28

204.9%

60.0% 156.54

93.99

163.0%

81.5% 308.52

251.36

159.7%

Hotels Open Throughout the Year Ended December 31, 2021

Property

Location

Kimpton Shorebreak Resort . . . . . . . . . . . . . . . . . . Huntington Beach, California

Cavallo Point, The Lodge at the Golden Gate(1)

. . . . . . . Sausalito, California

Havana Cabana Key West(1)

. . . . . . . . . . . . . . . . . . Key West, Florida

Hotel Emblem San Francisco(1)

. . . . . . . . . . . . . . . . San Francisco, California

L’Auberge de Sedona . . . . . . . . . . . . . . . . . . . . . . Sedona, Arizona

The Landing Lake Tahoe Resort & Spa(1) . . . . . . . . . . . South Lake Tahoe, California

Orchards Inn Sedona(1) . . . . . . . . . . . . . . . . . . . . . Sedona, Arizona

Henderson Park Inn(4)

. . . . . . . . . . . . . . . . . . . . . Destin, Florida

Number
of
Rooms

Occupancy
(%)

ADR
($)

RevPAR
($)

%
Change
from
2020
RevPAR

157

142

106

66.9% 311.01

208.15

69.0%

45.5% 652.13

296.95

144.9%

90.2% 285.74

257.78

104.2%

44.5% 158.29

70.38

34.3%

80.0% 920.04

736.34

70.3%

45.0% 484.40

217.76

13.9%

71.8% 304.71

218.91

87.3%

82.8% 575.63

476.67

16.2%

TOTAL/WEIGHTED AVERAGE FOR OPEN HOTELS .

7,678

54.3% $242.87 $131.80

98.8%

Hotels Closed for a Portion of the Year Ended December 31, 2021

Property

Location

Date of
Closure

Date of
Reopening

Number of
Rooms

Occupancy
(%)

ADR
($)

RevPAR
($)

%
Change
from
2020
RevPAR

Chicago Marriott Downtown Magnificent Mile(1)

. . . . . . . Chicago, Illinois

4/10/2020
1/3/2021

9/1/2020
4/15/2021

1,200

31.2% $197.29 $ 61.53

199.0%

The Lexington Hotel(1) (5) . . . . . . . . . . . . . . . . . . . . . New York, New York 3/29/2020

—

Hilton Garden Inn New York/Times Square Central(1)

. . . . New York, New York 3/29/2020

5/3/2021

Courtyard New York Manhattan/Fifth Avenue(1)

. . . . . . . New York, New York 3/27/2020

6/1/2021

TOTAL/WEIGHTED AVERAGE FOR CLOSED

HOTELS . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TOTAL/WEIGHTED AVERAGE . . . . . . . . . . . . . . .

725

282

189

2,396

10,074

—%

—

— (100.0)%

57.0% 204.33

116.51

294.5%

54.3% 211.93

115.08

264.5%

33.0% 201.42

66.40

116.7%

49.8% $237.13 $118.15

100.8%

(1) Operations were suspended for a portion of the year ended December 31, 2020.

(2) The operating statistics reflect our ownership period from July 29, 2021 to December 31, 2021. The

hotel was closed during the comparable period in 2020.

(3) The operating statistics reflect our ownership period from December 23, 2021 to December 31, 2021.

(4) The operating statistics reflect our ownership period from July 30, 2021 to December 31, 2021.

(5) The hotel was sold on June 30, 2021. The operating statistics reflect the period from January 1, 2021 to

June 30, 2021.

Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020

Our results of operations for the year ended December 31, 2021 improved relative to the year ended
December 31, 2020 as all but four of our hotels were open for the entire year and the U.S. economy recovered
from the impacts of COVID-19, government mandates eased, vaccines were distributed, and travel
increased.

Revenue. Revenue consists primarily of the room, food and beverage and other operating revenues

from our hotels, as follows (in millions):

Year Ended December 31,

2021

2020

% Change

Rooms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$399.1

$196.7

102.8%

Food and beverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

117.7

50.3

68.6

34.2

71.7

47.1

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$567.1

$299.5

89.3%

Our total revenues increased $267.6 million from $299.5 million for the year ended December 31, 2020

to $567.1 million for the year ended December 31, 2021.

The following are key hotel operating statistics for the years ended December 31, 2021 and 2020. The

2020 amounts reflect the period in 2020 comparable to our ownership period in 2021 for our dispositions of
Frenchman’s Reef and The Lexington Hotel and the acquisitions of the Bourbon Orleans Hotel, Henderson
Park Inn, and Henderson Beach Resort.

Year Ended December 31,

2021

2020

% Change

Occupancy % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49.8%

28.1%

ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$237.13

$209.10

21.7%

13.4%

RevPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$118.15

$ 58.83

100.8%

Food and beverage revenues increased $49.1 million from the year ended December 31, 2020, primarily

due to an increase in outlet revenues.

Other revenues, which primarily represent spa, parking, resort fees and attrition and cancellation fees,
increased $16.1 million from the year ended December 31, 2020, primarily due to an increase in resort fees
and parking.

Hotel operating expenses. The operating expenses consisted of the following (in millions):

Year Ended December 31,

2021

2020

% Change

Rooms departmental expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$102.2

$ 68.6

49.0%

Food and beverage departmental expenses . . . . . . . . . . . . . . . . . . . . . .

Other departmental expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Franchise fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Base management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incentive management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property taxes
Other fixed charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Professional fees and pre-opening costs related to Frenchman’s Reef . . . .

Lease expense (cash and non-cash) . . . . . . . . . . . . . . . . . . . . . . . . . . .

89.8

12.3

58.9

18.3
30.7
37.7
18.7
9.7
0.5
50.5
19.4

(0.1)

1.4

11.7

58.4

8.3

45.0

16.0
24.1
28.7
10.1
3.6
—
54.5
17.0

7.6

1.0

11.4

53.8

48.2

30.9

14.4
27.4
31.4
85.1
169.4
100.0
(7.3)
14.1

(101.3)

40.0

2.6

Total hotel operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$461.7

$354.3

30.3%

Our hotel operating expenses increased $107.4 million from $354.3 million for the year ended

December 31, 2020 to $461.7 million for the year ended December 31, 2021. For the year ended December 31,
2020, we recognized $7.6 million of severance costs at our properties in connection with the COVID-19
pandemic.

Depreciation and amortization. Our depreciation and amortization expense decreased $11.8 million

from the year ended December 31, 2020. This is primarily due to the timing of fully depreciated capital
expenditures and the sale of The Lexington Hotel on June 30, 2021.

Impairment losses. During the year ended December 31, 2021, we recorded impairment losses of
$11.5 million related to Frenchman’s Reef, which was sold on April 30, 2021, and $115.2 million related to
The Lexington Hotel, which was sold on June 30, 2021. During the year ended December 31, 2020, we
recorded an impairment loss of $174.1 million related to Frenchman’s Reef.

Corporate expenses. Corporate expenses principally consist of employee-related costs, including base
payroll, bonus and restricted stock. Corporate expenses also include corporate operating costs, professional
fees and directors’ fees. Our corporate expenses increased $5.2 million, from $27.4 million for the year
ended December 31, 2020 to $32.6 million for the year ended December 31, 2021. The increase is primarily
due to an increase in employee-related compensation and other employee-related expenses.

Business interruption insurance income. For the year ended December 31, 2021, we recognized

$0.7 million of business interruption insurance income related to the Caldor wildfires at The Landing Lake
Tahoe Resort & Spa, which caused the hotel to be closed for 21 days. For the year ended December 31, 2020,
we recognized $2.2 million of business interruption insurance income related to lost revenue at the Westin
Boston Seaport District due to the COVID-19 pandemic.

Interest expense. Our interest expense was $37.0 million and $54.0 million for the years ended
December 31, 2021 and December 31, 2020, respectively, and is comprised of the following (in millions):

Mortgage debt interest

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Term loan interest

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Credit facility interest and unused fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of debt issuance costs and debt premium . . . . . . . . . . . . . . . . . . . . .

Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest rate swap mark-to-market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2021

$24.9

14.8

2.4

2.6

—

(7.7)

$37.0

2020

$26.2

13.4

4.5

2.0

(2.1)

10.0

$54.0

The decrease in interest expense is primarily related to the mark-to-market of our interest rate swaps

and lower average outstanding borrowings on our credit facility in 2021, partially offset by the cessation of
interest capitalization due to ceasing reconstruction of Frenchman’s Reef.

Income taxes. We recorded income tax expense of $3.3 million in 2021 and income tax benefit of
$26.5 million in 2020. The 2021 income tax expense was incurred on the $39.5 million pre-tax income of
our TRSs. The 2021 income tax provision includes a valuation allowance of $1.4 million. The 2020 income
tax benefit is net of a valuation allowance of $24.9 million. These valuation allowances were recognized based
on assessments of our ability to utilize our net operating loss carryforwards in future years.

Comparison of the Year Ended December 31, 2020 to the Year Ended December 31, 2019

In response to the COVID-19 pandemic, we suspended operations at 20 of our 30 previously operating
hotels for a portion of the year ended December 31, 2020. Seventeen of these hotels reopened by December 31,
2020. Three of our previously operating hotels were closed as of December 31, 2020.

Revenue. Revenue consists primarily of the room, food and beverage and other operating revenues

from our hotels, as follows (in millions):

Rooms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Food and beverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2020
$196.7
68.6
34.2
$299.5

2019
$661.2
215.3
61.6
$938.1

% Change
(70.2)%
(68.1)
(44.5)
(68.1)%

Our total revenues decreased $638.6 million from $938.1 million for the year ended December 31, 2019

to $299.5 million for the year ended December 31, 2020.

The following are key hotel operating statistics for the years ended December 31, 2020 and 2019.

Year Ended December 31,

Occupancy % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RevPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

27.0%

$207.68
$ 55.99

2019

% Change
79.1% (52.1)%
(13.0)%
(70.3)%

$238.63
$188.75

Food and beverage revenues decreased $146.7 million from the year ended December 31, 2019.

Other revenues, which primarily represent spa, parking, resort fees and attrition and cancellation fees,

decreased $27.4 million from the year ended December 31, 2019.

Hotel operating expenses. The operating expenses consisted of the following (in millions):

Year Ended December 31,

2020

2019

% Change

Rooms departmental expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 68.6

Food and beverage departmental expenses . . . . . . . . . . . . . . . . . . . . . .

Other departmental expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Franchise fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Base management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Incentive management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property taxes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other fixed charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees and pre-opening costs related to Frenchman’s Reef . . . .
Lease expense (cash and non-cash) . . . . . . . . . . . . . . . . . . . . . . . . . . .

58.4

8.3

45.0

16.0

24.1

28.7

10.1

3.6

—
54.5
17.0
7.6
1.0
11.4

$166.9

137.9

15.7

83.3

20.6

35.3

66.9

26.9

19.8

5.7
57.6
23.7
—
17.8
12.7

(58.9)%

(57.7)

(47.1)

(46.0)

(22.3)

(31.7)

(57.1)

(62.5)

(81.8)

(100.0)
(5.4)
(28.3)
100.0
(94.4)
(10.2)

Total hotel operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$354.3

$690.8

(48.7)%

Our hotel operating expenses decreased $336.5 million from $690.8 million for the year ended

December 31, 2019 to $354.3 million for the year ended December 31, 2020. For the year ended December 31,
2020, we recognized $7.6 million of severance costs at our properties in connection with the COVID-19
pandemic. Additionally, in connection with the change in hotel manager of the Renaissance Charleston
Historic District Hotel, we recognized $1.4 million of accelerated amortization of the unfavorable
management agreement liability during the year ended December 31, 2020, which reduced base management
fees.

Depreciation and amortization. Our depreciation and amortization expense decreased $3.4 million
from the year ended December 31, 2019. This is primarily due to the timing of fully depreciated capital
expenditures.

Impairment losses. During the year ended December 31, 2020, we recorded an impairment loss of
$174.1 million related to Frenchman’s Reef. No impairment losses were recorded during the year ended
December 31, 2019.

Corporate expenses. Corporate expenses principally consist of employee-related costs, including base
payroll, bonus and restricted stock. Corporate expenses also include corporate operating costs, professional
fees and directors’ fees. Our corporate expenses decreased $0.8 million, from $28.2 million for the year
ended December 31, 2019 to $27.4 million for the year ended December 31, 2020.The decrease is primarily
due to a decrease in employee compensation, travel costs, and certain professional fees, partially offset by an
increase in legal fees.

Business interruption insurance income. For the year ended December 31, 2020, we recognized

$2.2 million of business interruption insurance income related to lost revenue at the Westin Boston Waterfront
due to the COVID-19 pandemic. In September 2017, Hurricane Irma caused significant damage to
Frenchman’s Reef and resulted in lost revenue and additional expenses covered under our insurance policy.
For the year ended December 31, 2019, we recognized $8.8 million of business interruption insurance income
related to the Frenchman’s Reef insurance claim.

Gain on property insurance settlement.

In December 2019, we settled our insurance claim for the

property damage related to Frenchman’s Reef. We recognized a gain on insurance settlement of
$144.2 million, which represents the net proceeds received in excess of the carrying amount of the damaged
property written off.

Interest expense. Our interest expense was $54.0 million and $46.6 million for the years ended
December 31, 2020 and December 31, 2019, respectively, and is comprised of the following (in millions):

Mortgage debt interest

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Term loan interest

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Credit facility interest and unused fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortization of debt issuance costs and debt premium . . . . . . . . . . . . . . . . . . . . .

Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest rate swap mark-to-market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2020

$26.2

13.4

4.5

2.0

(2.1)

10.0

2019

$26.5

13.7

3.7

2.1

(1.9)

2.5

$54.0

$46.6

The increase in interest expense is primarily related to the mark-to-market of our interest rate swaps.

Loss on early extinguishment of debt. On July 25, 2019, we refinanced our senior unsecured credit

facility and unsecured term loans. In connection with the refinancing we repaid our previously existing
$100 million and $200 million term loans and recognized a $2.4 million loss on early extinguishment of debt
related to the write-off of certain unamortized debt issuance costs.

Income taxes. We recorded income tax benefit of $26.5 million in 2020 and income tax expense of

$22.0 million in 2019. The 2020 income tax benefit is net of a valuation allowance of $24.9 million, which
was recognized based on an assessment of our ability to utilize our net operating loss carryforwards in
future years. The 2019 income tax expense includes $1.2 million of income tax expense incurred on the
$5.7 million pre-tax income of our domestic TRSs, foreign income tax expense of $20.8 million incurred
on the $132.6 million pre-tax income of the TRS that owns Frenchman’s Reef.

Liquidity and Capital Resources

Our short-term liquidity requirements consist primarily of funds necessary to pay our scheduled debt
service, operating expenses, ground lease payments (see Note 4 to the accompanying consolidated financial

statements), capital expenditures directly associated with our hotels and distributions to our preferred
stockholders. We have suspended our quarterly common dividend. We currently expect that our existing
cash balances and available capacity on our senior unsecured credit facility will be sufficient to meet our
short-term liquidity requirements.

Our mortgage debt agreements contain “cash trap” provisions that are triggered when the hotel’s
operating results fall below a certain debt service coverage ratio. When these provisions are triggered, all of
the excess cash flow generated by the hotel is deposited directly into cash management accounts for the benefit
of our lenders until a specified debt service coverage ratio is reached and maintained for a certain period
of time. Such provisions do not allow the lender the right to accelerate repayment of the underlying debt. As
of December 31, 2021, the debt service coverage ratios or debt yields for all of our mortgage loans, except
for the mortgage loan secured by the Salt Lake Marriott Downtown at City Creek, were below the minimum
thresholds such that the cash trap provision of each respective loan was triggered. We do not expect that
such cash traps will affect our ability to satisfy our short-term liquidity requirements.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of
acquiring additional hotels,renovations, and other capital expenditures that need to be made periodically to
our hotels, scheduled debt payments, debt maturities, redemption of limited operating partnership units
(“common OP units”), ground lease payments, and making distributions to our common and preferred
stockholders. We expect to meet our long-term liquidity requirements through various sources of capital,
including cash provided by operations, borrowings, issuances of additional equity, including common OP
units, and/or debt securities and proceeds from property dispositions. Our ability to incur additional debt
is dependent upon a number of factors, including the state of the credit markets, our degree of leverage, the
value of our unencumbered assets and borrowing restrictions imposed by existing lenders. Our ability to
raise capital through the issuance of additional equity and/or debt securities is also dependent on a number
of factors including the current state of the capital markets, investor sentiment and intended use of
proceeds. We may need to raise additional capital if we identify acquisition opportunities that meet our
investment objectives and require liquidity in excess of existing cash balances. Our ability to raise funds
through the issuance of equity securities depends on, among other things, general market conditions for hotel
companies and REITs and market perceptions about us.

On April 30, 2021, we sold a wholly owned subsidiary of the Company that owns Frenchman’s Reef to

an unaffiliated third party pursuant to a share purchase agreement for $35.0 million in cash upon closing,
as well as a participation right in the future profits of the hotel once certain return metrics are achieved. On
June 30, 2021, we sold The Lexington Hotel for $185.3 million.

On July 29, 2021, we acquired the 218-room Bourbon Orleans Hotel located in New Orleans, Louisiana,

for net consideration of $90.1 million, including prorations. On July 30, 2021, we acquired the 37-room
Henderson Park Inn located in Destin, Florida, for net consideration of $26.4 million, including prorations
and transaction costs. On December 23, 2021, we acquired the 170-room Henderson Beach Resort located
in Destin, Florida, for net consideration of $110.1 million, including prorations and transaction costs.

On January 6, 2022, we acquired the 103-room Tranquility Bay Beachfront Resort located in Marathon,

Florida, for net consideration of $62.3 million, including prorations and transaction costs.

Our Financing Strategy

Since our formation in 2004, we have been committed to a conservative capital structure with prudent

leverage. Our outstanding debt consists of fixed interest rate mortgage debt, unsecured term loans and
borrowings on our senior unsecured credit facility. We have a preference to maintain a significant portion of
our portfolio as unencumbered assets in order to provide balance sheet flexibility. We expect that our
strategy will enable us to maintain a balance sheet with an appropriate amount of debt throughout all phases
of the lodging cycle. We believe that it is prudent to reduce the inherent risk of highly cyclical lodging
fundamentals through a low leverage capital structure.

We prefer a relatively simple but efficient capital structure. We generally structure our hotel acquisitions

to be straightforward and to fit within our capital structure; however, we will consider a more complex
transaction, such as the issuance of common OP units in connection with the acquisition of Cavallo Point,

The Lodge at the Golden Gate, if we believe that the projected returns to our stockholders will significantly
exceed the returns that would otherwise be available.

We believe that we maintain a reasonable amount of debt. As of December 31, 2021, we had $1.1 billion
of debt outstanding with a weighted average interest rate of 3.88% and a weighted average maturity date of
approximately 2.5 years.We have limited near-term mortgage debt maturities and 24 of our 32 hotels are
unencumbered by mortgage debt. We remain committed to our core strategy of prudent leverage.

The following table outlines the timing and extent of our debt principal maturities and estimated interest

payments for our mortgage debt and unsecured term loans as of December 31, 2021 (in thousands).

Principal

Interest(1)

Total Principal
and Interest

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 15,896

$ 39,618

55,514

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

236,420

432,381

295,807

—

32,213

21,642

8,406

—

268,633

454,023

304,213

—

$980,504

$101,879

$1,082,383

(1) The interest expense for our variable rate mortgage and unsecured term loans is calculated based on

the rate as of December 31, 2021. Excludes interest expense on the outstanding borrowings on our senior
unsecured credit facility of $90.0 million as of December 31, 2021.

Information about our financing activities is available in Note 8 to the accompanying consolidated

financial statements.

ATM Program

In August 2021, we implemented an “at-the-market” equity offering program (the “Current ATM
Program”), pursuant to which we may issue and sell shares of our common stock from time to time, having
an aggregate offering price of up to $200.0 million. We have not sold any shares under the Current ATM
Program. Prior to the implementation of the Current ATM Program, we had a $200.0 million ATM program
(the “Prior ATM Program”), which is no longer active. No shares under the Prior ATM Program were
sold during the year ended December 31, 2021.

Short-Term Borrowings

Other than borrowings under our senior unsecured credit facility, we do not utilize short-term

borrowings to meet liquidity requirements.

Senior Unsecured Credit Facility and Unsecured Term Loans

We are party to a $400 million senior unsecured credit facility expiring in July 2023, a $350 million
unsecured term loan maturing in July 2024 and a $50 million unsecured term loan maturing in October 2023.
The maturity date for the senior unsecured credit facility may be extended for an additional year upon the
payment of applicable fees and the satisfaction of certain customary conditions. As of December 31, 2021, we
had $90.0 million of borrowings outstanding under our senior unsecured credit facility. Subsequent to
December 31, 2021, we drew an additional $70.0 million on our senior unsecured credit facility. On each of
June 9, 2020, August 14, 2020, January 20, 2021 and February 4, 2022, we executed amendments to the credit
agreements for our corporate credit facility and term loans. These amendments provided for a waiver of
the quarterly tested financial covenants beginning with the second quarter of 2020 through the first quarter
of 2022 and allow for certain other modifications to the covenants thereafter through the second quarter
of 2023. We expect to comply with the quarterly tested financial covenants beginning with the first testing
period following the end of the covenant waiver period. The third amendment to the credit agreements for our

corporate credit facility and term loans also permits us to pay dividends on our Series A Preferred Stock in
an amount up to $25.0 million annually.

Additional information about the credit agreements, including the restrictions imposed by the

amendments and their impacts on our liquidity, sources of capital, and ability to incur additional debt, can
be found in Note 8 to the accompanying consolidated financial statements.

Sources and Uses of Cash

Our principal sources of cash are net cash flow from hotel operations, sales of common and preferred
stock, debt financings and proceeds from hotel dispositions. Our principal uses of cash are acquisitions of
hotel properties, debt service and maturities, share repurchases, capital expenditures, operating costs, ground
lease payments, corporate expenses, and distributions to holders of common stock, common units and
preferred stock. As of December 31, 2021, we had $38.6 million of unrestricted corporate cash and
$36.9 million of restricted cash, and $90.0 million of outstanding borrowings on our senior unsecured
credit facility.

Our net cash used in operations was $2.3 million for the year ended December 31, 2021. Our cash from

operations generally consists of the net cash flow from hotel operations, offset by cash paid for corporate
expenses and other working capital changes.

Our net cash used in investing activities was $62.2 million for the year ended December 31, 2021, which
consisted of $213.8 million of net proceeds from the sale of Frenchman’s Reef and The Lexington Hotel and
$0.5 million receipt of deferred key money received for the Westin Washington, D.C. City Center, offset by
$226.6 million paid for the acquisitions of the Bourbon Orleans Hotel, Henderson Park Inn, and Henderson
Beach Resort, $44.5 million of capital expenditures at our operating hotels, $2.7 million of capital
expenditures for the rebuild of Frenchman’s Reef, and $2.8 million paid to extend the Salt Lake City
Marriott Downtown at City Center ground lease.

Our net cash provided by financing activities was $5.2 million for the year ended December 31, 2021,

which consisted of net draws of $35.0 million on our senior unsecured credit facility, offset by $15.3 million
of scheduled mortgage debt principal payments, $1.9 million of mortgage debt principal repaid in
connection with the extension of the Salt Lake City Marriott Downtown at City Center mortgage loan,
$1.2 million of financing costs related to the amendment and restatement of our credit agreements and the
extension of the Salt Lake City Marriott Downtown at City Center mortgage loan, $1.5 million paid to
repurchase shares upon the vesting of restricted stock for the payment of tax withholdings obligations,
and $9.8 million of distributions paid to holders of preferred stock.

We currently anticipate our significant sources of cash for the year ending December 31, 2022 will be

the net cash flow from hotel operations as the lodging disruptions from COVID-19 continue to subside and
draws on our senior unsecured credit facility. We expect our estimated uses of cash for the year ending
December 31, 2022 will be scheduled debt service payments, payments of outstanding borrowings on our
unsecured credit facility, capital expenditures, potential funding of hotel working capital requirements,
distributions to preferred stockholders, corporate expenses, the acquisition of the Tranquility Bay Beachfront
Resort in Marathon, Florida on January 6, 2022 and other potential hotel acquisitions.

Dividend Policy

We intend to distribute to our stockholders dividends at least equal to our REIT taxable income to
avoid paying corporate income tax and excise tax on our earnings (other than the earnings of our TRS,
which are all subject to tax at regular corporate rates) and to qualify for the tax benefits afforded to REITs
under the Code. In order to qualify as a REIT under the Code, we generally must make distributions to our
stockholders each year in an amount equal to at least:

• 90% of our REIT taxable income determined without regard to the dividends paid deduction and

excluding net capital gains, plus

• 90% of the excess of our net income from foreclosure property over the tax imposed on such income

by the Code, minus

• any excess non-cash income.

The timing and frequency of distributions will be authorized by our board of directors and declared by

us based upon a variety of factors, including our financial performance, restrictions under applicable law
and our current and future loan agreements, our debt service requirements, our capital expenditure
requirements, the requirements for qualification as a REIT under the Code and other factors that our board
of directors may deem relevant from time to time.

Our board of directors suspended the quarterly common dividend commencing with the first quarter
dividend that would have been paid in April 2020. The payment of future dividends, including a quarterly
common dividend, will be determined by our board of directors after considering our projected taxable
income, obligations under our financing agreements, expected capital requirements, and risks affecting our
business.

We have paid the following dividends to holders of our Series A Preferred Stock during 2020 and 2021,

and through the date of this report:

Payment Date

Record Date

September 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

September 20, 2020

December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 18, 2020

March 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 18, 2021

June 30, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 18, 2021

September 30, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

September 17, 2021

December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 20, 2021

Dividend
per Share

$0.178

$0.516

Capital Expenditures

The management and franchise agreements for each of our hotels provide for the establishment of

separate property improvement reserves to cover, among other things, the cost of replacing and repairing
furniture, fixtures and equipment at our hotels and other routine capital expenditures. Contributions to the
property improvement fund are calculated as a percentage of hotel revenues. In addition, we may be
required to pay for the cost of certain additional improvements that are not permitted to be funded from
the property improvement reserves under the applicable management or franchise agreement. As of
December 31, 2021, we have set aside $24.5 million for capital projects in property improvement funds,
which are included in restricted cash.

We spent approximately $44.5 million on capital improvements at our operating hotels and

approximately $2.7 million on the rebuild of Frenchman’s Reef during the year ended December 31,
2021.Due to the COVID-19 pandemic, we canceled or deferred a significant portion of the planned capital
improvements at our operating hotels and paused the rebuild of Frenchman’s Reef prior to its sale.Significant
projects in 2021 were as follows:

• The Lodge at Sonoma: We completed a renovation to reposition and rebrand the hotel to an

Autograph Collection Hotel in July 2021. The renovation includes a new restaurant by celebrity chef
Michael Mina.

• The Hythe Vail, a Luxury Collection Resort: We completed the final phase of a multi-year renovation
to rebrand the Vail Marriott Mountain Resort as The Hythe Vail, a Luxury Collection Resort, in
the fourth quarter of 2021.

• Margaritaville Beach House Key West: We converted the Barbary Beach House Key West to the

Margaritaville Beach Resort Key West in the fourth quarter of 2021.

In 2022, we expect to spend approximately $100 million on necessary capital improvements and a select
few transformational projects with attractive returns on investment. Significant projects in 2022 are expected
to include the following:

• JW Marriott Denver Cherry Creek: We plan to complete the renovations in the first quarter of

2022 to rebrand the hotel as Hotel Clio, a Luxury Collection Hotel.

• Hilton Boston Downtown/Faneuil Hall: We expect to commence a comprehensive renovation and

repositioning of the hotel commencing in the fourth quarter of 2022.

• Orchards Inn Sedona: We expect to commence the first phase of the upgrade renovation of the

resort in mid-2022.

• Hilton Burlington Lake Champlain: We expect to complete a renovation of the hotel to rebrand it
as a Curio Collection Hotel in late 2022. The renovation is expected to include a new restaurant
concept by a local renowned chef.

The United States is experiencing both supply chain disruptions and significant price increases for
certain construction materials. The supply chain disruptions are the result of, in part, substantial backlogs
of container ships seeking to unload cargo at major ports, with delays caused or exacerbated by port and
trucking labor shortages, railway logistics issues and a shortage of warehouse space in close proximity to
the affected ports. We have not been significantly impacted by these backlogs to date; however, if not resolved,
these backlogs and related logistics issues could result in material delays and increased costs for our
planned capital improvements.

Non-GAAP Financial Measures

We use the following non-GAAP financial measures that we believe are useful to investors as key

measures of our operating performance: EBITDA, EBITDAre, Adjusted EBITDA, FFO and Adjusted
FFO. These measures should not be considered in isolation or as a substitute for measures of performance
in accordance with U.S. GAAP.EBITDA, EBITDAre, Adjusted EBITDA, FFO and Adjusted FFO, as
calculated by us, may not be comparable to other companies that do not define such terms exactly as the
Company.

Use and Limitations of Non-GAAP Financial Measures

Our management and Board of Directors use EBITDA, EBITDAre, Adjusted EBITDA, FFO and
Adjusted FFO to evaluate the performance of our hotels and to facilitate comparisons between us and
other lodging REITs, hotel owners who are not REITs and other capital intensive companies. The use of
these non-GAAP financial measures has certain limitations. These non-GAAP financial measures as presented
by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies.
These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as
depreciation, interest and capital expenditures. We compensate for these limitations by separately considering
the impact of these excluded items to the extent they are material to operating decisions or assessments of
our operating performance. Our reconciliations to the most comparable U.S. GAAP financial measures, and
our consolidated statements of operations and cash flows, include interest expense, capital expenditures,
and other excluded items, all of which should be considered when evaluating our performance, as well as the
usefulness of our non-GAAP financial measures.

These non-GAAP financial measures are used in addition to and in conjunction with results presented
in accordance with U.S. GAAP. They should not be considered as alternatives to operating profit, cash flow
from operations, or any other operating performance measure prescribed by U.S. GAAP. These non-
GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed
with our U.S. GAAP results and the reconciliations to the corresponding U.S. GAAP financial measures,
provide a more complete understanding of factors and trends affecting our business than could be obtained
absent this disclosure. We strongly encourage investors to review our financial information in its entirety
and not to rely on a single financial measure.

EBITDA, EBITDAre and FFO

EBITDA represents net income (calculated in accordance with U.S. GAAP) excluding: (1) interest
expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation
and amortization. The Company computes EBITDAre in accordance with the National Association of
Real Estate Investment Trusts (“Nareit”) guidelines, as defined in its September 2017 white paper “Earnings
Before Interest, Taxes, Depreciation and Amortization for Real Estate.” EBITDAre represents net income
(calculated in accordance with U.S. GAAP) adjusted for: (1) interest expense; (2) provision for income taxes,

including income taxes applicable to sale of assets; (3) depreciation and amortization; (4) gains or losses on
the disposition of depreciated property, including gains or losses on change of control; (5) impairment write-
downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value
of depreciated property in the affiliate; and (6) adjustments to reflect the entity’s share of EBITDAre of
unconsolidated affiliates.

We believe EBITDA and EBITDAre are useful to an investor in evaluating our operating performance

because they help investors evaluate and compare the results of our operations from period to period by
removing the impact of our capital structure (primarily interest expense) and our asset base (primarily
depreciation and amortization, and in the case of EBITDAre, impairment and gains or losses on dispositions
of depreciated property) from our operating results. In addition, covenants included in our debt agreements
use EBITDA as a measure of financial compliance. We also use EBITDA and EBITDAre as measures in
determining the value of hotel acquisitions and dispositions.

The Company computes FFO in accordance with standards established by the Nareit, which defines

FFO as net income determined in accordance with U.S. GAAP, excluding gains or losses from sales of
properties and impairment losses, plus real estate related depreciation and amortization. The Company
believes that the presentation of FFO provides useful information to investors regarding its operating
performance because it is a measure of the Company’s operations without regard to specified non-cash items,
such as real estate related depreciation and amortization and gains or losses on the sale of assets.The
Company also uses FFO as one measure in assessing its operating results.

Adjustments to EBITDAre and FFO

We adjust EBITDAre and FFO when evaluating our performance because we believe that the exclusion
of certain additional items described below provides useful supplemental information to investors regarding
our ongoing operating performance and that the presentation of Adjusted EBITDA and Adjusted FFO,
when combined with U.S. GAAP net income, EBITDAre and FFO, is beneficial to an investor’s complete
understanding of our consolidated operating performance. We adjust EBITDAre and FFO for the following
items:

• Non-Cash Lease Expense and Other Amortization: We exclude the non-cash expense incurred from
the straight line recognition of expense from our ground leases and other contractual obligations
and the non-cash amortization of our favorable and unfavorable contracts, originally recorded in
conjunction with certain hotel acquisitions. We exclude these non-cash items because they do not
reflect the actual cash amounts due to the respective lessors in the current period and they are of lesser
significance in evaluating our actual performance for that period.

• Cumulative Effect of a Change in Accounting Principle: The Financial Accounting Standards Board

promulgates new accounting standards that require or permit the consolidated statement of
operations to reflect the cumulative effect of a change in accounting principle.We exclude the effect
of these adjustments, which include the accounting impact from prior periods, because they do not
reflect the Company’s actual underlying performance for the current period.

• Gains or Losses from Early Extinguishment of Debt: We exclude the effect of gains or losses

recorded on the early extinguishment of debt because these gains or losses result from transaction
activity related to the Company’s capital structure that we believe are not indicative of the ongoing
operating performance of the Company or our hotels.

• Hotel Acquisition Costs: We exclude hotel acquisition costs expensed during the period because we
believe these transaction costs are not reflective of the ongoing performance of the Company or
our hotels.

• Severance Costs: We exclude corporate severance costs, or reversals thereof, incurred with the

termination of corporate-level employees and severance costs incurred at our hotels related to lease
terminations or structured severance programs because we believe these costs do not reflect the ongoing
performance of the Company or our hotels.

• Hotel Manager Transition Items: We exclude the transition items associated with a change in hotel
manager because we believe these items do not reflect the ongoing performance of the Company or
our hotels.

• Other Items: From time to time we incur costs or realize gains that we consider outside the

ordinary course of business and that we do not believe reflect the ongoing performance of the
Company or our hotels.Such items may include, but are not limited to the following: pre-opening
costs incurred with newly developed hotels; lease preparation costs incurred to prepare vacant space
for marketing; management or franchise contract termination fees; gains or losses from legal
settlements; costs incurred related to natural disasters; and gains on property insurance claim
settlements, other than income related to business interruption insurance.

In addition, to derive Adjusted FFO we exclude any unrealized fair value adjustments to interest rate
swaps.We exclude these non-cash amounts because they do not reflect the underlying performance of the
Company.

The following table is a reconciliation of our U.S. GAAP net income to EBITDA, EBITDAre and

Adjusted EBITDA (in thousands):

Year Ended December 31,

2021

2020

2019

(in thousands)

Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(195,405) $(396,027) $ 184,211

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . .

37,043

3,267

53,995

(26,452)

46,584

22,028

Real estate related depreciation and amortization . . . . . . . . . . . . .

102,963

114,716

118,110

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(52,132)

(253,768)

370,933

Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

126,697

174,120

—

EBITDAre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-cash lease expense and other amortization . . . . . . . . . . . . . .

74,565

6,673

(79,648)

370,933

6,910

7,013

Professional fees and pre-opening costs related to Frenchman’s

Reef(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uninsured costs related to natural disasters(2) . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt
Hotel manager transition items(3) . . . . . . . . . . . . . . . . . . . . . . . .
Severance costs(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on property insurance settlement

. . . . . . . . . . . . . . . . . . . .

1,388
298

—
651
(37)

—

1,012
—

—
(434)
7,648

20,524
—

2,373
3,758
—

— (144,192)

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 83,538

$ (64,512) $ 260,409

(1) Represents pre-opening costs and professional fees relate to the reopening of Frenchman’s Reef, as well

as legal an other costs incurred at Frenchman’s Reef as a result of Hurricane Irma that are not
covered by insurance.

(2) Represents costs incurred at the Bourbon Orleans Hotel as a result of Hurricane Ida that have not

been or are not expected to be recovered by insurance.

(3) Amount for the year ended December 31, 2021 primarily relates to the manager transition at the

Westin Washington D.C. City Center. Amount for the year ended December 31, 2020 is offset by a
downward adjustment of $0.6 million to the termination fees for the Sheraton Suites Key West (now
known as Margaritaville Beach House Key West) franchise agreement and $1.4 million of accelerated
amortization of the unfavorable management agreement liability related to the manager transition at the
Renaissance Charleston Historic District Hotel. Amount for the year ended December 31, 2019
include $2.5 million related to the termination of the franchise agreement for Sheraton Suites Key
West.

(4) For the year ended December 31, 2020, consists of severance costs incurred with the elimination of

positions at our hotels, which are classified within other hotel expenses on the consolidated statement
of operations.

The following table is a reconciliation of our U.S. GAAP net income to FFO, FFO available to
common stock and unit holders, and Adjusted FFO available to common stock and unit holders (in
thousands):

Year Ended December 31,

2021

2020

2019

(in thousands)

Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(195,405) $(396,027) $ 184,211

Real estate related depreciation and amortization . . . . . . . . . . . . .

Impairment losses, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .

102,963

127,282

114,716

174,120

118,110

—

FFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34,840

(107,191)

302,321

Distributions to preferred stockholders . . . . . . . . . . . . . . . . . . . .

(9,817)

(3,300)

—

FFO available to common stock and unit holders . . . . . . . . . . . . . . . .

25,023

(110,491)

302,321

Non-cash lease expense and other amortization . . . . . . . . . . . . . .

6,673

6,910

7,013

Professional fees and pre-opening costs related to Frenchman’s

Reef(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uninsured costs related to natural disasters(2) . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt
. . . . . . . . . . . . . . . . . . . . .
Hotel manager transition items(3) . . . . . . . . . . . . . . . . . . . . . . . .
Gain on property insurance settlement, net of income tax . . . . . . .
Severance costs(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value adjustments to interest rate swaps . . . . . . . . . . . . . . . .

1,388
298

—
651

—
(37)

1,012
—

—
(434)

20,524
—

2,373
3,758

— (121,525)
—

7,648

(7,690)

10,072

2,545

Adjusted FFO available to common stock and unit holders . . . . . . . . .

$ 26,306

$ (85,283) $ 217,009

(1) Represents pre-opening costs and professional fees relate to the reopening of Frenchman’s Reef, as well

as legal an other costs incurred at Frenchman’s Reef as a result of Hurricane Irma that are not
covered by insurance.

(2) Represents costs incurred at the Bourbon Orleans Hotel as a result of Hurricane Ida that have not

been or are not expected to be recovered by insurance.

(3) Amount for the year ended December 31, 2021 primarily relates to the manager transition at the

(4) For the year ended December 31, 2020, consists of severance costs incurred with the elimination of

positions at our hotels, which are classified within other hotel expenses on the consolidated statement
of operations.

Critical Accounting Estimates and Policies

Our consolidated financial statements include the accounts of DiamondRock Hospitality Company
and all consolidated subsidiaries. The preparation of financial statements in conformity with U.S. 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. While we do not believe the reported amounts would be materially different,
application of these policies involves the exercise of judgment and the use of assumptions as to future
uncertainties and, as a result, actual results could differ materially from these estimates. We evaluate our
estimates and judgments, including those related to the impairment of long-lived assets, on an ongoing basis.

We base our estimates on experience and on various assumptions that are believed to be reasonable under
the circumstances. All of our significant accounting policies are disclosed in the notes to our consolidated
financial statements. The following represent certain critical accounting policies that require us to exercise our
business judgment or make significant estimates:

Investment in Hotels

Investment purchases of hotel properties, land, land improvements, building and furniture, fixtures and

Identifiable intangible assets are typically related to contracts, including ground lease agreements and
hotel management agreements, which are recorded at fair value. Above-market and below-market contract
values are based on the present value of the difference between contractual amounts to be paid pursuant to the
contracts acquired and our estimate of the fair market contract rates for corresponding contracts. Contracts
acquired that are at market do not have significant value. We enter into a hotel management agreement at
the time of acquisition and such agreements are generally based on market terms. Intangible assets are
amortized using the straight-line method over the remaining non-cancelable term of the related agreements.
In making estimates of fair values for purposes of allocating purchase price, we may utilize a number of
sources that may be obtained in connection with the acquisition or financing of a property and other market
data. Management also considers information obtained about each property as a result of its pre-
acquisition due diligence in estimating the fair value of the tangible and intangible assets acquired.

We review our investments in hotels for impairment whenever events or changes in circumstances
indicate that the carrying value of the hotel properties may not be recoverable. Events or circumstances that
may cause us to perform a review include, but are not limited to, adverse changes in the demand for
lodging at our properties, current or projected losses from operations, and an expectation that the property
is more likely than not to be sold significantly before the end of its previously estimated useful life. If such
events or circumstances are identified, management performs an analysis to compare the estimated
undiscounted future cash flows from operations and the net proceeds from the ultimate disposition of a
hotel to the carrying amount of the asset. If the estimated undiscounted future cash flows are less than the
carrying amount of the asset, an adjustment to reduce the carrying amount to the related hotels’ estimated
fair value is recorded and an impairment loss is recognized. The fair value is determined through various
valuation techniques, including discounted cash flow models with estimated discount and terminal
capitalization rates, comparable market transactions, third-party appraisals, the net sales proceeds from
pending offers, or from transactions that closed subsequent to the end of the reporting period.

Seasonality

The periods during which our hotels experience higher revenues vary from property to property,

New Accounting Pronouncements Not Yet Implemented

See Note 2 to the accompanying consolidated financial statements for additional information relating

to recently issued accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates,

commodity prices, equity prices and other market changes that affect market sensitive instruments. In
pursuing our business strategies, the primary market risk to which we are currently exposed, and, to which
we expect to be exposed in the future, is interest rate risk. The face amount of our outstanding debt as of
December 31, 2021 was $1.1 billion, of which $308.6 million was variable rate.If market rates of interest

on our variable rate debt fluctuate by 100 basis points, interest expense would increase or decrease, depending
on rate movement, future earnings and cash flows, by $3.1 million annually.

We entered into (i) an interest rate swap agreement in 2019 to fix LIBOR at 2.41% through maturity
for our $50 million unsecured term loan and (ii) an interest rate swap agreement in 2019 to fix LIBOR at
1.70% through maturity for $175 million of our $350 million unsecured term loan. Information about our
unsecured term loans and interest rate swap agreements can be found in Note 8 to the accompanying
consolidated financial statements.

The LIBOR benchmark has been the subject of national, international and other regulatory guidance

We have contracts that are indexed to LIBOR, including contracts governing our variable rate debt and
our interest rate swaps. We expect that all LIBOR settings relevant to us will cease to be published or will no
longer be representative after June 30, 2023. As a result, any of our LIBOR-based borrowings that extend
beyond such date will need to be converted to a replacement rate. Certain risks may arise in connection with
transitioning contracts to SOFR or any other alternative variable rate, including any resulting value
transfer that may occur. The value of loans, securities, or derivative instruments tied to LIBOR could also
be impacted. For some instruments, the method of transitioning to an alternative rate may be challenging, as
they may require substantial negotiation with each respective counterparty. If a contract is not transitioned
to an alternative rate and LIBOR is discontinued, the impact is likely to vary by contract.

Item 8. Financial Statements and Supplementary Data

See Index to the Financial Statements on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management has evaluated, under the supervision and with the participation of the
Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)), as required by paragraph (b) of Rules 13a-15 and 15d-15 under the
Exchange Act, and our Chief Executive Officer and Chief Financial Officer have concluded that as of the
end of the period covered by this report, the Company’s disclosure controls and procedures were effective to
give reasonable assurances that information we disclose in reports filed with the Securities and Exchange
Commission (i) is recorded, processed, summarized and reported within the time periods specified in the

Securities and Exchange Commission’s rules and forms and (ii) is accumulated and communicated to our
management, including our principal executive officer and principal financial officer, as appropriate to allow
timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting identified in connection

with the evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act during
the Company’s most recent fiscal quarter that materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

The report of our management regarding internal control over financial reporting is set forth on page

F-2 of this Annual Report on Form 10-K under the caption “Management’s Report on Internal Control
over Financial Reporting” and incorporated herein by reference.

Attestation Report of Independent Registered Public Accounting Firm

The report of our independent registered public accounting firm regarding our internal control over
financial reporting is set forth on page F-3 of this Annual Report on Form 10-K under the caption “Report
of Independent Registered Public Accounting Firm” and incorporated herein by reference.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

The information required by Items 10-14 is incorporated by reference to our proxy statement for the
2022 annual meeting of stockholders (to be filed with the SEC not later than 120 days after the end of the
fiscal year covered by this report) (“2022 proxy statement”).

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information required by this item is incorporated by reference to our 2022 proxy statement.

Item 11. Executive Compensation

The information required by this item is incorporated by reference to our 2022 proxy statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

The information required by this item is incorporated by reference to our 2022 proxy statement.

Information regarding our equity plans set forth in Item 5 of this Annual Report on Form 10-K is
incorporated by reference into this Item 12.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information required by this item is incorporated by reference to our 2022 proxy statement.

Item 14. Principal Accounting Fees and Services

The information required by this item is incorporated by reference to our 2022 proxy statement.

Our independent public accounting firm is KPMG LLP, McLean, Virginia, PCAOB Auditor ID: 185.

PART IV

Item 15. Exhibits and Financial Statement Schedules

Financial Statements

Included herein at pages F-1 through F-34.

Financial Statement Schedules

The following financial statement schedule is included herein on pages F-35 and F-36:

Schedule III – Real Estate and Accumulated Depreciation

All other schedules for which provision is made in Regulation S-X are either not required to be
included herein under the related instructions or are inapplicable or the related information is included in
the footnotes to the applicable financial statement and, therefore, have been omitted.

3. Exhibits

The following exhibits are included in this Annual Report on Form 10-K for the fiscal year ended

December 31, 2021 (and are numbered in accordance with Item 601 of Regulation S-K):

Exhibit
Number

3.1.1

3.1.2

3.1.3

3.1.4

3.1.5

3.1.6

3.1.7

3.2.1

3.2.2

Description of Exhibit

Articles of Amendment and Restatement of the Articles of Incorporation of DiamondRock
Hospitality Company (incorporated by reference to the Registrant’s Registration Statement on
Form S-11 filed with the Securities and Exchange Commission on March 1, 2005
(File no. 333-123065))

Amendment to the Articles of Amendment and Restatement of the Articles of Incorporation
of DiamondRock Hospitality Company (incorporated by reference to the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on January 10, 2007)

Articles Supplementary Prohibiting DiamondRock Hospitality Company From Electing to
be Subject to Section 3-803 of the Maryland General Corporation Law Absent Stockholder
Approval (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with
the Securities and Exchange Commission on February 26, 2014)

Articles of Amendment to the Articles of Amendment and Restatement of the Articles of
Incorporation of DiamondRock Hospitality Company (incorporated by reference to the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
May 13, 2019)

Articles Supplementary Designating DiamondRock Hospitality Company’s 8.250% Series A
Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 3.7 to the
Registrant’s Form 8-A filed with the Securities and Exchange Commission on August 28, 2020
(File No. 001-32514))
Fourth Amended and Restated Bylaws of DiamondRock Hospitality Company (incorporated
by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 5, 2016)

First Amendment to the Fourth Amended and Restated Bylaws of DiamondRock
Hospitality Company (incorporated by reference to the Registrant’s Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission on November 7, 2017)

Exhibit
Number

Description of Exhibit

4.1

4.2

4.3

10.1

10.2

10.3*

10.4*

10.5*

10.6*

10.7*

10.8*

10.9*

10.10*

10.11*

10.12

Form of Certificate for Common Stock for DiamondRock Hospitality Company
(incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on May 5, 2010)

Form of Specimen Certificate for DiamondRock Hospitality Company’s 8.250% Series A
Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 4.1 to the
Registrant’s Form 8-A filed with the Securities and Exchange Commission on August 28, 2020
(File No. 001-32514))
Description of Securities of DiamondRock Hospitality Company (incorporated by reference
to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 1, 2021)

Amended and Restated Agreement of Limited Partnership of DiamondRock Hospitality
Limited Partnership, dated as of August 28, 2018 (incorporated by reference to the
Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
August 31, 2018)

Amendment No. 1 to the Agreement of Limited Partnership of DiamondRock Hospitality
Limited Partnership, dated August 28, 2020 (incorporated by reference to Exhibit 10.1 to the
Registrant’s Form 8-K filed with the Securities and Exchange Commission on August 31, 2020)
DiamondRock Hospitality Company Deferred Compensation Plan (incorporated by reference
to the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange
Commission on August 8, 2014)

First Amendment to DiamondRock Hospitality Company Deferred Compensation Plan,
approved by the Compensation Committee of the Board of Directors on December 15, 2014
(incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission on February 27, 2015)
Form of Restricted Stock Award Agreement (incorporated by reference to the Registrant’s
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 5,
2010)
Form of Market Stock Unit Agreement (incorporated by reference to the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2010)
Relative TSR Performance Stock Unit Agreement (incorporated by reference to the
Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission
on February 25, 2014)
Form of Deferred Stock Unit Award Agreement (incorporated by reference to the Registrant’s
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 5,
2010)
Form of Director Election Form (incorporated by reference to the Registrant’s Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission on May 5, 2010)
Form of Incentive Stock Option Agreement (incorporated by reference to the Registrant’s
Registration Statement on Form S-11 filed with the Securities and Exchange Commission
(File no. 333-123065))
Form of Non-Qualified Stock Option Agreement (incorporated by reference to the
Registrant’s Registration Statement on Form S-11 filed with the Securities and Exchange
Commission (File no. 333-123065))

Fifth Amended and Restated Credit Agreement, dated as of July 25, 2019, by and among
DiamondRock Hospitality Company, DiamondRock Hospitality Limited Partnership, Wells
Fargo Bank, National Association, as Administrative Agent, each of Bank of America, N.A.,
Citibank, N.A. and U.S. Bank National Association, as Syndication Agents, Keybank
National Association, Regions Bank, PNC Bank, National Association and TD Bank, N.A.,
as Documentation Agents, and each of Wells Fargo Securities, LLC, BofA Securities, Inc.,

Exhibit
Number

Description of Exhibit

10.13

10.14

10.15

10.16

10.17

10.18

10.19*

10.20*

10.21*

10.22*

10.23*

10.24*

10.25*

10.26*

10.27*

Citigroup Global Markets Inc., U.S. Bank National Association, Keybanc Capital Markets,
Inc., Regions Capital Markets, a division of Regions Bank, PNC Capital Markets LLC and
TD Securities (USA) LLC, as Joint Lead Arrangers, and Wells Fargo Securities, LLC, BofA
Securities, Inc., Citigroup Global Markets Inc. and U.S. Bank National Association, as Joint
Bookrunners (incorporated by reference to the Registrant’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on July 29, 2019)
First Amendment to Fifth Amended and Restated Credit Agreement (incorporated by
reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 10, 2020)
Second Amendment to Fifth Amended and Restated Credit Agreement dated as of
August 14, 2020 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission on November 6, 2020)

Third Amendment to Fifth Amended and Restated Credit Agreement dated as of January 20,
2021 (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 25, 2021)

Consent Letter, dated August 4, 2020, under Fifth Amended and Restated Credit Agreement
(incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on August 7, 2020)

Consent Letter, dated March 26, 2021, under Fifth Amended and Restated Credit Agreement
(incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on May 7, 2021)

Fourth Amendment to Fifth Amended and Restated Credit Agreement dated as of
February 4, 2022 (incorporated by reference to the Registrant’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on February 8, 2022)
Form of Severance Agreement (and schedule of material differences thereto) (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on April 30, 2012)
Form of Stock Appreciation Right (incorporated by reference to the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on March 6, 2008)
Form of Dividend Equivalent Right (incorporated by reference to the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on March 6, 2008)

Form of Amendment No. 1 to Dividend Equivalent Rights Agreement under the
DiamondRock Hospitality Company 2004 Stock Option and Incentive Plan (incorporated by
reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 30, 2008)
Form of Indemnification Agreement (incorporated by reference to the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on December 16, 2009)

Severance Agreement between DiamondRock Hospitality Company and William J. Tennis,
dated as of December 16, 2009 (incorporated by reference to the Registrant’s Quarterly Report
on Form 10-Q filed with the Securities and Exchange Commission on April 30, 2012)

Letter Agreement, dated as of December 9, 2009, by and between DiamondRock Hospitality
Company and William J. Tennis (incorporated by reference to the Registrant’s Annual Report
on Form 10-K filed with the Securities and Exchange Commission on February 26, 2010)

First Amendment to Severance Agreement between DiamondRock Hospitality Company and
William J. Tennis, dated March 12, 2021 (incorporated by reference to the Registrant’s Current
Report on Form 8-K filed with the Securities and Exchange Commission on March 15, 2021)

Severance Agreement between DiamondRock Hospitality Company and Troy G. Furbay,
dated as of April 9, 2014 (incorporated by reference to the Registrant’s Quarterly Report on
From 10-Q filed with the Securities and Exchange Commission on May 12, 2014)

Exhibit
Number

10.28*

10.29*

10.30*

10.31*

10.32*

10.33*

10.34*

10.35*

10.36*

21.1†

23.1†

31.1†

31.2†

32.1**

Description of Exhibit

Letter Agreement between DiamondRock Hospitality Company and Thomas G. Healy, dated
as of December 21, 2016 (incorporated by reference to the Registrant’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on January 4, 2017)

Severance Agreement between DiamondRock Hospitality Company and Thomas G. Healy,
dated as of January 17, 2017 (incorporated by reference to the Registrant’s Quarterly Report on
Form 10-Q filed with the Securities and Exchange Commission on May 5, 2017)

DiamondRock Hospitality Company 2016 Equity Incentive Plan, effective as of May 3, 2016
(incorporated by reference to Appendix B to the Registrant’s Proxy Statement on Schedule 14A
filed with the Securities and Exchange Commission on March 24, 2016)

First Amendment to the DiamondRock Hospitality Company 2016 Equity Incentive Plan
(incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 26, 2018)

Form of Restricted Stock Award Agreement under the 2016 Equity Incentive Plan
(incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on August 5, 2016)

Form of Performance Stock Unit Agreement under the 2016 Equity Incentive Plan
(incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on August 5, 2016)

Form of Deferred Stock Unit Award Agreement under the 2016 Equity Incentive Plan
(incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the
Securities and Exchange Commission on August 5, 2016)
Form of LTIP Unit Award Agreement under the 2016 Equity Incentive Plan (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on May 9, 2019)

Severance Agreement between DiamondRock Hospitality Company and Jeffrey J. Donnelly,
dated as of August 8, 2019 (incorporated by reference to the Registrant’s Current Report on
Form 10-Q filed with the Securities and Exchange Commission on November 8, 2019)

List of DiamondRock Hospitality Company Subsidiaries

Consent of KPMG LLP

Certification of Chief Executive Officer Required by Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.

Certification of Chief Financial Officer Required by Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended.

Certification of Chief Executive Officer and Chief Financial Officer Required by
Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.

101.SCH†
101.CAL†
101.LAB†
101.PRE†
101.DEF†
104†

Inline XBRL Taxonomy Extension Schema Document.
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
Inline XBRL Taxonomy Extension Label Linkbase Document.
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
Inline XBRL Taxonomy Definition Linkbase Document.
Cover Page Interactive Data File (formatted as inline XBRL and with applicable taxonomy
extension information contained in Exhibits 101.*)

†

Exhibit is a management contract or compensatory plan or arrangement.

Filed herewith

** Furnished herewith

Item 16. Form 10-K Summary

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the

registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Bethesda, State of Maryland, on February 22, 2022.

SIGNATURES

DIAMONDROCK HOSPITALITY COMPANY

By:

/s/ WILLIAM J. TENNIS
Name: William J. Tennis
Title:

Executive Vice President, General
Counsel and Corporate Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by

the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ MARK W. BRUGGER
Mark W. Brugger

Chief Executive Officer and Director
(Principal Executive Officer)

February 22, 2022

/s/ JEFFREY J. DONNELLY
Jeffrey J. Donnelly

Executive Vice President and Chief
Financial Officer (Principal Financial
Officer)

February 22, 2022

/s/ BRIONY R. QUINN
Briony R. Quinn

Senior Vice President and Treasurer
(Principal Accounting Officer)

February 22, 2022

/s/ WILLIAM W. McCARTEN
William W. McCarten

Chairman

February 22, 2022

/s/ TIMOTHY R. CHI
Timothy R. Chi

Director

February 22, 2022

/s/ MICHAEL A. HARTMEIER
Michael A. Hartmeier

Director

/s/ KATHLEEN A. MERRILL
Kathleen A. Merrill

/s/ WILLIAM J. SHAW
William J. Shaw

/s/ BRUCE D. WARDINSKI
Bruce D. Wardinski

Director

/s/ TABASSUM S. ZALOTRAWALA
Tabassum S. Zalotrawala

Director

February 22, 2022

Index to Financial Statements

Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . .

Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets as of December 31, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019 . . .

Consolidated Statements of Equity for the Years Ended December 31, 2021, 2020 and 2019 . . . . . .

Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 . . .

Page

F-2

F-3

F-6

F-7

F-8

F-9

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11

Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2021 . . . . . . . . . . . . F-35

F-1

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial
reporting for the Company. Internal control over financial reporting refers to the process designed by, or
under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board
of directors, management and other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles, and includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect

the transactions and dispositions of the assets of the company;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation

of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that could have a material effect on the financial
statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial
reporting objectives because of its inherent limitations. Internal control over financial reporting is a process
that involves human diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting also can be circumvented by collusion
or improper management override. Because of such limitations, there is a risk that material misstatements
may not be prevented or detected on a timely basis by internal control over financial reporting. However, these
inherent limitations are known features of the financial reporting process. Therefore, it is possible to
design into the process safeguards to reduce, though not eliminate, this risk.

Management has used the framework set forth in the report entitled Internal Control — Integrated
Framework (2013) published by the Committee of Sponsoring Organizations of the Treadway Commission
to evaluate the effectiveness of the Company’s internal control over financial reporting. Management has
concluded that the Company’s internal control over financial reporting was effective as of December 31, 2021.
KPMG LLP, an independent registered public accounting firm, audited the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2021 as stated in their report, which appears
below.

/s/ Mark W. Brugger
Chief Executive Officer
(Principal Executive Officer)

/s/ Jeffrey J. Donnelly
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

/s/ Briony R. Quinn
Senior Vice President and Treasurer
(Principal Accounting Officer)

February 22, 2022

F-2

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
DiamondRock Hospitality Company:

Opinion on Internal Control Over Financial Reporting

We have audited DiamondRock Hospitality Company and subsidiaries’ (the Company) internal

control over financial reporting as of December 31, 2021, based on criteria established in Internal
Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2021, based on criteria established in Internal
Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021
and December 31, 2020, the related consolidated statements of operations, equity, and cash flows for each
of the years in the three-year period ended December 31, 2021, and the related notes and financial statement
schedule III (collectively, the consolidated financial statements), and our report dated February 22, 2022
expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are
a public accounting firm registered with the PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.

/s/ KPMG LLP
McLean, Virginia
February 22, 2022

F-3

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
DiamondRock Hospitality Company:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of DiamondRock Hospitality Company

and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of
operations, equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and
the related notes and financial statement schedule III (collectively, the consolidated financial statements).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S.
generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight

Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31,
2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22,
2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial
reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our

responsibility is to express an opinion on these consolidated financial statements based on our audits. We
are a public accounting firm registered with the PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the consolidated financial statements. We
believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the

consolidated financial statements that was communicated or required to be communicated to the audit
committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication
of a critical audit matter does not alter in any way our opinion on the consolidated financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of investments in hotel properties for impairment

As discussed in Notes 2 and 3 to the consolidated financial statements, property and equipment, net as
of December 31, 2021, was $2,651 million, which primarily consists of investments in hotel properties. The
Company reviews its investments in hotel properties for impairment whenever events or changes in
circumstances indicate that the carrying amount of the hotel properties may not be recoverable. If such
events or circumstances are identified, management performs an analysis to compare the estimated

F-4

undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel,
to the carrying amount of the hotel property. If the estimated undiscounted future cash flows are less than the
carrying amount of the hotel property, an adjustment to reduce the carrying amount to the related hotel’s
estimated fair value is recorded and an impairment loss is recognized.

We identified the evaluation of investments in hotel properties for impairment as a critical audit matter.
Identifying and evaluating the Company’s judgments about events or changes in circumstances that indicate
the carrying amount of a hotel property may not be recoverable involved a high degree of auditor judgment.
This included judgments regarding the likelihood that a property will be sold significantly before the end of its
previously estimated useful life, and the impact of the COVID-19 pandemic on the recoverability of
investments in hotel properties. Changes in these judgments could have a significant impact on the
determination of whether the carrying amount of the investments in hotel properties may not be recoverable.

The following are the primary procedures we performed to address this critical audit matter. We tested

certain internal controls over the Company’s process to identify and evaluate events or changes in
circumstances that indicate the carrying amount of investments in hotel properties may not be recoverable,
and when applicable, the Company’s process to evaluate whether a hotel’s carrying amount is recoverable
based on its undiscounted future cash flows. We assessed management’s assumptions related to the recovery
from the COVID-19 pandemic and the likelihood of a potential decrease in expected future cash flows caused
by a shortened hold period that may indicate an investment in a hotel property would not be recoverable.
We assessed the Company’s intent and ability to hold each hotel property by examining documents to assess
the Company’s plans, if any, to dispose of individual hotel properties. We inquired of Company officials
and obtained written representations regarding the status of potential plans, if any, to dispose of individual
hotel properties, corroborated the Company’s plans with others in the organization who are responsible
for, and have the authority over, potential disposition activities. When events or changes in circumstances
indicated the carrying amount of a hotel property may not be recoverable, we challenged the methodology
and significant assumptions used by the Company to estimate undiscounted future cash flows.

/s/ KPMG LLP

We have served as the Company’s auditor since 2004.

McLean, Virginia
February 22, 2022

F-5

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED BALANCE SHEETS
As of December 31, 2021 and 2020
(in thousands, except share and per share amounts)

ASSETS

2021

2020

Property and equipment, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,651,444

$2,817,356

Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Due from hotel managers

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Prepaid and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100,212

36,887

120,671

17,472

38,620

96,673

23,050

69,495

28,403

111,796

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,965,306

$3,146,773

Liabilities:

LIABILITIES AND EQUITY

Mortgage and other debt, net of unamortized debt issuance costs

. . . . . . . . . .

$ 578,651

$ 595,149

Unsecured term loans, net of unamortized debt issuance costs . . . . . . . . . . . . .

Senior unsecured credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

398,572

90,000

398,550

55,000

Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,067,223

1,048,699

Deferred income related to key money, net . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unfavorable contract liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,203

62,780

60,800

10,946

64,796

56,344

Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

108,605

104,973

Due to hotel managers

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

85,493

51,238

95,548

46,542

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,444,342

1,427,848

Equity:

Preferred stock, $0.01 par value; 10,000,000 shares authorized:

8.250% Series A Cumulative Redeemable Preferred Stock (liquidation

preference $25.00 per share), 4,760,000 shares issued and outstanding at
December 31, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock, $0.01 par value; 400,000,000 shares authorized; 210,746,895
and 210,073,514 shares issued and outstanding at December 31, 2021 and
2020, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,107
2,293,990
(780,931)

2,101
2,285,491
(576,531)

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,515,214

1,711,109

Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,750

7,816

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,520,964

1,718,925

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,965,306

$3,146,773

The accompanying notes are an integral part of these consolidated financial statements.
F-6

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2021, 2020, and 2019
(in thousands, except share and per share amounts)

2021

2020

2019

Revenues:

Rooms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

399,055

196,736

Food and beverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

117,742

50,337

567,134

Operating expenses:

Rooms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

102,183

Food and beverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Franchise fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other hotel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

Depreciation and amortization . . . . . . . . . . . . . . . . . . . .

Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Corporate expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Business interruption insurance income . . . . . . . . . . . . . .

Gain on property insurance settlement . . . . . . . . . . . . . . .

89,795

10,208

18,665

240,818

102,963

126,697

32,552

(705)

—

68,566

34,186

299,488

68,603

58,391

3,578

10,131

213,631

114,716

174,120

27,401

(2,208)

—

Total operating expenses, net . . . . . . . . . . . . . . . . . . . .

723,176

668,363

Interest and other income, net . . . . . . . . . . . . . . . . . . . . .

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss on early extinguishment of debt . . . . . . . . . . . . . . . .

Total other expenses, net . . . . . . . . . . . . . . . . . . . . . . .

(947)

37,043

—

36,096

(391)

53,995

—

53,604

(Loss) income before income taxes . . . . . . . . . . . . . . . . . .

(192,138)

(422,479)

Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . .

(3,267)

26,452

Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(195,405)

(396,027)

661,153

215,261

61,677

938,091

166,937

137,916

25,475

26,932

333,505

118,110

—

28,231

(8,822)

(144,192)

684,092

(1,197)

46,584

2,373

47,760

206,239

(22,028)

184,211

Less: Net loss (income) attributable to noncontrolling

interests

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

821

1,652

(724)

Net (loss) income attributable to the Company . . . . . . . . . .

(194,584)

(394,375)

183,487

Distributions to preferred stockholders . . . . . . . . . . . . . .

(9,817)

(3,300)

—

Net (loss) income attributable to common stockholders . . . .

(204,401) $

(397,675) $

183,487

(Loss) earnings per share:

Net (loss) income per share available to common

stockholders – basic . . . . . . . . . . . . . . . . . . . . . . . .

Net (loss) income per share available to common

stockholders – diluted . . . . . . . . . . . . . . . . . . . . . . .

Weighted-average number of common shares outstanding:

(0.96) $

(1.97) $

0.91

(0.96) $

(1.97) $

0.90

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

212,056,923

201,670,721

202,009,750

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

212,056,923

201,670,721

202,741,630

The accompanying notes are an integral part of these consolidated financial statements.
F-7

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF EQUITY
Years Ended December 31, 2021, 2020 and 2019
(in thousands, except share and per share amounts)

Preferred Stock

Common Stock

Par
Value

Additional
Paid-In
Capital

Total
Stockholders’
Equity

Deficit

Noncontrolling
interests

Total
Equity

Balance at December 31, 2018 . . . . .

— $— 204,536,485 $2,045 $2,126,472 $(245,620)

1,882,897

$ 7,696

$1,890,593

Cumulative effect of ASC 842

adoptions

. . . . . . . . . . . . . . . .

— —

Distributions on common stock ($0.50
per common share/unit) . . . . . . . .

Share-based compensation . . . . . . .

Redemption of common OP units . . .

Common stock repurchased and

— —

—

95,704

4,553

retired . . . . . . . . . . . . . . . . . . .

— — (4,428,947)

Net income . . . . . . . . . . . . . . . . .

— —

—

(44)

—

— (15,286)

(15,286)

—

(15,286)

441

(101,442)

(101,001)

5,176

(42,784)

—

5,177

(42,828)

— 183,487

183,487

(527)

723

(44)

—

724

(101,528)

5,900

—

(42,828)

184,211

Balance at December 31, 2019 . . . . .

— $— 200,207,795 $2,002 $2,089,349 $(178,861) $1,912,490

$ 8,572

$1,921,062

Distributions on preferred stock
($0.694 per preferred share)

. . . . .

Share-based compensation . . . . . . .

Redemption of common OP units . . .

— —

—

304,301

—

(3,300)

5,001

(15)

Sale of common stock . . . . . . . . . .

— — 10,680,856

107

86,722

Common stock repurchased and

retired . . . . . . . . . . . . . . . . . . .

— — (1,119,438)

(11)

(9,989)

Sale of preferred stock, net of

placement fees of $4,529 . . . . . . . 4,760,000

Net loss . . . . . . . . . . . . . . . . . . .

— —

—

— 114,423

(3,300)

5,009

(15)

86,829

(10,000)

114,423

—

1,082

(186)

—

(3,300)

6,091

(201)

86,829

(10,000)

114,423

—

— (394,375)

(394,375)

(1,652)

(396,027)

Balance at December 31, 2020 . . . . . 4,760,000 $48 210,073,514 $2,101 $2,285,491 $(576,531) $1,711,109

$ 7,816

$1,718,925

Distributions on preferred stock
($2.063 per preferred share)

. . . . .

Share-based compensation . . . . . . .

Redemption of common OP units . . .

Net loss . . . . . . . . . . . . . . . . . . .

— —

—

349,391

323,990

—

(9,817)

6,132

2,367

—

6,136

2,370

—

1,125

(2,370)

(9,817)

7,261

—

— (194,584)

(194,584)

(821)

(195,405)

Balance at December 31, 2021 . . . . . 4,760,000 $48 210,746,895 $2,107 $2,293,990 $(780,931) $1,515,214

$ 5,750

$1,520,964

The accompanying notes are an integral part of these consolidated financial statements.
F-8

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2021, 2020 and 2019
(in thousands)

Cash flows from operating activities:

Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net (loss) income to net cash (used in) provided by

operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate asset depreciation as corporate expenses . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on property insurance settlement . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash lease expense and other amortization . . . . . . . . . . . . . . . . . .
Non-cash interest rate swap fair value adjustment . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs
. . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred income related to key money . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in assets and liabilities:

Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to/from hotel managers
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by operating activities . . . . . . . . . . . . . . . . . . .

Cash flows from investing activities:

Capital expenditures for operating hotels . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures for Frenchman’s Reef reconstruction . . . . . . . . . . . . .
Hotel acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of properties, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of interest in the land underlying the Kimpton Shorebreak Resort
Extension of the Salt Lake City Marriott Downtown ground lease . . . . . . . .
Proceeds from property insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receipt of deferred key money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from financing activities:

Scheduled mortgage debt principal payments . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of common stock, net . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of preferred stock, net
. . . . . . . . . . . . . . . . . . . . . . .
Proceeds from mortgage debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of mortgage debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from unsecured term loan . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of unsecured term loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Draws on senior unsecured credit facility . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of senior unsecured credit facility . . . . . . . . . . . . . . . . . . . .
Payment of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions on common stock and units . . . . . . . . . . . . . . . . . . . . . . .
Distributions on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of Operating Partnership units . . . . . . . . . . . . . . . . . . . . . .
Shares redeemed to satisfy tax withholdings on vested share-based

2021

2020

2019

$(195,405)

$(396,027)

$ 184,211

102,963
226
—
—
6,673
7,690
2,547
126,697
(329)
8,744
468

3,142
(63,236)
(2,487)
(2,307)

(44,459)
(2,673)
(226,627)
213,817
—
(2,781)
—
524
(62,199)

(15,318)
—
—
—
—
(1,880)
—
—
205,500
(170,500)
(1,217)
(119)
(9,817)
—

118,110
114,716
229
233
—
2,373
— (144,192)
7,011
2,545
1,885
—
(396)
6,385
21,018

5,480
10,072
2,024
174,120
(396)
7,225
(26,538)

(5,412)
44,526
(13,709)
(83,686)

(47,115)
(40,936)
—
—
(1,585)
—
10,663
—
(78,973)

(6,674)
(5,082)
5,866
193,289

(102,660)
(96,599)
—
—

—
133,529
—
(65,730)

(14,195)
(14,406)
(42,828)
(10,000)
—
86,829
—
114,471
—
48,000
—
(55,460)
—
350,000
— (300,000)
150,000
(75,000)
(4,805)
(102,052)
—
—

400,000
(420,000)
(1,410)
(25,557)
(3,300)
(201)

Net cash provided by (used in) financing activities

compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Net (decrease) increase in cash and cash equivalents, and restricted cash . . . . . .
Cash, cash equivalents, and restricted cash beginning of year . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
Cash, cash equivalents, and restricted cash, end of year

(1,482)
5,167
(59,339)
134,846
$ 75,507

(1,253)
117,713
(44,946)
179,792
$ 134,846

(485)
(39,365)
88,194
91,598
$ 179,792

The accompanying notes are an integral part of these consolidated financial statements.
F-9

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years Ended December 31, 2021, 2020 and 2019
(in thousands)

2021

2020

2019

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$42,494

$43,734

$43,742

Cash paid (refunded) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,632

(11) $ 1,470

Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $ 2,136

$ 1,944

Non-cash cumulative effect of ASC 842 accounting standard adoption . . . .

$ — $ — $15,286

Non-cash Investing and Financing Activities:

Unpaid dividends and distributions declared . . . . . . . . . . . . . . . . . . . . . .

138

$25,815

Accrued capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,295

$ 3,896

$13,082

Transfer of land interest in consideration for extension of ground lease (see
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 4)

855

$ — $ —

Redemption of Operating Partnership units for common stock . . . . . . . . .

$ 2,370

$ — $

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported
within the consolidated balance sheets to the amount shown within the consolidated statements of cash
flows:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$38,620

$111,796

$122,524

Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36,887

23,050

57,268

Total cash, cash equivalents, and restricted cash . . . . . . . . . . . . . . . . . .

$75,507

$134,846

$179,792

2021

2020

2019

The accompanying notes are an integral part of these consolidated financial statements.
F-10

DIAMONDROCK HOSPITALITY COMPANY

Notes to the Consolidated Financial Statements

1. Organization

DiamondRock Hospitality Company (the “Company” or “we”) is a lodging-focused real estate
company that owns a portfolio of premium hotels and resorts. Our hotels are concentrated in major urban
market cities and in destination resort locations and many of our hotels are operated under a brand owned by
one of the leading global lodging brand companies (Marriott International, Inc. (“Marriott”) or Hilton
Worldwide (“Hilton”)). We are an owner, as opposed to an operator, of the hotels in our portfolio. As an
owner, we receive all of the operating profits or losses generated by our hotels after we pay fees to the hotel
managers and hotel brands, which are based on the revenues and profitability of the hotels.

As of December 31, 2021, we owned 32 hotels with 9,349 rooms, located in the following markets:
Atlanta, Georgia; Boston, Massachusetts (2); Burlington, Vermont; Charleston, South Carolina; Chicago,
Illinois (2); Denver, Colorado (2); Destin, Florida (2); Fort Lauderdale, Florida; Fort Worth, Texas;
Huntington Beach, California; Key West, Florida (2); New Orleans, Louisiana; New York, New York (3);
Phoenix, Arizona; Salt Lake City, Utah; San Diego, California; San Francisco, California (2); Sedona,
Arizona (2); Sonoma, California; South Lake Tahoe, California; Washington D.C. (2); and Vail, Colorado.

During 2021, we sold the Frenchman’s Reef & Morning Star Marriott Beach Resort (“Frenchman’s
Reef ”), located in St. Thomas, U.S. Virgin Islands, and The Lexington Hotel, located in New York, New York.
See Note 9 for further discussion of these sales. During 2021, we acquired the Bourbon Orleans Hotel,
located in New Orleans, Louisiana, the Henderson Park Inn and the Henderson Beach Resort, located in
Destin, Florida. On January 6, 2022, we acquired the Tranquility Bay Beachfront Resort located in Marathon,
Florida. See Note 10 for further discussion of these acquisitions.

We conduct our business through a traditional umbrella partnership real estate investment trust, or
UPREIT, in which our hotel properties are owned by our operating partnership, DiamondRock Hospitality
Limited Partnership, or subsidiaries of our operating partnership. The Company is the sole general
partner of our operating partnership and owns either directly or indirectly 99.7% of the limited
partnership units (“common OP units”) of our operating partnership. The remaining 0.3% of the common
OP units are held by third parties and executive officers of the Company. See Note 5 for additional disclosures
related to common OP units.

COVID-19 Update

The novel coronavirus (COVID-19) has had and continues to have a significant effect on our industry
and our business. The demand for lodging materially decreased beginning in March 2020 and, as a result of
pandemic-induced government mandates and health official recommendations, twenty of our hotels
suspended operations for a period of time in 2020. Four of our hotels suspended operations for a period of
time in 2021. As of December 31, 2021, all of our hotels were open.

The effectiveness and wide distribution of COVID-19 vaccines have generally reduced the spread and

2. Summary of Significant Accounting Policies

Basis of Presentation

Our financial statements include all of the accounts of the Company and its subsidiaries in accordance
with U.S. GAAP. All intercompany accounts and transactions have been eliminated in consolidation. If the

F-11

Company determines that it has an interest in a variable interest entity within the meaning of the Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation, the
Company will consolidate the entity when it is determined to be the primary beneficiary of the entity. Our
operating partnership meets the criteria of a variable interest entity. The Company is the primary beneficiary
and, accordingly, we consolidate our operating partnership.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to

make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.

Risks and Uncertainties

The state of the overall economy can significantly impact hotel operational performance and thus,

impact our financial position. Should any of our hotels experience a significant decline in operational
performance, it may affect our ability to make distributions to our stockholders and service debt or meet
other financial obligations.

Currently, one of the most significant risks and uncertainties is the potential length and severity of the
ongoing COVID-19 pandemic. The COVID-19 pandemic has adversely affected the hospitality industry in
general. The extent to which our business will continue to be affected by COVID-19 will largely depend on
future developments, which we cannot predict with a high degree of confidence, and its impact on customer
travel, including the duration of the outbreak, the continued spread and treatment of COVID-19, new
information and developments that may emerge concerning the severity of COVID-19 and the actions of
governments and individuals to contain COVID-19 or mitigate its impact, as well as the effect of any relaxation
of current restrictions, among others. To the extent that certain travel activity in the U.S. continues to be
materially and adversely affected by COVID-19, the overall business and financial results of the hospitality
industry, as well as the business and financial results of the Company, would similarly continue to be materially
and adversely impacted. See Note 1 for additional disclosures related to COVID-19 and its impact on the
Company.

Fair Value Measurements

In evaluating fair value, U.S. GAAP outlines a valuation framework and creates a fair value hierarchy
that distinguishes between assumptions based on market data (observable inputs) and a reporting entity’s
own assumptions (unobservable inputs). The hierarchy ranks the quality and reliability of inputs used to
determine fair value, which are then classified and disclosed in one of the three categories. The three levels are
as follows:

• Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2 — Inputs include quoted prices in active markets for similar assets and liabilities, quoted

prices for identical or similar assets in markets that are not active and model-derived valuations whose
inputs are observable

• Level 3 — Model-derived valuations with unobservable inputs

Property and Equipment

Investment purchases of hotel properties, land, land improvements, building and furniture, fixtures and

equipment and identifiable intangible assets that are not businesses are accounted for as asset acquisitions
and recorded at relative fair value based upon total accumulated cost of the acquisition. Direct acquisition-
related costs are capitalized as a component of the acquired assets. Property and equipment purchased
after the hotel acquisition date is recorded at cost. Replacements and improvements are capitalized, while
repairs and maintenance are expensed as incurred. Upon the sale or retirement of a fixed asset, the cost and
related accumulated depreciation are removed from the Company’s accounts and any resulting gain or loss
is included in the statements of operations.

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Depreciation is computed using the straight-line method over the estimated useful lives of the assets,

generally five to 40 years for buildings, land improvements and building improvements and one to 10 years
for furniture, fixtures and equipment. Leasehold improvements are amortized over the shorter of the lease
term or the useful lives of the related assets.

We review our investments in hotel properties for impairment whenever events or changes in
circumstances indicate that the carrying amount of the hotel properties may not be recoverable. Events or
circumstances that may cause a review include, but are not limited to, adverse changes in the demand for
lodging at the properties, current or projected losses from operations, and an expectation that the property is
more likely than not to be sold significantly before the end of its useful life. If present, management
performs an analysis to determine if the estimated undiscounted future cash flows from operations and the
proceeds from the ultimate disposition of a hotel, less costs to sell, exceed its carrying amount. If the estimated
undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the
carrying amount to the related hotel’s estimated fair market value is recorded and an impairment loss is
recognized.

We will classify a hotel as held for sale in the period that we have made the decision to dispose of the

hotel, a binding agreement to purchase the property has been signed under which the buyer has committed
a significant amount of nonrefundable cash and no significant financing or other contingencies exist which
could cause the transaction to not be completed in a timely manner. If these criteria are met, we will
record an impairment loss if the fair value less costs to sell is lower than the carrying amount of the hotel
and related assets and will cease recording depreciation expense. We will classify the assets and related liabilities
as held for sale on the balance sheet.

As discussed in Note 3, we recorded impairment losses on Frenchman’s Reef during the years ended

December 31, 2021 and 2020, and the Lexington Hotel during the year ended December 31, 2021.

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less to be cash

equivalents.

Revenue Recognition

Revenues from hotel operations are recognized when the goods or services are provided. Revenues
consist of room sales, food and beverage sales, and other hotel department revenues, such as telephone,
parking, gift shop sales and resort fees. Rooms revenue is recognized over the length of stay that the hotel
room is occupied by the customer. Food and beverage revenue is recognized at the point in time in which the
goods and/or services are rendered to the customer, such as for restaurant dining services or banquet
services. Other revenues are recognized at the point in time or over the time period that goods or services
are provided to the customer. Certain ancillary services are provided by third parties and we assess whether
we are the principal or agent in these arrangements. If we are the agent, revenue is recognized based upon
the commission earned from the third party. If we are the principal, we recognize revenue based upon the gross
sales price.

Advance deposits are recorded as liabilities when a customer or group of customers provides a deposit
for a future stay or banquet event at our hotels. Advance deposits are converted to revenue when the services
are provided to the customer or when a customer with a noncancelable reservation fails to arrive for part
or all of the reservation. Conversely, advance deposits are generally refundable upon guest cancellation of the
related reservation within an established period of time prior to the reservation.

Income Taxes

We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are

recognized for the estimated future tax consequences attributable to the differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in

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tax rates is recognized in earnings during the period in which the new rate is enacted. However, deferred tax
assets are recognized only to the extent that it is more likely than not that they will be realized based on
consideration of all available evidence, including the future reversals of existing taxable temporary differences,
future projected taxable income and tax planning strategies. Valuation allowances are provided if, based
upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets
will not be realized. As of December 31, 2021 and 2020, we had a valuation allowance of $14.9 million and
$25.6 million, respectively, on our deferred tax assets. The decrease in the valuation allowance is primarily due
to the sale of Frenchman’s Reef, along with a commensurate decrease in the associated deferred tax assets.

We have elected to be treated as a REIT under the provisions of the Internal Revenue Code, which
requires that we distribute at least 90% of our taxable income annually to our stockholders and comply with
certain other requirements. In addition to paying federal and state taxes on any retained income, we may
be subject to taxes on “built-in gains” on sales of certain assets. Our taxable REIT subsidiaries will generally
be subject to federal, state, local and/or foreign income taxes. In order for the income from our hotel
property investments to constitute “rents from real properties” for purposes of the gross income tests required
for REIT qualification, the income we earn cannot be derived from the operation of any of our hotels.
Therefore, we lease each of our hotel properties to wholly owned taxable REIT subsidiaries.

We may recognize a tax benefit from an uncertain tax position when it is more-likely-than-not that the

position will be sustained upon examination, including resolutions of any related appeals or litigation
processes, based on the technical merits. If a tax position does not meet the more-likely-than-not recognition
threshold, despite our belief that our filing position is supportable, the benefit of that tax position is not
recognized in the consolidated statements of operations. We recognize interest and penalties, as applicable,
related to unrecognized tax benefits as a component of income tax expense. We recognize unrecognized tax
benefits in the period that the uncertainty is eliminated by either affirmative agreement of the uncertain
tax position by the applicable taxing authority, or by expiration of the applicable statute of limitation. We
had no accruals for tax uncertainties as of December 31, 2021 and 2020.

Intangible Assets and Liabilities

Intangible assets or liabilities are recorded on non-market contracts assumed as part of the acquisition
of certain hotels. We review the terms of agreements assumed in conjunction with the purchase of a hotel to
determine if the terms are favorable or unfavorable compared to an estimated market agreement at the
acquisition date. Favorable contract assets or unfavorable contract liabilities are recorded at the acquisition
date and amortized using the straight-line method over the term of the agreement. We do not amortize
intangible assets with indefinite useful lives, but we review these assets for impairment annually or at
interim periods if events or circumstances indicate that the asset may be impaired.

Earnings (Loss) Per Share

Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) available to common

stockholders by the weighted-average number of common shares outstanding during the period. Diluted
EPS is calculated by dividing net income (loss) available to common stockholders by the weighted-average
number of common shares outstanding during the period plus other potentially dilutive securities such as
stock grants. No adjustment is made for shares that are anti-dilutive during a period.

Share-Based Compensation

We account for share-based employee compensation using the fair value based method of accounting.

We record the cost of awards with service or market conditions based on the grant-date fair value of the
award. That cost is recognized over the period during which an employee is required to provide service in
exchange for the award. No compensation cost is recognized for equity instruments for which employees do
not render the requisite service.

Comprehensive Income

We do not have any comprehensive income other than net income. If we have any comprehensive
income in future periods, such that a statement of comprehensive income would be necessary, such statement
will be reported as one statement with the consolidated statement of operations.

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Derivative Instruments

In the normal course of business, we are exposed to the effects of interest rate changes. We may enter

into derivative instruments, including interest rate swaps and caps, to manage or hedge interest rate risk.
Derivative instruments are recorded at fair value on the balance sheet date. We have not elected hedge
accounting treatment for the changes in the fair value of derivatives. Changes in the fair value of derivatives
are recorded each period and are included in interest expense in the accompanying consolidated statements
of operations.

Noncontrolling Interests

The noncontrolling interest is the portion of equity in our consolidated operating partnership not

attributable, directly or indirectly, to the Company. Such noncontrolling interests are reported on the
consolidated balance sheets within equity, separately from the Company’s equity. The noncontrolling interests
are classified as permanent equity as we have the right to choose to settle each holder’s redemption of the
interests in either cash or delivery of shares of our common stock. See Note 5 for additional details. On the
consolidated statements of operations, revenues, expenses and net income or loss from our less-than-wholly-
owned operating partnership are reported within the consolidated amounts, including both the amounts
attributable to the Company and noncontrolling interests. Income or loss is allocated to noncontrolling
interests based on their weighted average ownership percentage for the applicable period. Consolidated
statements of equity include beginning balances, activity for the period and ending balances for stockholders’
equity, noncontrolling interests and total equity.

Restricted Cash

Restricted cash primarily consists of cash held in reserve for replacement of furniture and fixtures

generally held by our hotel managers and cash held in escrow pursuant to lender requirements.

Debt Issuance Costs

Financing costs are recorded at cost as a component of the debt carrying amount and consist of loan
fees and other costs incurred in connection with the issuance of debt. Amortization of deferred financing
costs is computed using a method that approximates the effective interest method over the remaining life of
the debt and is included in interest expense in the accompanying consolidated statements of operations.
Debt issuance costs related to our Revolving Credit Facility (defined in Note 8) are included within prepaid
and other assets on the accompanying consolidated balance sheets. These debt issuance costs are amortized
ratably over the term of the Revolving Credit Facility, regardless of whether there are any outstanding
borrowings, and the amortization is included in interest expense in the accompanying consolidated statements
of operations.

Due to/from Hotel Managers

The due from hotel managers consists of hotel level accounts receivable, periodic hotel operating

distributions receivable from managers and prepaid and other assets held by the hotel managers on our
behalf. The due to hotel managers represents liabilities incurred by the hotel on behalf of us in conjunction
with the operation of our hotels which are legal obligations of the Company.

Key Money

Key money received in conjunction with entering into hotel management or franchise agreements or

completing specific capital projects is deferred and amortized over the term of the hotel management
agreement, the term of the franchise agreement, or on a systematic or rational basis, if appropriate. Deferred
key money is classified as deferred income in the accompanying consolidated balance sheets and amortized
as an offset to management fees or franchise fees.

Leases

We determine if an arrangement is a lease or contains an embedded lease at inception. For agreements

with both lease and nonlease components (e.g., common-area maintenance costs), we do not separate the

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nonlease components from the lease components, but account for these components as one. We determine
the lease classification (operating or finance) at lease inception.

Right-of-use assets and lease liabilities are recognized based on the present value of the future lease

payments over the lease term at the commencement date. The discount rate used to determine the present
value of the lease payments is our incremental borrowing rate as of the lease commencement date, as the
implicit rate is not readily determinable. The right-of-use assets also include any initial direct costs and any
lease payments made at or before the commencement date, and is reduced for any unrestricted incentives
received at or before the commencement date.

Options to extend or terminate the lease are included in the recognition of our right-of-use assets and

lease liabilities when it is reasonably certain that we will exercise the option. Variable payments that are
based on an index or a rate are included in the recognition of our right-of-use assets and lease liabilities using
the index or rate at lease commencement; however, changes to these lease payments due to rate or index
updates are recorded as rent expense in the period incurred. Contingent rentals based on a percentage of sales
in excess of stipulated amounts are not included in the measurement of the lease liability and right-of-use
asset but will be recognized as variable lease expense when they are incurred. Leases that contain provisions
that increase the fixed minimum lease payments based on previously incurred variable lease payments
related to performance will be remeasured, as these payments now represent an increase in the fixed minimum
payments for the remainder of the lease term. However, leases with provisions that increase minimum lease
payments based on changes in a reference index or rate (e.g. Consumer Price Index) will not be remeasured as
such changes do not constitute a resolution of a contingency.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk

consist principally of our cash and cash equivalents. We maintain cash and cash equivalents with various
financial institutions. We perform periodic evaluations of the relative credit standing of these financial
institutions and limit the amount of credit exposure with any one institution.

Segment Reporting

Each one of our hotels is an operating segment. We evaluate each of our properties on an individual
basis to assess performance, the level of capital expenditures, and acquisition or disposition transactions.
Our evaluation of individual properties is not focused on property type (e.g. urban, suburban, or resort),
brand, geographic location, or industry classification.

We aggregate our operating segments using the criteria established by U.S. GAAP, including the
similarities of our product offering, types of customers and method of providing service. All of our
properties react similarly to economic stimulus, such as business investment, changes in Gross Domestic
Product, and changes in travel patterns. As such, all our operating segments meet the aggregation criteria,
resulting in a single reportable segment represented by our consolidated financial results.

Accounting for Impacts of Natural Disasters

Assets destroyed or damaged as a result of natural disasters or other involuntary events are written off

or reduced in carrying value to their salvage value. When recovery of all or a portion of the amount of
property damage loss or other covered expenses through insurance proceeds is demonstrated to be probable,
a receivable is recorded and offsets the loss or expense up to the amount of the total loss or expense. No
gain is recorded until all contingencies related to the insurance claim have been resolved. Income resulting
from business interruption insurance is not recognized until all contingencies related to the insurance recoveries
are resolved. We received $10.7 million and $142.5 million in insurance proceeds during the years ended
December 31, 2020 and 2019, respectively. For the year ended December 31, 2019, we recognized a
$144.2 million gain related to the settlement of the property damage insurance claim at Frenchman’s Reef.

In September 2017, Hurricane Irma caused significant damage to Frenchman’s Reef and Havana
Cabana Key West. Frenchman’s Reef was further impacted by Hurricane Maria. The Company filed
insurance claims for the remediation and repair of property damage and business interruption resulting

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from the hurricanes. In July 2018, the Company settled the insurance claim for Havana Cabana Key West
for $8.3 million, net of deductibles. In June 2019, the Company settled the insurance claim for Frenchman’s
Reef related to the damages caused by Hurricane Maria for $1.4 million. In December 2019, the Company
settled the insurance claim related to Hurricane Irma for total insurance payments of $246.8 million, of which
$238.5 million related to Frenchman’s Reef and $8.3 million related to the settlement previously agreed to
for the Havana Cabana Key West.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued Accounting Standard Update 2020-04, Reference Rate Reform (Topic
848) (“ASU 2020-04”). ASU 2020-04 provides temporary optional expedients and exceptions to the guidance
in U.S. GAAP on contract modifications to ease reporting burdens related to the expected market transition
from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative
reference rates, such as the Secured Overnight Financing Rate (“SOFR”). ASU 2020-04 permits a contract
with a modified reference rate to be accounted for as a continuation of the existing contract. We have not
entered into any contract modifications yet as it directly relates to reference rate reform, but we anticipate
undertaking such modifications in the future related to our variable rate debt and interest rate swaps indexed
to LIBOR. The adoption of ASU No. 2020-04 is not expected to have a material impact on our consolidated
financial statements.

3. Property and Equipment

Property and equipment as of December 31, 2021 and 2020 consists of the following (in thousands):

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

546,800

618,210

Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,994

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,667,024

2,724,277

2021

2020

Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . .

Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

501,505

14,485

539,729

37,481

3,737,808

3,927,691

Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,086,364)

(1,110,335)

$ 2,651,444

$ 2,817,356

As of December 31, 2021 and 2020, we had accrued capital expenditures of $7.3 million and $3.9 million,

respectively.

During the year ended December 31, 2020, we evaluated the recoverability of the carrying amount of
Frenchman’s Reef as a result of our determination that it was more likely than not that the hotel would be
sold significantly before the end of its previously estimated useful life. As a result, we recorded an impairment
loss of $174.1 million in 2020 to adjust the hotel’s carrying amount to its estimated fair value. See Note 12
for further discussion about the determination of the hotel’s fair value as of December 31, 2020. On April 30,
2021, we sold the wholly owned subsidiary of the Company that owns Frenchman’s Reef. During the year
ended December 31, 2021, we recorded additional impairment losses totaling $11.5 million to adjust the
Frenchman’s Reef carrying amount to the contractual consideration. During the year ended December 31,
2021, we recorded impairment losses totaling $115.2 million related to The Lexington Hotel, which was
sold in 2021. See Note 9 for further discussion about these impairment losses.

4. Leases

We are subject to operating leases, the most significant of which are ground leases. We are the lessee to
ground leases under eight of our hotels and two parking areas. The lease liabilities for our operating leases
assume the exercise of all available extension options, as we believe they are reasonably certain to be exercised.
Additional information regarding the terms of our ground leases can be found in Note 13. As of
December 31, 2021, our operating leases have a weighted-average remaining lease term of 66 years and a
weighted-average discount rate of 5.77%.

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The components of operating lease expense, which is included in other hotel expenses in our consolidated

statements of operations, and cash paid for amounts included in the measurement of lease liabilities, are as
follows (in thousands):

Year Ended December 31,

2021

2020

Operating lease cost

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,101

$11,091

Variable lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

648

295

Cash paid for amounts included in the measurement of operating lease

liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,515

$ 3,214

Maturities of lease liabilities are as follows (in thousands):

Year Ending December 31,

As of
December 31, 2021

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,976

4,033

4,012

4,072

4,640

759,838

780,571

Less imputed interest

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(671,966)

Total lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 108,605

The Salt Lake City Marriott Downtown at City Creek is subject to a ground lease. On April 1, 2021, we
completed a transaction to extend the lease term by 50 years to December 31, 2106. In consideration for the
extension, we transferred our 21.25% interest in the land to the majority ground owners and provided a
cash payment of $2.8 million.

5. Equity

Common Shares

We are authorized to issue up to 400,000,000 shares of common stock, $0.01 par value per share. Each

outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of
stockholders. Holders of our common stock are entitled to receive dividends out of assets legally available
for the payment of dividends when authorized by our board of directors.

We had a share repurchase program (the “Share Repurchase Program”), which authorized us to
repurchase shares of our common stock having an aggregate price of up to $250 million. During the year
ended December 31, 2020, we repurchased 1,119,438 shares of our common stock at an average price of $8.91
per share for a total purchase price of $10.0 million. These shares were all repurchased prior to March 4,
2020. The Share Repurchase Program expired on November 5, 2020.

Preferred Shares

We are authorized to issue up to 10,000,000 shares of preferred stock, $0.01 par value per share. Our

board of directors is required to set for each class or series of preferred stock the terms, preferences,

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conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions,
qualifications, and terms or conditions of redemption.

In 2020, we issued a total of 4,760,000 shares of 8.250% Series A Cumulative Redeemable Preferred

Stock (“Series A Preferred Stock”) with a liquidation preference of $25.00 per share, for gross proceeds of
$119.0 million. In connection with the offering, we incurred $4.5 million of offering costs. On or after
August 31, 2025, the Series A Preferred Stock will be redeemable at the Company’s option, in whole or in
part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus accrued and
unpaid dividends up to, but not including, the redemption date. As of December 31, 2021 and 2020, we had
4,760,000 shares of Series A Preferred Stock issued and outstanding.

Operating Partnership Units

In connection with the acquisition of Cavallo Point in December 2018, we issued 796,684 common OP
units to third parties, otherwise unaffiliated with the Company, at $11.76 per unit. Each common OP unit is
redeemable at the option of the holder. Holders of common OP units have certain redemption rights,
which enable them to cause our operating partnership to redeem their units in exchange for cash per unit
equal to the market price of our common stock, at the time of redemption, or, at our option, for shares of our
common stock on a one-for-one basis, subject to adjustment upon the occurrence of stock splits, mergers,
consolidations or similar pro-rata share transactions.

Long-Term Incentive Partnership units (“LTIP units”), which are also referred to as profits interest units,
may be issued to eligible participants under the 2016 Plan (as defined in Note 6 below) for the performance
of services to, or for the benefit of, our operating partnership. LTIP units are a class of partnership unit
in our operating partnership and will receive, whether vested or not, the same per-unit distributions as the
outstanding common OP units, which equal per-share dividends on shares of our common stock. Initially,
LTIP units have a capital account balance of zero, do not receive an allocation of operating income (loss), and
do not have full parity with common OP units with respect to liquidating distributions. If such parity is
reached, vested LTIP units are converted into an equal number of common OP units, and thereafter will
possess all of the rights and interests of common OP units, including the right to exchange the common OP
units for cash per unit equal to the market price of our common stock, at the time of redemption, or, at
our option, for shares of our common stock on a one-for-one basis, subject to adjustment upon the occurrence
of stock splits, mergers, consolidations or similar pro-rata share transactions. See Note 6 for additional
disclosures related to LTIP units.

There were 639,622 and 855,191 common OP units held by unaffiliated third parties and executive
officers of the Company as of December 31, 2021 and 2020, respectively. There were 135,388 and 243,809
LTIP units outstanding as of December 31, 2021 and 2020, respectively. All vested LTIP units have reached
economic parity with common OP units and have been converted into common OP units.

Dividends and Distributions

We have paid the following dividends to holders of our common stock and distributions to holders of
common OP units and LTIP units for the years ended December 31, 2021 and 2020, and through the date
of this report:

Payment Date

Record Date

Dividend
per Share

January 13, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

January 2, 2020

$0.125

Our board of directors suspended the quarterly common dividend commencing with the first quarter
dividend that would have been paid in April 2020. The resumption in quarterly common dividends will be
determined by our board of directors after considering our projected taxable income, obligations under our
financing agreements, expected capital requirements, and risks affecting our business.

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We have paid the following dividends to holders of our Series A Preferred Stock for the years ended

December 31, 2021 and 2020, and through the date of this report:

Payment Date

Record Date

Dividend
per Share

September 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

September 20, 2020

0.178

December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 18, 2020

$0.515625

March 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 18, 2021

$0.515625

June 30, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 18, 2021

$0.515625

September 30, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

September 17, 2021

$0.515625

December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 20, 2021

$0.515625

6. Stock Incentive Plans

We are authorized to issue up to 6,082,664 shares of our common stock under our 2016 Equity
Incentive Plan (the “2016 Plan”), of which we have issued or committed to issue 4,409,225 shares as of
December 31, 2021. In addition to these shares, additional shares of common stock could be issued in
connection with the performance stock unit awards as further described below.

Restricted Stock Awards

Restricted stock awards issued to our officers and employees generally vest over a three-year period
from the date of the grant based on continued employment. We measure compensation expense for the
restricted stock awards based upon the fair market value of our common stock at the date of grant.
Compensation expense is recognized on a straight-line basis over the vesting period and is included in
corporate expenses in the accompanying consolidated statements of operations. A summary of our restricted
stock awards from January 1, 2019 to December 31, 2021 is as follows:

Unvested balance at January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares

641,844

162,806

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(21,534)

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(310,117)

Unvested balance at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

472,999

344,997

(22,857)
(237,866)

Unvested balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . .

557,273

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,177,537
(47,025)
(244,490)

Weighted-
Average Grant
Date Fair
Value

$10.25

10.38

10.37

10.08

10.40

9.39

7.73
10.54

9.83

9.37
9.21
9.94

Unvested balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . .

1,443,295

$ 9.46

In March 2021, our board of directors granted 691,490 restricted shares of common stock as special

retention awards (the “Special Retention Awards”) to certain executives, including our named executive
officers. The Special Retention Awards generally vest over a five-year period from the date of their grant based
on continued employment. Vesting occurs on the following schedule:

• 0% for the first three years,

• 25% on the third anniversary of the grant,

F-20

• 25% on the fourth anniversary of the grant, and

• 50% on the fifth anniversary of the grant.

The remaining share awards are expected to vest as follows: 268,882 during 2022, 306,183 during 2023,

381,527 during 2024, 162,234 during 2025, and 324,469 during 2026. As of December 31, 2021, the
unrecognized compensation cost related to restricted stock awards was $10.0 million and the weighted-
average period over which the unrecognized compensation expense will be recorded is approximately
37 months. For the years ended December 31, 2021, 2020, and 2019, we recorded $3.9 million, $2.6 million
and $2.6 million, respectively, of compensation expense related to restricted stock awards.

Performance Stock Units

Performance stock units (“PSUs”) are restricted stock units that vest three years from the date of

grant. Each executive officer is granted a target number of PSUs (the “PSU Target Award”). The actual
number of shares of common stock issued to each executive officer is based on the Company’s achievement
of certain performance targets. Under this framework, 50% of the PSUs are based on relative total
stockholder return and 50% on hotel market share improvement. The achievement of certain levels of total
stockholder return relative to the total stockholder return of a peer group of publicly-traded lodging
REITs is measured over a three-year performance period. There is no payout of shares of our common
stock if our total stockholder return falls below the 30th percentile of the total stockholder returns of the
peer group. The maximum number of shares of common stock issued to an executive officer is equal to 150%
of the PSU Target Award and is earned if our total stockholder return is equal to or greater than the
75th percentile of the total stockholder returns of the peer group. The number of PSUs earned is limited to
100% of the PSU Target Award if the Company’s total stockholder return is negative for the three-year
performance period. The improvement in market share for each of our hotels is measured over a three-year
performance period based on a report prepared for each hotel by STR Global, a well-recognized
benchmarking service for the hospitality industry. There is no payout of shares of our common stock if
the percentage of our hotels with market share improvements is less than 30%. The maximum number of
shares of common stock issued to an executive officer is equal to 150% of the PSU Target Award and is earned
if the percentage of our hotels with market share improvements is greater than or equal to 75%. For the
PSUs granted on March 2, 2021, the improvement in market share for each of our hotels will be measured
over a two-year performance period starting on January 1, 2022, which is when we anticipate most major
hotels will be open within our competitive sets.

We measure compensation expense for the PSUs based upon the fair value of the award at the grant
date. Compensation expense is recognized on a straight-line basis over the three-year performance period
and is included in corporate expenses in the accompanying consolidated statements of operations. The grant
date fair value of the portion of the PSUs based on our relative total stockholder return is determined
using a Monte Carlo simulation performed by a third-party valuation firm. The grant date fair value of the
portion of the PSUs based on improvement in market share for each of our hotels is the closing price of
our common stock on the grant date. The determination of the grant-date fair values of outstanding awards
based on our relative total stockholder return included the following assumptions:

Award Grant Date

Volatility

Risk-Free Rate

Fair Value at
Grant Date

March 2, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 2, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February 25, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 2, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26.9%
26.9%
24.3%
21.4%

68.8%

2.40%
2.37%
2.54%
1.16%

0.26%

$9.52
$9.00
$9.68
$8.52

$9.28

F-21

A summary of our PSUs from January 1, 2019 to December 31, 2021 is as follows:

Unvested balance at January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional units from dividends . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested balance at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional units from dividends . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . .

Weighted-
Average Grant
Date Fair
Value
$11.19
10.14
10
8.8
9.93
11.16
9.02
10.42
11.00
9.63
9.34
9.90
$ 9.45

Number of
Units
781,923
296,050
40,662
(251,375)
(70,728)
796,532
352,035
9,556
(245,937)
912,186
347,981
(290,927)
969,240

(1) The number of shares of common stock earned for the PSUs vested in 2019 was equal to 74.33% of

the PSU Target Award.

(2) The number of shares of common stock earned for the PSUs vested in 2020 was equal to 123.07% of

the PSU Target Award.

(3) The number of shares of common stock earned for the PSUs vested in 2021 was equal to 100.00% of

the PSU Target Award.

The remaining unvested target units are expected to vest as follows: 269,224 during 2022, 352,035
during 2023, and 347,981 in 2024. As of December 31, 2021, the unrecognized compensation cost related to
the PSUs was $3.7 million and is expected to be recognized on a straight-line basis over a period of
21 months. For the years ended December 31, 2021, 2020, and 2019, we recorded approximately $3.0 million,
$2.7 million, and $2.4 million, respectively, of compensation expense related to the PSUs.

LTIP Units

LTIP units are designed to offer executives a long-term incentive comparable to restricted stock, while

potentially allowing them a more favorable income tax treatment. Each LTIP unit awarded is deemed
equivalent to an award of one share of common stock reserved under the 2016 Plan. At the time of award,
LTIP units do not have full economic parity with common OP units, but can achieve such parity over time
upon the occurrence of specified events in accordance with partnership tax rules.

A summary of our LTIP units from January 1, 2019 to December 31, 2021 is as follows:

Unvested balance at January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested balance at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . .

F-22

Weighted-
Average Grant
Date Fair
Value
$ —
10.65
10.65
10.65
9.58
10.65
10.29
10.38
$10.22

Number of
Units

—
281,925
(37,559)
244,366
80,898
(81,455)
243,809
(108,421)
135,388

The remaining unvested LTIP units are expected to vest as follows: 108,422 during 2022 and 26,966
during 2023. As of December 31, 2021, the unrecognized compensation cost related to LTIP unit awards
was $0.4 million and the weighted-average period over which the unrecognized compensation expense will
be recorded is approximately 13 months. For the years ended December 31, 2021, 2020, and 2019, we recorded
$1.1 million, $1.1 million, and $0.7 million, respectively, of compensation expense related to LTIP unit
awards.

7. Earnings (Loss) Per Share

Basic EPS is calculated by dividing net income (loss) available to common stockholders by the weighted-

average number of common shares outstanding. Diluted EPS is calculated by dividing net income (loss)
available to common stockholders that has been adjusted for dilutive securities by the weighted-average
number of common shares outstanding including dilutive securities.

Unvested share-based awards that contain nonforfeitable rights to dividends or dividend equivalents

(whether paid or unpaid) are participating securities and are included in the computation of EPS pursuant
to the two-class method. Accordingly, distributed and undistributed earnings attributable to unvested share-
based compensation (participating securities) have been excluded, as applicable, from net income (loss)
available to common stockholders used in the basic and diluted EPS calculations.

The following is a reconciliation of the calculation of basic and diluted EPS (in thousands, except

share and per-share data):

Years Ended December 31,

2021

2020

2019

Numerator:

Net (loss) income attributable to common

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(204,401) $

(397,675) $

183,487

Dividends declared on unvested share-based

compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(132)

Net (loss) income available to common stockholders

. . .

(204,401) $

(397,675) $

183,355

Denominator:

Weighted-average number of common shares

outstanding – basic . . . . . . . . . . . . . . . . . . . . . . . . . .

212,056,923

201,670,721

202,009,750

Effect of dilutive securities:

Unvested restricted common stock . . . . . . . . . . . . . .

Shares related to unvested PSUs . . . . . . . . . . . . . . . .

—

156,146

575,734

Weighted-average number of common shares

outstanding – diluted . . . . . . . . . . . . . . . . . . . . . . . . .

212,056,923

201,670,721

202,741,630

(Loss) earnings per share:

Net (loss) income per share available to common

stockholders – basic . . . . . . . . . . . . . . . . . . . . . . . .

Net (loss) income per share available to common

stockholders – diluted . . . . . . . . . . . . . . . . . . . . . . .

(0.96) $

(1.97) $

0.91

(0.96) $

(1.97) $

0.90

For the year ended December 31, 2021, 379,767 of unvested restricted common shares were excluded
from diluted weighted-average common shares outstanding, as their effect would be anti-dilutive. For the
year ended December 31, 2020, there were no unvested restricted common shares excluded from the diluted
weighted-average common shares outstanding. For the years ended December 31, 2021 and 2020, 299,810
and 44,045 of unvested PSU’s, respectively, were excluded from diluted weighted-average common shares
outstanding, as their effect would be anti-dilutive.

The common OP units held by the noncontrolling interest holders have been excluded from the
denominator of the diluted EPS calculation as there would be no effect on the amounts since the common

F-23

OP units’ share of income or loss would also be added or subtracted to derive net income (loss) available to
common stockholders.

8. Debt

The following table sets forth information regarding the Company’s debt as of December 31, 2021 and

2020 (dollars in thousands):

Loan

Salt Lake City Marriott Downtown at

Interest Rate as of
December 31, 2021

Maturity Date

2021

2020

Principal Balance
as of December 31,

City Creek mortgage loan . . . . . . . . LIBOR + 3.25%(1)

January 2023

43,570

47,250

Westin Washington D.C. City Center

mortgage loan . . . . . . . . . . . . . . . .

The Lodge at Sonoma Resort mortgage
loan . . . . . . . . . . . . . . . . . . . . . . .

Westin San Diego Downtown mortgage
loan . . . . . . . . . . . . . . . . . . . . . . .

Courtyard New York Manhattan /

3.99% January 2023

55,913

58,282

3.96% April 2023

25,542

26,268

3.94% April 2023

58,600

60,261

Midtown East mortgage loan . . . . . .

4.40% August 2024

77,882

79,535

Worthington Renaissance Fort Worth

Hotel mortgage loan . . . . . . . . . . . .

JW Marriott Denver Cherry Creek

3.66% May 2025

77,453

79,214

mortgage loan . . . . . . . . . . . . . . . .

4.33% July 2025

58,789

60,052

Westin Boston Seaport District

mortgage loan . . . . . . . . . . . . . . . .

4.36% November 2025

182,755

186,840

Unamortized debt issuance costs . . .

Total mortgage and other debt, net of

unamortized debt issuance costs . . . .

Unsecured term loan . . . . . . . . . . . . . LIBOR + 2.40%(2) October 2023
Unsecured term loan . . . . . . . . . . . . . LIBOR + 2.40%(3)

July 2024

Unamortized debt issuance costs . . .

Unsecured term loans, net of

unamortized debt issuance costs . . . .

Senior unsecured credit facility . . . . . . LIBOR + 2.55%(4)

July 2023(5)

Total debt, net of unamortized debt

issuance costs . . . . . . . . . . . . . . .

Weighted-Average Interest Rate . . . . . .

3.88%

(1,853)

(2,553)

578,651

50,000
350,000

595,149

50,000
350,000

(1,428)

(1,450)

398,572

90,000

398,550

55,000

$1,067,223

$1,048,699

(1) LIBOR is subject to a floor of 1.0%.

(2) We are party to an interest rate swap agreement that fixes LIBOR at 2.41% through October 2023.

(3) We are party to an interest rate swap agreement that fixes LIBOR at 1.70% through July 2024 for

$175 million of the loan. Effective June 9, 2020, LIBOR is subject to a floor of 0.25%.

(4) Effective June 9, 2020, LIBOR is subject to a floor of 0.25%.

(5) The credit facility may be extended for an additional year upon the payment of applicable fees and the

satisfaction of certain customary conditions.

F-24

The aggregate debt maturities for our mortgage debt and unsecured term loans as of as of December 31,

2021 are as follows (in thousands):

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 15,896

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

236,420

432,381

295,807

—

$980,504

Mortgage and Other Debt

We have incurred limited recourse, property specific mortgage debt secured by certain of our hotels. In

the event of default, the lender may only foreclose on the pledged assets; however, in the event of fraud,
misapplication of funds or other customary recourse provisions, the lender may seek payment from us. As
of December 31, 2021, eight of our 32 hotel properties were secured by mortgage debt. On December 27,
2021, we extended the mortgage loan secured by the Salt Lake City Marriott Downtown at City Creek for
one year. As part of the extension, we used $1.9 million of the lender-held escrow funds as a principal
payment.

Our mortgage debt contains certain property specific covenants and restrictions, including minimum

debt service coverage ratios or debt yields that trigger “cash trap” provisions, as well as restrictions on
incurring additional debt without lender consent. Such cash trap provisions are triggered when the hotel’s
operating results fall below a certain debt service coverage ratio or debt yield. When these provisions are
triggered, all of the excess cash flow generated by the hotel is deposited directly into cash management accounts
for the benefit of our lenders until a specified debt service coverage ratio or debt yield is reached and
maintained for a certain period of time. Such provisions do not provide the lender the right to accelerate
repayment of the underlying debt. As of December 31, 2021, the debt service coverage ratios or debt yields
for all of our mortgage loans, except for the mortgage loan secured by the Salt Lake Marriott Downtown at
City Creek, were below the minimum thresholds such that the cash trap provision of each respective loan
was triggered. As of December 31, 2021, we have $2.8 million held in cash traps, which is included within
restricted cash on the accompanying balance sheet. We do not expect that such cash traps affect our ability to
satisfy our short-term liquidity requirements.

Senior Unsecured Credit Facility and Unsecured Term Loans

We are party to credit agreements (the “Credit Agreements”) that provide for a $400 million senior

unsecured credit facility (the “Revolving Credit Facility”), which matures in July 2023, a $350 million
unsecured term loan maturing in July 2024 (the “Term Loan Facility”) and a $50 million unsecured term
loan maturing in October 2023 (the “2023 Term Loan”). The maturity date for the Revolving Credit Facility
may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain
customary conditions. The interest rate on the Revolving Credit Facility and unsecured term loans is based
upon LIBOR, plus an applicable margin based upon the Company’s leverage ratio. In addition to the
interest payable on amounts outstanding under the Revolving Credit Facility, we are required to pay an
amount equal to 0.20% of the unused portion of the Revolving Credit Facility if the average usage is greater
than 50% or 0.30% of the unused portion of the Revolving Credit Facility if the average usage is less than
or equal to 50%.

During the year ended December 31, 2020, we entered into two amendments (the “Amendments”) to

the Credit Agreements (as amended, the “Amended Credit Agreements”). The Amendments waived the
quarterly tested financial covenants from June 9, 2020 through the first quarter of 2021, unless we elect to
terminate the waiver on an earlier date (such period between June 9, 2020 and the earlier of such date of
termination and the end of the first quarter of 2021, the “Covenant Relief Period”).

During the Covenant Relief Period and until the date we have demonstrated compliance with the
financial covenants for the fiscal quarter following the end of the Covenant Relief Period (the “Restriction

F-25

Period”), the Amendments (i) require that the net cash proceeds from certain incurrences of indebtedness,
equity issuances and asset dispositions will, subject to various exceptions, be applied as a mandatory
prepayment of the amounts outstanding under the Amended Credit Agreements, (ii) impose an additional
covenant that we and our subsidiaries maintain minimum liquidity, defined as unrestricted cash plus available
capacity on the Revolving Credit Facility, of at least $100.0 million, (iii) impose additional negative
covenants that will limit our ability to incur additional indebtedness, pay dividends and distributions
(except to the extent required to maintain REIT status), repurchase shares, make prepayments of other
indebtedness, make capital expenditures, conduct asset dispositions or transfers and make investments, in
each case subject to various exceptions, and (iv) permit the payment of dividends on the Company’s preferred
stock, up to $17.5 million annually.

Following the end of the Covenant Relief Period, the Amendments modify certain financial covenants

until January 1, 2022 or unless we elect to terminate the period on an earlier date (the “Ratio Adjustment
Period”), as follows:

• Maximum Leverage Ratio is increased from 60% to 65%;

• Unencumbered Leverage Ratio is increased from 60% to 65%; and

• Unencumbered Implied Debt Service Coverage Ratio may not be less than 1.00 to 1.00 for the first
two testing periods in the Ratio Adjustment Period, not less than 1.10 to 1.00 for the third testing
period in the Ratio Adjustment Period and not less than 1.20 to 1.00 for all testing periods
thereafter.

During the Covenant Relief Period and until the earlier of (i) January 1, 2022 and (ii) the date on

which we have demonstrated compliance with the financial covenants, without giving effect to the
modifications imposed during the Ratio Adjustment Period for two consecutive quarters following the
Covenant Relief Period, the equity interests of certain of our subsidiaries that own unencumbered properties
are required to be pledged to secure the obligations owed under the Amended Credit Agreements. During
the Covenant Relief Period and the Ratio Adjustment Period, the Amendments also set the applicable interest
rate to LIBOR plus a margin of 2.40% for the Revolving Credit Facility and LIBOR plus a margin of
2.35% for the Term Loan Facility and 2023 Term Loan. The Amendments also add a LIBOR floor of 0.25%
to the variable interest rate calculation.

During the year ended December 31, 2021, we entered into amendments to the Amended Credit

Agreements that provided for the following modifications:

• Extension of the Covenant Relief Period through the fourth quarter of 2021, unless we elect to

terminate the period on an earlier date;

• Extension of the Ratio Adjustment Period until April 1, 2023, unless we elect to terminate the period

on an earlier date;

• The minimum Unencumbered Implied Debt Service Coverage Ratio was lowered to 1.00 to 1.00 for

the Ratio Adjustment period;

• Increases the applicable interest rate as follows: (i) for all revolving loans outstanding, LIBOR plus a

margin of 2.55% per annum, and (ii) for all term loans outstanding, LIBOR plus a margin of
2.40% per annum;

• Increases the minimum liquidity covenant to $125.0 million; and

• Increases our ability to pay dividends on preferred stock up to $25.0 million annually.

On February 4, 2022, we entered into additional amendments to the Amended Credit Agreements that

provide for the following modifications:

• Extends the Covenant Relief Period through the first quarter of 2022, unless we elect to terminate

the period on an earlier date;

• Extends of the Ratio Adjustment Period until July 1, 2023, unless we elect to terminate the period

on an earlier date,

F-26

• During the Ratio Adjustment Period, the Fixed Charge Coverage Ratio may not be less than 1.00 to
1.00 for the first testing period of the Ratio Adjustment Period, 1.20 to 1.00 for the second testing
period of the Ratio Adjustment Period, 1.40 to 1.00 for the third testing period of the Ratio Adjustment
Period, and 1.50 to 1.00 thereafter.

We incurred interest and unused fees on the Revolving Credit Facility of $2.4 million, $4.5 million and
$3.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. We incurred interest on the
unsecured term loans of $14.8 million, $13.4 million and $13.7 million for the years ended December 31,
2021, 2020 and 2019, respectively. Subsequent to December 31, 2021, we drew an additional $70.0 million on
our senior unsecured credit facility.

9. Hotel Dispositions

On April 30, 2021, we sold the wholly owned subsidiary of the Company that owns Frenchman’s Reef

to an unaffiliated third party pursuant to a share purchase agreement (the “Purchase Agreement”) dated
April 27, 2021. Pursuant to the Purchase Agreement, the Company received $35.0 million in cash upon
closing, as well as a participation right in the future profits of the hotel once certain return metrics are
achieved. Although we expect the profit participation could be meaningful, there can be no assurance that the
property will satisfy such return metrics. The Purchase Agreement was a recognized subsequent event to
the first quarter of 2021 in accordance with FASB ASC 855, Subsequent Events. Accordingly, we recorded
an impairment loss of $10.8 million during the first quarter of 2021 to adjust the hotel’s carrying amount to
the contractual consideration. The fair value was determined based on the contractual sales price pursuant
to an executed purchase and sale agreement (a Level 2 measurement in the fair value hierarchy). Upon
classifying Frenchman’s Reef as held for sale, we recognized an additional impairment loss of approximately
$0.7 million in the second quarter of 2021.

On June 30, 2021, we sold The Lexington Hotel to an unaffiliated third party for $185.3 million.
During the first quarter of 2021, we evaluated the recoverability of the carrying amount of The Lexington
Hotel as a result of our assessment in the first quarter of 2021 that it was more likely than not that the hotel
would be sold significantly before the end of its previously estimated useful life. As a result, we recorded
an impairment loss of $111.7 million during the first quarter of 2021 to adjust the hotel’s carrying amount
to its estimated fair value. The fair value was determined based on the contractual sales price pursuant to an
executed purchase and sale agreement (a Level 2 measurement in the fair value hierarchy). Upon classifying
The Lexington Hotel as held for sale, we recognized an additional impairment loss of approximately
$3.5 million in the second quarter of 2021.

10. Acquisitions

On July 29, 2021, we acquired the 218-room Bourbon Orleans Hotel located in New Orleans, Louisiana,
for net consideration of $90.1 million, including prorations and transaction costs. The acquisition was funded
with corporate cash.

On July 30, 2021, we acquired the 37-room Henderson Park Inn located in Destin, Florida, for net
consideration of $26.4 million, including prorations and transaction costs. The acquisition was funded with
corporate cash.

On December 23, 2021, we acquired the 216-room Henderson Beach Resort located in Destin, Florida,

for net consideration of $110.1 million, including prorations and transaction costs. The acquisition was
funded with corporate cash. The acquisition includes income from 46 units owned by third parties that
currently participate in the hotel’s rental management program. The remaining 170 rooms are owned fee
simple by the Company.

On January 6, 2022, we acquired the 103-room Tranquility Bay Beachfront Resort located in Marathon,

Florida, for net consideration of $62.3 million, including prorations and transaction costs. The acquisition
was funded with corporate cash. The acquisition includes income from 87 units owned by third parties that
currently participate in the hotel’s rental management program. The remaining 16 rooms are owned fee
simple by the Company.

F-27

11.

Income Taxes

Our provision (benefit) for income taxes consists of the following (in thousands):

Year Ended December 31,

2021

2020

2019

Current – Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,759

— $

State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred – Federal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

2,799

5,190

(13,766)

State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6,159)

(4,866)

420

541

1,010

132

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— (32,819)

20,806

Change in valuation allowance . . . . . . . . . . . . . . . . . . . . .

1,437

24,913

—

468

(26,538)

21,018

Income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . . .

$3,267

$(26,452) $22,028

A reconciliation of the statutory federal tax provision to our income tax provision is as follows (in

thousands):

Year Ended December 31,

2021

2020

2019

Statutory federal tax (benefit) provision(1) . . . . . . . . . . . . . . . .
Tax impact of REIT election . . . . . . . . . . . . . . . . . . . . . . . . .

$(40,337) $(88,733) $ 43,313

45,946

37,394

(14,125)

State income tax (benefit) provision, net of federal tax benefit . .

(6,119)

(3,782)

Foreign income tax expense (benefit) . . . . . . . . . . . . . . . . . . .

Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . .

Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

1,437

2,561

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(221)

3,618

24,913

—

138

532

(6,998)

—

(694)

Income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,267

$(26,452) $ 22,028

(1) Beginning January 1, 2018, the U.S. federal income tax rate decreased from 35% to 21%.

Deferred income taxes are recognized for temporary differences between the financial reporting bases

of assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards
based on enacted tax rates expected to be in effect when such amounts are paid. However, deferred tax assets
are recognized only to the extent that it is more likely than not that they will be realizable based on
consideration of available evidence, including future reversals of existing taxable temporary differences,
projected future taxable income and tax planning strategies. Deferred tax assets are included in prepaid and
other assets and deferred tax liabilities are included in accounts payable and accrued expenses on the
accompanying consolidated balance sheets. The total deferred tax assets and liabilities are as follows (in
thousands):

F-28

2021

2020

Federal

Net operating loss carryforwards

. . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,141

$ 13,960

Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,892

408

(5,835)

(4,678)

2,799

(7,028)

(9,166)

Federal – Deferred tax (liabilities) assets, net . . . . . . . . . . . . . . . . . . . .

(72) $

589

State

Net operating loss carryforwards

. . . . . . . . . . . . . . . . . . . . . . . . . .

$11,312

$ 5,639

Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alternative minimum tax credit carryforwards . . . . . . . . . . . . . . . . .

Other

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

729

118

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,471)

Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10,238)

712

(1,787)

(4,313)

State – Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign (USVI)

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Land basis recorded in purchase accounting . . . . . . . . . . . . . . . . . . .

Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

530

338

— $12,134

—

(2,617)

— (12,134)

Foreign – Deferred tax liabilities, net

. . . . . . . . . . . . . . . . . . . . . . . . .

— $ (2,617)

As of December 31, 2021, we had deferred tax assets of $18.5 million consisting of federal and state

net operating loss carryforwards. The state loss carryforwards generally expire in 2023 through 2041 if not
utilized by then; however, for certain states some loss carryforwards do not expire. The federal loss
carryforwards do not expire.

We analyze our deferred tax assets for each jurisdiction and record a valuation allowance when we
deem it more likely than not that future results will not generate sufficient taxable income to realize the
deferred tax assets. As of December 31, 2021, we have a valuation allowance of $14.9 million on our deferred
tax assets as we can no longer be assured that we will be able to realize most of these assets due to
uncertainties regarding how long the COVID-19 pandemic will last or what the long-term impact will be on
our hotels’ operations.

12. Relationships with Managers and Franchisors

We are party to hotel management agreements for each of our hotels owned. Under our hotel

management agreements, the hotel manager receives a base management fee and, if certain financial
thresholds are met or exceeded, an incentive management fee. The base management fee is generally payable
as a percentage of gross hotel revenues for each fiscal year. The incentive management fee is generally
based on hotel operating profits, but the fee only applies to that portion of hotel operating profits above a
negotiated return on our invested capital, which we refer to as the owner’s priority. We refer to this excess of
operating profits over the owner’s priority as “available cash flow.”

F-29

The following is a summary of management fees for the years ended December 31, 2021, 2020 and

2019 (in thousands):

Year Ended December 31,

2021

2020

2019

Base management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,542

$ 6,908

$21,712

Incentive management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred income related to key money(1) . . . . . . .
Amortization of unfavorable contract liabilities . . . . . . . . . . . . . .

468
(213)

—
(227)

5,705
(227)

(1,589)

(3,103)

(1,715)

Total management fees, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,208

$ 3,578

$25,475

(1) Relates to key money received for Chicago Marriott Downtown Magnificent Mile and Westin

Washington D.C. City Center.

Five of our hotels earned incentive management fees for the year ended December 31, 2021. None of

our hotels earned incentive management fees for the year ended December 31, 2020. Eight of our hotels
earned incentive management fees for the year ended December 31, 2019.

Performance Termination Provisions

Our management agreements provide us with termination rights upon a manager’s failure to meet
certain financial performance criteria and manager’s decision not to cure the failure by making a cure
payment.

Key Money

Our managers and franchisors have contributed to us certain amounts in exchange for the right to

manage or franchise hotels we have acquired and in connection with the completion of certain brand
enhancing capital projects. We refer to these amounts as “key money.” Key money is classified as deferred
income in the accompanying consolidated balance sheets and amortized against management fees or franchise
fees on the accompanying consolidated statements of operations. During 2021, we received $0.5 million of
key money as a result of the change in manager of the Westin Washington D.C. City Center.

Franchise Agreements

We are party to franchise agreements for 18 of our hotels as of December 31, 2021. Pursuant to these
franchise agreements, we pay franchise fees based on a percentage of gross room sales, and, under certain
agreements, a percentage based on gross food and beverage sales. Further, we pay certain other fees for
marketing and reservation services.

The following is a summary of franchise fees for the years ended December 31, 2021, 2020 and 2019 (in

thousands):

Franchise fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred income related to key money(1) . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total franchise fees, net

$18,781
(116)

$10,301
(170)

$27,102
(170)

$18,665

$10,131

$26,932

Year Ended December 31,

2021

2020

2019

(1) Relates to key money received for The Lexington Hotel and Courtyard New York Manhattan/Fifth

Avenue.

13. Commitments and Contingencies

Litigation

We are subject to various claims, lawsuits and legal proceedings, including routine litigation arising in

the ordinary course of business, regarding the operation of our hotels and Company matters. While it is not

F-30

possible to ascertain the ultimate outcome of such matters, management believes that the aggregate amount
of such liabilities, if any, in excess of amounts covered by insurance, will not have a material adverse
impact on our financial condition or results of operations. The outcome of claims, lawsuits and legal
proceedings brought against the Company, however, is subject to significant uncertainties.

Ground Leases

Additional information regarding our leases can be found in Note 4.

Six of our hotels are subject to ground lease agreements that cover all of the land underlying the

respective hotel as of December 31, 2021:

• The Bethesda Marriott Suites hotel is subject to a ground lease that runs until 2087. There are no

renewal options.

• The Courtyard New York Manhattan/Fifth Avenue is subject to a ground lease that runs until 2085,

inclusive of one 49-year renewal option.

• The Salt Lake City Marriott is subject to two ground leases: one ground lease covers the land under

the hotel and the other ground lease covers the portion of the hotel that extends into the adjacent City
Creek Center. The term of the ground lease covering the land under the hotel runs through 2106.
The term of the ground lease covering the extension into the City Creek Center runs through 2056.

• The Westin Boston Seaport District is subject to a ground lease that runs until 2099. There are no

renewal options.

• The Hotel Palomar Phoenix is subject to a ground lease that runs until 2085, inclusive of three

renewal options of five years each.

• Cavallo Point is subject to a ground lease with the United States National Park Service that runs

until 2066. There are no renewal options.

A portion of the parking garage relating to the Worthington Renaissance Fort Worth Hotel is subject

to three ground leases that cover, contiguously with each other, approximately one-fourth of the land on
which the parking garage is constructed. Each of the ground leases has a term that runs through July 2067,
inclusive of three 15-year renewal options. The remainder of the land on which the parking garage is
constructed is owned by us in fee simple.

A portion of the JW Marriott Denver Cherry Creek is subject to a ground lease that covers
approximately 5,500 square feet. The term of the ground lease runs through December 2030, inclusive of
two 5-year renewal options. The lease may be indefinitely extended thereafter in one-year increments. The
remainder of the land on which the hotel is constructed is owned by us in fee simple.

We lease the buildings and sublease the underlying land containing 28 of the 70 rooms at the Orchards

Inn Sedona, which expires in 2070, including all extension options. The remainder of the land underlying
the hotel is owned by us in fee simple.

We sublease a parking area near the Bourbon Orleans Hotel. The sublease runs through July 2069.

There are no renewal options.

These ground leases generally require us to make rental payments (including a percentage of gross

receipts as percentage rent with respect to the Courtyard New York Manhattan/Fifth Avenue, Westin
Boston Seaport District, Salt Lake City Marriott, and Cavallo Point ground leases). Most of our ground
leases require us to make payments for all charges, costs, expenses, assessments and liabilities, including real

F-31

property taxes and utilities. Furthermore, these ground leases generally require us to obtain and maintain
insurance covering the subject property.

The following table reflects the current and future annual rents under our ground leases:

Term(1)

Property
Bethesda Marriott Suites . . . . . . . . . . . . . . . . . . . . . Through 4/2087
Courtyard New York Manhattan/Fifth Avenue(3) . . .
10/2017 – 9/2027
10/2027 – 9/2037
10/2037 – 9/2047
10/2047 – 9/2057
10/2057 – 9/2067
10/2067 – 9/2077
10/2077 – 9/2085

Annual Rent
$917,512(2)
$1,132,812
$1,416,015
$1,770,019
$2,212,524
$2,765,655
$3,457,069
$4,321,336

Salt Lake City Marriott (Ground lease for hotel)

. . . Through 12/2106 Greater of $132,000 or 2.6% of annual gross

Salt Lake City Marriott (Ground lease for

extension) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Westin Boston Seaport District(5) (Base rent) . . . . . .

Westin Boston Seaport District (Percentage rent) . . .

JW Marriott Denver Cherry Creek . . . . . . . . . . . . .

1/2018 – 12/2056
1/2021 – 12/2025
1/2026 – 12/2030
1/2031 – 12/2035
1/2036 – 5/2099
6/2016 – 5/2026
6/2026 – 5/2036
6/2036 – 5/2046
6/2046 – 5/2056
6/2056 – 5/2066
6/2066 – 5/2099
1/2021 – 12/2025
1/2026 – 12/2030(6)
7/2018 – 12/2070
4/2022 – 3/2085

room sales

$14,045(4)
$1,000,000
$1,500,000
$1,750,000
No base rent
1.0% of annual gross revenue
1.5% of annual gross revenue
2.75% of annual gross revenue
3.0% of annual gross revenue
3.25% of annual gross revenue
3.5% of annual gross revenue
$55,000
$60,000
$127,856(7)
$35,459(8)

Orchards Inn Sedona . . . . . . . . . . . . . . . . . . . . . . .
Hotel Palomar Phoenix (Base Rent) . . . . . . . . . . . . .
Hotel Palomar Phoenix (Government Property Lease
Excise Tax)(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cavallo Point (Base Rent)
. . . . . . . . . . . . . . . . . . . .
Cavallo Point(11) (Percentage Rent) . . . . . . . . . . . . . .

1/2022 – 12/2023
1/2024 – 12/2033
1/2034 – 12/2043
1/2044 – 12/2053
1/2054 – 12/2063
1/2064 – 3/2085
1/2019 – 12/2066
1/2019 – 12/2023
1/2024 – 12/2028
1/2029 – 12/2033
1/2034 – 12/2066
Cavallo Point(12) (Participation Rent) . . . . . . . . . . . . Through 12/2066
Bourbon Orleans Hotel parking sublease . . . . . . . . . Through 7/2069
Worthington Renaissance Fort Worth Hotel garage

$390,000
$312,000
$234,000
$156,000
$78,000
$—
$67,034(10)
2.0% of adjusted gross revenue over threshold
3.0% of adjusted gross revenue over threshold
4.0% of adjusted gross revenue over threshold
5.0% of adjusted gross revenue over threshold
10.0% of adjusted gross revenue over threshold
$36,000(13)

ground lease . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8/2013 – 7/2022
8/2022 – 7/2037
8/2037 – 7/2052
8/2052 – 7/2067

$40,400
$46,081
$51,763
$57,444

(1) These terms assume our exercise of all renewal options.

(2) Represents rent for the year ended December 31, 2021. Rent increases annually by 5.5%.

(3) The total annual rent includes the fixed rent noted in the table plus a percentage rent equal to 5% of

F-32

gross receipts for each lease year, but only to the extent that 5% of gross receipts exceeds the minimum
fixed rent in such lease year. There was no such percentage rent earned during the year ended
December 31, 2021.

(4) Represents rent for the year ended December 31, 2021. Rent increases annually based on the greater of

2% or a Consumer Price Index calculation.

(5) Total annual rent under the ground lease is capped at 2.5% of hotel gross revenues during the initial

30 years of the ground lease.

(6) Beginning January 2031, we have the right to renew the ground lease in one-year increments at the

prior year’s annual rent plus 3%.

(7) Represents rent for the year ended December 31, 2021. Rent increases based on a Consumer Price

Index calculation annually.

(8) Represents rent for the year ended March 31, 2022. Rent increases annually each April by 2.5%.

(9) As lessee of government property, the hotel is subject to a Government Property Lease Excise Tax

under Arizona state statute with payments beginning in 2022.

(10) Base rent resets every five years based on the average of the previous three years of adjusted gross

revenues, as defined in the ground lease, multiplied by 75%. The next base rent reset will be January 2024.

(11) Percentage rent is applied to annual adjusted gross revenues, as defined in the ground lease, between
$30 million and the participation rent threshold. Base rent is deducted from the percentage rent.

(12) Participation rent is applied to annual adjusted gross revenues, as defined in the ground lease, over

$42 million plus an annual increase based on a Consumer Price Index calculation beginning January 1,
2020, and every year thereafter through the end of the lease term.

(13) Represents rent for the year ending December 31, 2022. Annual rent increases by $6,000 every five years.

The next rent increase will be January 2027.

14. Fair Value Measurements and Interest Rate Swaps

The fair value of certain financial assets and liabilities and other financial instruments as of

December 31, 2021 and 2020, in thousands, are as follows:

Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,067,223

$1,066,139

$1,048,699

$1,078,900

December 31, 2021

December 31, 2020

Carrying
Amount(1)

Fair Value

Carrying
Amount(1)

Fair Value

(1) The carrying amount of debt is net of unamortized debt issuance costs.

The fair value of our debt is a Level 2 measurement under the fair value hierarchy (see Note 2). We
estimate the fair value of our debt by discounting the future cash flows of each instrument at estimated
market rates.

The Company’s interest rate derivatives, which are not designated or accounted for as accounting

hedges, consisted of the following as of December 31, 2021 and 2020, in thousands:

Hedged Debt

Rate
Fixed

Type

Index

Effective
Date

Maturity
Date

Notional
Amount

December 31,
2021

December 31,
2020

$50 million term loan . . . Swap

2.41% 1-Month LIBOR January 7, 2019 October 18, 2023 $ 50,000

$(1,565)

$ (3,231)

$350 million term loan . . Swap

1.70% 1-Month LIBOR

July 25, 2019 July 25, 2024

$175,000

(3,362)

$(4,927)

(9,386)

$(12,617)

Fair Value of Assets
(Liabilities)

F-33

The fair values of the interest rate swap agreements are included in accounts payable and accrued

expenses on the accompanying consolidated balance sheets as of December 31, 2021 and 2020. The fair
value of our interest rate swaps is a Level 2 measurement under the fair value hierarchy. We estimate the fair
value of the interest rate swap based on the interest rate yield curve and implied market volatility as inputs
and adjusted for the counterparty’s credit risk. We concluded the inputs for the credit risk valuation adjustment
are Level 3 inputs, however these inputs are not significant to the fair value measurement in its entirety.

The carrying value of our other financial instruments approximate fair value due to the short-term

nature of these financial instruments.

The following table presents the fair value of assets that were measured on a non-recurring basis (in

thousands):

Fair Value Measurements as of
December 31, 2020

Total

Level 1

Level 2

Level 3

Hotel properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$45,500

$ — $ — $45,500

As described in Note 3, we adjusted the carrying amount of Frenchman’s Reef to its fair value and

recorded a related impairment loss of $174.1 million in 2020. The fair value was determined using a
discounted cash flow model whereby we estimated the future net cash flows expected to be generated by the
hotel, using assumptions for estimated remaining reconstruction costs, estimated developer profit,
forecasted operating revenues and expenses, and proceeds from the ultimate disposition of the hotel. The
discount rate of 11.5% and the terminal capitalization rate of 8.5% used in the discounted cash flow model
are considered significant unobservable inputs in estimating the non-recurring fair value measurement. The
fair value measurement of the property is a Level 3 measurement under the fair value hierarchy (see
Note 2).

In 2021, we recorded impairment losses related to Frenchman’s Reef and The Lexington Hotel, as a
result of the disposition of these hotels. See Note 9 for additional information related to these fair value
measurements and corresponding impairment losses. As of December 31, 2021, there were no assets measured
on a non-recurring basis.

F-34

DiamondRock Hospitality Company

Schedule III — Real Estate and Accumulated Depreciation
As of December 31, 2021 (in thousands)

Initial Cost

Encumbrances

Land

Building and
Improvements

Costs
Capitalized
Subsequent to
Acquisition

Gross Amount at End of Year
Building and
Improvements Total

Land

Accumulated
Depreciation

Net
Book
Value

Year
of
Acquisition

Depreciation
Life

—

3,623

33,503

4,247

3,623

37,750

41,373

(14,501)

26,872

2005

40 Years

—

20,644

45,656

60,969

—

123,100

8,432

3,827

—

20,645

54,088

60,991

54,088

81,636

(20,872)

(1,357)

33,216

80,279

2004

2021

40 Years

—

126,927

(13,405)

113,522

2018

40 Years

36,900

31,650

347,921

76,961

97,273

22,904

36,900

31,650

445,194

99,865

482,094

131,515

(155,082)

(32,649)

327,012

98,866

2006

40 Years

9,400

36,180

6,312

9,400

42,492

51,892

(10,593)

41,299

2011

40 Years

—

34,685

5,363

—

40,048

(16,610)

23,438

2004

40 Years

(77,882)

16,500

54,812

7,512

16,500

62,324

78,824

(25,039)

53,785

2004

40 Years

—

32,888

10,118

8,395

13,371

93,176

17,462

5,629

—

32,888

10,118

8,395

19,000

93,176

17,473

51,888

103,294

25,868

(3,216)

—

(365)

48,672

103,294

25,503

2014

2021

40 Years

23,262

128,628

15,807

23,262

144,435

167,697

(33,073)

134,624

2012

40 Years

9,197

40,644

9,237

9,197

49,881

59,078

(10,580)

48,498

2012

40 Years

60,300

88,896

1,116

60,300

90,012

150,312

(16,569)

133,743

2014

40 Years

7,856

—

21,085

59,703

8,741

7,856

—

29,826

59,704

37,682

59,704

(5,460)

(5,796)

32,222

53,908

2012

2018

40 Years

5,800

52,463

34,121

5,800

86,584

92,384

(24,874)

67,510

2005

40 Years

(58,789)

9,200

63,183

11,252

9,200

74,435

83,635

(17,760)

65,875

2011

40 Years

—

19,908

37,525

4,805

20,423

41,815

62,238

(7,109)

55,129

2015

40 Years

49,592

42,958

16,451

49,592

59,409

109,001

(8,321)

100,680

2015

40 Years

14,816

39,384

9,726

24,351

22,204

10,180

1,174

4,363

322

14,816

39,384

9,726

25,525

26,567

10,502

40,341

65,951

20,228

(2,547)

(4,516)

(1,362)

37,794

61,435

18,866

2018

2017

40 Years

5,900

32,511

10,123

5,900

42,634

48,534

(10,357)

38,177

2010

40 Years

(43,570)

—

45,815

10,232

—

56,047

(21,242)

34,805

2004

40 Years

(25,542)

3,951

22,720

20,943

3,951

43,663

47,614

(15,546)

32,068

2004

40 Years

(182,755)

—

273,696

35,907

—

309,603

(112,028)

197,575

2007

40 Years

—

54,293

83,227

11,913

54,293

95,140

149,433

(16,418)

133,015

2014

40 Years

(58,600)

22,902

95,617

10,349

22,902

105,966

128,868

(24,634)

104,234

2012

40 Years

(55,913)

24,579

122,229

13,526

24,579

135,755

160,334

(31,672)

128,662

2012

40 Years

(77,453)

15,500

63,428

24,759

15,500

88,187

103,687

(29,753)

73,934

2005

40 Years

(580,504)

546,284

2,268,859

406,675

546,800

2,675,018

3,221,818

(693,306)

2,528,512

F-35

Description
Atlanta Marriott
Alpharetta .

Bethesda Marriott
.

Suites .

Bourbon Orleans Hotel

Cavallo Point, The Lodge at
.

Golden Gate

Chicago Marriott

Downtown, Magnificent
.
.
Mile

The Gwen Hotel .

Courtyard Denver
.
Downtown .

Courtyard New York
Manhattan/Fifth
Avenue .

Courtyard New York

Manhattan/Midtown
.
.
East .

Havana Cabana Key
.
.

West

Henderson Beach Resort .

Henderson Park Inn .

Hilton Boston Downtown/
.

Faneuil Hall .

Hilton Burlington Lake

Champlain .

Hilton Garden Inn New
York/Times Square
.
.
Central

Hotel Emblem San
.

Francisco .

Hotel Palomar Phoenix .

The Hythe Vail, a Luxury
.

Collection Resort

JW Marriott Denver Cherry
.
.

Creek .

Kimpton Shorebreak
.

Resort

Margaritaville Beach House
.
.

Key West

The Landing Lake Tahoe
.

Resort & Spa .

L’Auberge de Sedona .

Orchards Inn Sedona .

Renaissance Charleston

Historic District Hotel .

Salt Lake City Marriott
Downtown at City
.
.
Creek .

The Lodge at Sonoma
.
.

Resort

Westin Boston
Waterfront

Westin Fort Lauderdale
.

Beach Resort

Westin San Diego
.
Downtown .

Westin Washington D.C
.

City Center .

Worthington Renaissance
.

Fort Worth Hotel

Total

Notes:

A) The change in total cost of properties for the fiscal years ended December 31, 2021, 2020 and 2019

is as follows (in thousands):

Balance at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,308,009

Additions:

Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69,270

Deductions:

Dispositions and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Balance at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,377,279

Additions:

Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34,512

Deductions:

Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(61,310)

Dispositions and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,350,481

Additions:

Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deductions:

Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dispositions and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

210,764

41,482

(175,551)

(205,358)

Balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,221,818

B) The change in accumulated depreciation of real estate assets for the fiscal years ended December 31,

2021, 2020 and 2019 is as follows (in thousands):

Balance at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$556,868

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68,543

Dispositions and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Balance at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

625,411

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dispositions and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73,362
(15,230)
—

Balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

683,543

70,765
(61,002)
—

Balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$693,306

C) The aggregate cost of properties for Federal income tax purposes (in thousands) is approximately

$3,115,515 as of December 31, 2021.

F-36

CORPORATE
INFORMATION

BOARD OF DIRECTORS

WILLIAM W. MCCARTEN
Chairman of the Board

MARK W. BRUGGER
President and Chief Executive Officer and Director

TIMOTHY R. CHI
Chief Executive Officer at
The Knot Worldwide, Inc. and Independent Director

MICHAEL A. HARTMEIER
Independent Director

KATHLEEN A. MERRILL
Senior Vice President and
Chief Information Officer at
Southwest Airlines and Independent Director

WILLIAM J. SHAW
Independent Director

BRUCE D. WARDINSKI
President and Chief Executive Officer at Playa Hotels
and Resorts and Independent Director

TABASSUM S. ZALOTRAWALA
Chief Development Officer at Chipotle Mexican Grill
and Independent Director

CORPORATE OFFICERS

MARK W. BRUGGER
President and Chief Executive Officer

JEFFREY J. DONNELLY
Executive Vice President and
Chief Financial Officer

TROY G. FURBAY
Executive Vice President and
Chief Investment Officer

THOMAS G. HEALY
Executive Vice President and
Chief Operating Officer

BRIONY R. QUINN
Senior Vice President and Treasurer

WILLIAM J. TENNIS
Executive Vice President,
General Counsel and Corporate Secretary

CORPORATE HEADQUARTERS

DiamondRock Hospitality Company
2 Bethesda Metro Center
Suite 1400
Bethesda, Maryland 20814
(240) 744-1150
FAX (240) 744-1199

ANNUAL MEETING

DiamondRock Hospitality Company will hold its annual meeting of share-
holders on May 3, 2022 via live audio webcast.

A formal notice and proxy will be mailed before the meeting to shareholders
entitled to vote.

REGISTRAR AND STOCK TRANSFER AGENT

American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, New York 11219
(718) 921-8200
www.astfinancial.com

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP
8350 Broad Street, Suite 900
McLean, Virginia 22102

OTHER SHAREHOLDER INFORMATION

For information about DiamondRock Hospitality Company and its subsidiar-
ies, including copies of its annual report on Form 10-K, quarterly reports
on Form 10-Q and current reports on Form 8-K, you may call our corporate
headquarters or submit a written request to Investor Relations.

Our Chief Executive Officer and Chief Financial Officer have furnished the
Sections 302 and 906 certifica tions required by the U.S. Securities and
Exchange Commission in our Annual Report on Form 10-K. In addition, our
Chief Executive Officer has certified to the NYSE that he is not aware of any
violations by us of NYSE corporate governance standards.

INTERNET ACCESS

A corporate profile, recent press releases, SEC filings, property locations and
other information about DiamondRock Hospitality Company can be found
on the internet at www.drhc.com.

BACK COVER: TOP, THE LODGE AT SONOMA, SONOMA, CALIFORNIA. BOTTOM, THE HYTHE, A LUXURY COLLECTION RESORT, VAIL, COLORADO.

2 BETHESDA METRO CENTER

SUITE 1400, BETHESDA, MARYLAND 20814

(240) 744-1150 | WWW.DRHC.COM