DiamondRock Hospitality Company Annual Report 2022

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FY2022 Annual Report · DiamondRock Hospitality Company

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DIAMONDROCK HOSPITALITY
ANNUAL REPORT 2022

Our Vision

Our Company

Diversified Portfolio

To create opportunities for our
shareholders and associates to better
their lives through successful hotel
investments.

Urban Gateway

Urban Lifestyle

Luxury Resorts

15%

14%

53%

Lifestyle Resorts

18%

9,607 ROOMS

PROPERTIES

GEOGRAPHIC MARKETS

Locations in Key Gateway Cities and Destination Resorts

Urban Gateway

Urban Lifestyle

Luxury Resort
▲▲ Lifestyle Resort

Dear Shareholders

DiamondRock achieved new levels of success
in 2022 as total revenues surpassed $1 billion
for the first time in the history of the Company.
Hotel demand was robust as travelers from
around the world got “back on the road” after
the global pandemic temporarily deprived
them of the ability to travel. DiamondRock’s
portfolio of exceptional hotels and resorts
distinguished itself in 2022 by delivering record
profits. This outstanding operating perfor-
mance translated into total shareholder returns
that outperformed the peer average of hotel
lodging Real Estate Investment Trusts (“REITs”).

How DiamondRock Positioned Itself to
Outperform Coming Out of the Pandemic
The following highlight a few of the major
achievements since the start of the post-pan-
demic hotel cycle:

n Strategic Trends: DiamondRock accelerated
its portfolio strategy, conceived well before
the pandemic, to aggressively acquire high
quality properties in the fast-growing expe-
riential, leisure and lifestyle categories.

n Compelling Capital Recycling: The

Company completed over $600 million
of acquisitions and dispositions since the
beginning of the pandemic. DiamondRock
sold two, non-core properties, and recycled
that capital into the acquisition of five pre-
mium resorts and one urban boutique hotel.

n Unencumbering the Portfolio: Over 90% of
the Company’s 35 hotels have short-term
management agreements; only two hotels
are subject to long-term agreements. This
was made possible, in part, by taking advan-
tage of the pandemic to negotiate a deal with
global brand companies to convert numer-
ous existing long-term brand management
agreements into franchises to be operated
by third-party management companies. No

other public, full-service hotel REIT has as
high of a percentage of short-term agree-
ments. This fact distinguishes DiamondRock
from its peers by measurably improving net
asset value and tightening control over long-
term capital spending.

n Performance Enhancing ROI Projects:

The Company dramatically repositioned
and upgraded several of its most impor-
tant hotels in key markets, including Vail,
Sonoma, Denver and the Florida Keys. The
repositionings are meaningfully surpassing
underwritten financial goals.

2022 Operating Results
Hotel operations continued to rebound in
2022 from the dramatic impact of the global
pandemic, which brought travel to a stand-
still in 2020 and began recovering in 2021.
DiamondRock surpassed its pre-pandemic
performance and achieved record revenues
in 2022. Comparable RevPAR (a key industry
performance metric) increased 51.5% from
the prior year. Resorts led the way as secular
changes drove unprecedented leisure rates.
After the Omicron variant-impacted first
quarter, urban hotels experienced a signifi-
cant rebound in group business with demand
recovering to near pre-pandemic levels by
year-end. Business transient demand at the
urban hotels also reaccelerated during the year
with positive momentum but remained behind
prior peak levels.

Profits and profit margins were another bright
spot in 2022. DiamondRock’s best-in-class
asset management, working closely with the
talented associates at the hotels, successfully
implemented tight cost controls to maximize
the value of every incremental dollar of rev-
enue. Comparable Hotel Adjusted EBITDA mar-
gins increased 947 basis points from the prior
year to 31.4%, a new record for DiamondRock.

DIAMONDROCK HOSPITALITY 2022

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

“Identifying and executing major return-on-investment
projects is a cornerstone of DiamondRock’s strategy to
create shareholder value.”

The results were outstanding and distin-
guished DiamondRock as a leader among its
peer set of public, full-service hotel REITs.

Return-on-Investment (“ROI”) Projects
Identifying and executing major return-
on-investment projects is a cornerstone of
DiamondRock’s strategy to create shareholder
value. The success of repositionings completed
in recent years is remarkable:

n Hotel Clio Denver, a Luxury Collection
Hotel: This urban, luxury hotel was
rebranded in early 2022. Impressively,
despite renovation disruption from the con-
version, the hotel had a record year in 2022.

n The Hythe Vail, a Luxury Collection Resort:
The conversion to a Luxury Collection brand
at the end of 2021 was the culmination of
a four-year, $40 million repositioning. The
resort had a record year in 2022.

n Margaritaville Beach House Key West:

This lifestyle resort was transformed into
a Margaritaville brand at the end of 2021.
The transformation included two new
bar outlets, a new retail store, and a true
Margaritaville arrival and pool experience.
The resort achieved record revenue in 2022
with profits increasing more than 100% over
pre-pandemic 2019.

n The Lodge at Sonoma Resort, Autograph
Collection: Reimagined into a special life-
style experience in the heart of Sonoma with
its conversion to an Autograph Collection
brand in 2021, the resort broke performance
records in 2022.

DiamondRock continues to aggressively seek
out new high return projects in order to main-
tain a compelling pipeline of repositionings.
The current ROI pipeline includes the brand
conversion of the Hilton Burlington to a Curio
Collection, the repositioning of the Hilton
Boston to a lifestyle hotel, the reinvention of the
Bourbon Orleans Hotel, a new rooftop club at
the Palomar Phoenix, and many more projects.

New Acquisitions
The Company acquired six hotels and resorts
since the onset of the recovery from the pan-
demic for a total investment of over $400 mil-
lion. These on-strategy acquisitions continue
the powerful evolution of DiamondRock:

n Lake Austin Spa Resort: The impossible-to-
replicate resort is the only lakefront, luxury
destination spa in Texas. Sitting directly on
Lake Austin, it is one of the highest-rated spa
resorts in the world by Condé Nast Traveler.

n Kimpton Shorebreak Fort Lauderdale Beach

Resort: The newly built, boutique resort
is synergistic with the Company’s nearby

DIAMONDROCK HOSPITALITY 2022

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

resort in Fort Lauderdale Beach, one of the
top demand markets in Florida.

n Tranquility Bay Beachfront Resort: The

luxury, beachfront resort has been an enor-
mous success, exceeding original underwrit-
ing by delivering a remarkable 11 percent
unlevered yield on investment in 2022.

n Henderson Beach Resort: The resort,

acquired in an off-market transaction, is a
rare opportunity to own a recently-built,
independent, luxury resort in Destin, Florida.
The resort is consistently recognized by
Travel + Leisure and U.S. News & World
Report as one of the best resorts in Florida.

n Bourbon Orleans Hotel: The independent
boutique hotel, ideally located in the heart
of New Orleans’ French Quarter, provides
travelers an authentic, high-end, Big Easy
experience. Rarely do hotels of this quality
become available in the French Quarter.

n Henderson Park Inn: The boutique beach-
front resort in Destin, Florida, acquired in
an off-market transaction, is consistently
recognized as a Top 25 Hotel in the U.S. by
TripAdvisor.

ESG Excellence
DiamondRock is committed to remain-
ing a leader on environmental, social,

D I A M O N D R O C K

& S U S TA I N A B I L I T Y

DiamondRock is committed to

sustainability and reducing its carbon

footprint. To offset its paper usage, a

donation has been made to replant

10 trees for every tree used in the

production of this report to One Tree

Planted, a non-profit organization

focused on global reforestation.

iii

DIAMONDROCK HOSPITALITY 2022

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

and governance (“ESG”) matters. In 2022,
DiamondRock was ranked #1 by GRESB, a
global organization that sets the standard for
evaluating ESG excellence, and recognized
as the America’s Regional Sector Leader for
Hotels. ISS ESG Corporate Rating, a prominent
proxy advisor, ranked the Company in the top
10% of all participating companies worldwide;
earning DiamondRock the designation of
Prime Status for Corporate ESG Performance.

To further advance ESG excellence,
DiamondRock announced plans to achieve
net-zero emissions by 2050. As such, the
Company revised its energy intensity, carbon
emission intensity, water intensity targets to
2030 and announced a waste diversion target
by 2030, along with a new renewable energy
target. Additionally, to reflect the Company’s
commitment to ESG initiatives, it included
the ability to add sustainability linked incen-
tives as part of its $1.2B credit facility recast.
DiamondRock continues to be committed to
reducing the Company’s impact on the envi-
ronment from operations, its owned hotels,
and suppliers.

Looking Forward
Looking to the future, travel remains one
of the most highly valued and sought-after
experiences for its unique ability to satisfy
consumers’ needs. The U.S. hotel industry
is forecasted to achieve a record number
of room night stays in 2022. In this growth
environment, DiamondRock has several
unique, competitive advantages to continue
to outperform:

n Well-Positioned Portfolio: A high-quality port-
folio of well-located hotels that are ideally
positioned to benefit from strong secular
travel trends favoring experiential destinations.

n Value Enhancements: Increased net asset
value and flexibility from having only two
of the Company’s 35 hotels subject to
long-term management agreements. The
unencumbered nature of the portfolio dis-
tinguishes DiamondRock from its peers.

n ROI Pipeline: Significant pipeline of high
return-on-investment projects that are
either underway or planned for the future.

n Capitalized for Growth: With approximately
$600 million of liquidity, DiamondRock
ended 2022 with significant dry powder
that allows it to move decisively on any
emerging opportunities.

n Proven Management Team: An experienced

management team with more than 100-years
of collective experience leading real estate,
global brand, and hotel operating companies.

DiamondRock is unquestionably among the
best positioned hotel ownership platforms as
global travel demand continues to roar back.
With DiamondRock’s unique advantages, the
management team remains laser-focused on
driving the business forward and extending its
track record of delivering leading shareholder
returns in the sector.

Thank you for your continued support.

MARK W. BRUGGER

President and Chief Executive Officer

DIAMONDROCK HOSPITALITY 2022

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

For the fiscal year ended December 31, 2022

OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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)

(240) 744-1150
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading symbol(s)

Name of Exchange on Which Registered

Common Stock, $0.01 par value

8.250% Series A Cumulative Redeemable Preferred Stock,
$0.01 par value per share

DRH

DRH Pr A

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.

Large Accelerated Filer
Smaller reporting company

☒
☐

Accelerated filer
Emerging growth company

☐
☐

Non-accelerated filer

☐

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. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the

filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received

by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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, 2022, the last business day of the Registrant’s most recently completed second
fiscal quarter, was $1.7 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 209,552,733 shares of its $0.01 par value Common Stock outstanding as of February 24, 2023.

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, 2022, 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.

Item 3.

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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.

Item 9.

Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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 rising inflation and interest

rates, job loss or growth trends, an 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 and dispositions;

• risks and uncertainties affecting hotel management, operations and renovations (including, without
limitation, rising inflation, 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 or any future pandemic, epidemic or outbreak of any other highly
infectious disease 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 maintain our qualification 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:

• 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 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 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, 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.

• COVID-19 has caused, and COVID-19 or any future pandemic, epidemic or outbreak of any other
highly infectious disease could continue to cause, severe disruption in the U.S., regional and global
economies, travel and the hospitality industry and could materially and adversely impact our
business, financial condition and results of operations.

• 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, 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 U.S. federal income tax purposes. As of December 31, 2022, we owned a portfolio of 35 premium hotels
and resorts that contain 9,607 guest rooms located in 24 different markets in the United States. The
markets that we target are those that we believe align with our strategic objectives, which include investing
in assets in destination markets with constrained supply trends, geographic diversity relative to our existing
portfolio, and those markets that are considered to have high growth potential.

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

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.

Our Company

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

Our 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 in line with our target asset type;

• 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, 2022, we owned 35 premium hotels and resorts throughout the United States. Our

hotels and resorts are primarily categorized as luxury and upper upscale as defined by STR, Inc. and are
generally located in high barrier-to-entry markets with multiple demand generators. 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 continued to increase in 2022 with acquisitions in locations such as Marathon, Florida, Fort
Lauderdale, Florida and Austin, Texas. Over 98% of revenues for the year ended December 31, 2022 is
derived from core urban and resort destination hotels. Our capital recycling program has also achieved several
other important strategic portfolio goals that include improving our portfolio’s geographic, climate,
operator and brand diversity.

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

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

We evaluate each hotel in our portfolio to assess the optimal brand and management strategy for the
individual hotel and market. We leverage the leading global hotel brands at many of our hotels, which are
flagged under a brand owned by Marriott, Hilton Worldwide Holdings, Inc. (“Hilton”) or IHG Hotels &
Resorts (“IHG”). We also maintain a portion of our hotels as independent lifestyle hotels. We believe that
premier global hotel brands create significant value for certain hotels as a result of each brand’s ability to
produce incremental revenue through their strong reservation and rewards systems and sales organizations.
We are also interested in owning independent or 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 completed rebrandings at four of
our hotels in 2021 and 2022 and are currently completing rebrandings and renovations at two additional
hotels. We regularly evaluate our portfolio to determine if there are additional 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
underutilized space to revenue-generating meeting space, marketing underutilized midweek bookings 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 31 of our 35 hotels unencumbered by mortgage debt as of December 31, 2022.
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;

• 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, 2022, our outstanding debt consists of a combination of unsecured term loans
and fixed-rate property-specific mortgage debt. We prefer that a significant portion of our portfolio remain
unencumbered by debt in order to provide maximum balance sheet flexibility. 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

Created in 2014, our Corporate Responsibility program incorporates governance, environmental, and
social initiatives in our overall business strategy, investment decisions and asset management strategies. Our
Corporate Responsibility program is guided by executive and board-level oversight, with the board’s
Nominating and Corporate Governance Committee assigned to oversee the policies, strategy, and
implementation of the program. In 2022, as a result of our commitment to sustainability, we were ranked
first in sustainability performance as the America’s Regional Sector Leader for Hotels by the GRESB Real
Estate Assessment.

We are committed to transparent reporting of our environmental, social, and governance (“ESG”)
initiatives. In December 2022, we published our most recent annual Corporate Responsibility Report, which
includes ESG policies, environmental and social programs, historic results and performance targets. The
annual Corporate Responsibility Report is prepared in accordance with relevant international standards and
best practices, including the Sustainable Accounting Standards Board (“SASB”) (now The Value Reporting
Foundation) for the Real Estate Sector.

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.

Beginning 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
and 2021, the last fiscal year for which data is available. These metrics relate to our hotels owned for the entire
year presented. In 2020, total consumption of both energy and water was significantly reduced due to the
historically low occupancy levels at our hotels as a result of COVID-19 pandemic.

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.

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 program, as well as our enterprise-wide

policies, please see our current Corporate Responsibility 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. A portion 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, 2022, limited partners held 719,542 common OP units. In the future, we may issue additional
common OP units from time to time in connection with acquiring hotel properties, financing, compensation,
or other reasons.

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. In turn, our TRS lessees must engage a third-party management company to manage the hotels.
As of December 31, 2022, we leased all of our hotels to TRS lessees, except for one hotel that is directly
owned by a TRS.

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, Hilton or IHG 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.

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, 2022, we employed 30 full-time employees. We believe that our relations with our

employees are good. None of our employees is a member of any union. During 2022, all employees involved
in the day-to-day operation of our hotels were employed by third-party management companies engaged
pursuant to hotel management agreements. 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, 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, 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, including exhibits,
and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), 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.”

Supplemental Material U.S. Federal Income Tax Considerations

The following discussion supplements and updates the disclosure under “Material U.S. Federal Income

Tax Considerations” in the prospectus dated August 6, 2021 contained in our Registration Statement on
Form S-3 filed with the SEC on August 6, 2021 (such disclosure, the “Base Disclosure”). Capitalized terms
used in this section that are not otherwise defined shall have the same meaning as when used in the Base
Disclosure.

On December 29, 2022, the IRS promulgated final Treasury Regulations under Sections 897, 1441,

1445, and 1446 of the Code that were, in part, intended to coordinate various withholding regimes for
non-U.S. stockholders. The new Treasury Regulations provide that:

The withholding rules applicable to ordinary REIT dividends paid to a non-U.S. stockholder
(generally, a 30% rate of withholding on gross amounts unless otherwise reduced by treaty or
effectively connected with such non-U.S. stockholder’s trade or business within the United States

and proper certifications are provided) apply to (a) that portion of any distribution paid by us that
is not designated as a capital gain dividend, a return of basis or a distribution in excess of the
non-U.S. stockholder’s adjusted basis in its stock that is treated as gain from the disposition of such
stock and (b) any portion of a capital gain dividend paid by us that is not treated as gain
attributable to the sale or exchange of a United States real property interest by reason of the
recipient not owning more than 10% of a class of our stock that is regularly traded on an established
securities market during the one-year period ending on the date of the capital gain dividend.

ii. The withholding rules under FIRPTA apply to a distribution paid by us in excess of a non-U.S.

stockholder’s adjusted basis in our stock, unless the interest in our stock is not a United States real
property interest (for example, because we are a domestically controlled qualified investment
entity) or the distribution is paid to a “withholding qualified holder.” A “withholding qualified
holder” means a qualified holder (as defined below) and a foreign partnership all of the interests
of which are held by qualified holders, including through one or more partnerships.

iii. The withholding rules under FIRPTA apply to any portion of a capital gain dividend paid to a
non-U.S. stockholder that is attributable to the sale or exchange of a United States real property
interest, unless it is paid to a withholding qualified holder.

In the case of FIRPTA Withholding under clause (ii) above, the applicable withholding rate is currently
15%, and in the case of FIRPTA Withholding under clause (iii) above, the withholding rate is currently 21%.
For purposes of FIRPTA Withholding under clause (iii), whether a capital gain dividend is attributable to
the sale or exchange of a United States real property interest is determined taking into account the general
exception from FIRPTA distribution treatment for distributions paid to certain non-U.S. stockholders
under which any distribution paid by us to a non-U.S. stockholder with respect to any class of stock which
is regularly traded on an established securities market located in the United States is not treated as gain
recognized from the sale or exchange of a United States real property interest if such non-U.S. stockholder
did not own more than 10% of such class of stock at any time during the one-year period ending on the date
of such distribution. To the extent inconsistent, these Treasury Regulations supersede the discussion on
withholding contained in the Base Disclosure under the heading “Material U.S. Federal Income Tax
Considerations — Taxation of Non-U.S. Stockholders Holding Capital Stock.” However, if, notwithstanding
these Treasury Regulations, we encounter difficulties in properly characterizing a distribution for purposes
of the withholding rules, we may decide to withhold on such distribution at the highest possible U.S. federal
withholding rate that we determine could apply.

Additionally, the first sentence of the seventh paragraph under the heading “Material U.S. Federal
Income Tax Considerations — Taxation of Non-U.S. Stockholders Holding Capital Stock — Distributions”
is hereby deleted and replaced with the following:

Distributions to a non-U.S. stockholder that we designate as capital gain dividends but that are
not attributable to gain from our sale or exchange of United States real property interests (and thus not
subject to FIRPTA Withholding) will be subject to U.S. federal income taxation if (i) the capital gain
dividend is effectively connected with the non-U.S. stockholder’s United States trade or business, in
which case the non-U.S. stockholder will be subject to the same treatment as U.S. stockholders with
respect to such gain and may be subject to the 30% branch profits tax in the case of a non-U.S.
stockholder that is a non-U.S. corporation, or (ii) the non-U.S. stockholder is a nonresident alien
individual who was present in the United States for 183 days or more during the taxable year and meets
certain other criteria, in which case the non-U.S. stockholder will incur a 30% tax on the individual’s
capital gains derived from sources within the United States for the taxable year.

The new Treasury Regulations also provide new guidance regarding qualified foreign pension funds.
Accordingly, the second paragraph under the heading “Material U.S. Federal Income Tax Considerations —
Taxation of Non-U.S. Stockholders Holding Capital Stock — Special FIRPTA Rules” is hereby deleted
and replaced with the following:

Generally, for purposes of FIRPTA, and subject to the discussion below regarding “qualified
holders,” neither a “qualified foreign pension fund” (as defined below) nor any entity all of the interests
of which are held by a qualified foreign pension fund is treated as a foreign person, thereby exempting

such entities from tax under FIRPTA. A “qualified foreign pension fund” is an organization or
arrangement (i) created or organized in a foreign country, (ii) established by a foreign country (or one
or more political subdivisions thereof) or one or more employers to provide retirement or pension benefits
to current or former employees (including self-employed individuals) or their designees as a result of,
or, in consideration for, services rendered, (iii) which does not have a single participant or beneficiary that
has a right to more than 5% of its assets or income, (iv) which is subject to government regulation and
with respect to which annual information about its beneficiaries is provided, or is otherwise available, to
relevant local tax authorities, and (v) with respect to which, under its local laws, (A) contributions that
would otherwise be subject to tax are deductible or excluded from its gross income or taxed at a reduced
rate, or (B) taxation of its investment income is deferred, or such income is excluded from its gross
income or taxed at a reduced rate. Under Treasury Regulations, subject to the discussion below regarding
“qualified holders,” a “qualified controlled entity” also is not generally treated as a foreign person for
purposes of FIRPTA. A qualified controlled entity generally includes a trust or corporation organized
under the laws of a foreign country all of the interests of which are held by one or more qualified
foreign pension funds either directly or indirectly through one or more qualified controlled entities.

Treasury Regulations further require that a qualified foreign pension fund or qualified controlled

entity will not be exempt from FIRPTA with respect to dispositions of United States real property
interests or REIT distributions attributable to the same unless the qualified foreign pension fund or
qualified controlled entity is a “qualified holder.” To be a qualified holder, a qualified foreign pension
fund or qualified controlled entity must satisfy one of two alternative tests at the time of the disposition
of the United States real property interest or the REIT distribution. Under the first test, a qualified
foreign pension fund or qualified controlled entity is a qualified holder if it owned no United States real
property interests as of the earliest date during an uninterrupted period ending on the date of the
disposition or distribution during which it qualified as a qualified foreign pension fund or qualified
controlled entity. Alternatively, if a qualified foreign pension fund or qualified controlled entity held
United States real property interests as of the earliest date during the period described in the preceding
sentence, it can be a qualified holder only if it satisfies certain testing period requirements.

Treasury Regulations also provide that a foreign partnership all of the interests of which are held

by qualified holders, including through one or more partnerships, may certify its status as such and will
not be treated as a foreign person for purposes of withholding under Section 1445 of the Code (and
Section 1446 of the Code, as applicable).

Distributions that are attributable to gain from the sales of United States real property interests
received by a qualified foreign pension fund or a qualified controlled entity that satisfies the requirements
to be a qualified holder will not be subject to U.S. federal income or withholding tax. All other
distributions received by a qualified foreign pension fund or a qualified controlled entity will be taxed
as described above under “— Taxation of Non-U.S. Stockholders Holding Capital Stock —
Distributions.” Gain of a qualified holder from the sale or exchange of our stock and distributions
treated as gain from the sale or exchange of our stock under the rules described above under “— Taxation
of Non-U.S. Stockholders Holding Capital Stock — Distributions,” will not be subject to U.S. federal
income or withholding tax, unless such gain is treated as effectively connected with the qualified foreign
pension fund’s (or the qualified controlled entity’s, as applicable) conduct of a U.S. trade or business,
in which case, the qualified foreign pension fund (or qualified controlled entity) generally will be subject
to a tax at the same graduated rates applicable to U.S. stockholders, unless an applicable income tax
treaty provides otherwise, and may be subject to the 30% branch profits tax on its effectively connected
earnings and profits, subject to adjustments, in the case of a foreign corporation.

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

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 healthcare 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. Furthermore,
other macroeconomic factors, such as consumer confidence and conditions which negatively shape public
perception of travel, including travel-related disruptions or incidents and their impact on travel 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 increased use of business-related technology may materially and adversely affect the need for business-
related travel, and, therefore, demand for rooms in some of our hotels.

The increased use of Zoom video conferencing, Microsoft Teams and other teleconferencing and video-

conference technology by businesses could result in decreased business travel as companies increase the use
of technologies that allow multiple parties from different locations to participate in virtual meetings without
traveling to a centralized meeting location, such as our hotels. 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 five years to 36 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 28 years, inclusive of renewal
periods that are exercisable at the option of the franchisor. See Item 2, Properties, for hotel management
and franchise agreement details. 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 Embassy Suites by Hilton Bethesda, 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, including those caused by supply chain disruptions or

inflationary price increases;

• 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.

COVID-19 has caused, and COVID-19 or any future pandemic, epidemic or outbreak of any other highly
infectious disease could continue to cause, severe disruptions in the U.S., regional and global economies, travel
and the hospitality industry and could materially and adversely impact our business, financial condition and
results of operations.

COVID-19, including the emergence of additional variants, has caused, and COVID-19 or any future
pandemic, epidemic or outbreak of any other highly infectious disease could continue to cause, widespread
disruptions to the U.S. and global economy and has contributed to significant volatility and negative pressure
in financial markets.

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. 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; and

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

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.

We are subject to the risks associated with the direct and indirect physical effects of climate change,
which can include more frequent and severe storms, hurricanes, flooding, droughts and wildfires, any of
which could have a material adverse effect on our business, financial condition and results of operations.
Seven of our hotels (The Lodge at Sonoma Resort, Westin San Diego Bayview, Hotel Emblem San Francisco,
Renaissance Charleston Historic District Hotel, Kimpton Shorebreak Resort, The Landing Lake Tahoe
Resort & Spa, and Cavallo Point) are located in areas that are seismically active. Nine of our hotels (Havana
Cabana Key West, Margaritaville Beach House Key West, Westin Fort Lauderdale Beach Resort, Henderson
Park Inn, Henderson Beach Resort, Bourbon Orleans Hotel, Renaissance Charleston Historic District Hotel,
Tranquility Bay Beachfront Resort and Kimpton Shorebreak Fort Lauderdale Beach Resort) are located in
areas that have experienced, and will continue to experience, many hurricanes. Eleven of our hotels are located
in metropolitan markets that have been, or may in the future be, targets of actual or threatened terrorist
attacks or active shooter attacks, including New York City, Chicago, Boston, San Francisco and
Washington, D.C. These hotels are material to our financial results, having constituted 75% of our total
revenues in 2022. 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, Tranquility Bay Beachfront Resort and Kimpton Shorebreak Fort Lauderdale Beach Resort) each
have a deductible of 5% of total insured value for a named storm and the Renaissance Charleston Historic
District Hotel and Bourbon Orleans Hotel each has a deductible of 2% of total insured value. In addition,
each of our California hotels (Westin San Diego Bayview, Hotel Emblem San Francisco, Kimpton Shorebreak
Resort, The Lodge at Sonoma Resort, and Cavallo Point) have a deductible of 5% of total insured value
for damage due to an earthquake. 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 the date of this report, 16 of our 35 hotels operate under brands owned by Marriott and four of

our hotels operate under brands owned by Hilton. 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 the date of this report, 20 of our 35 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 35 hotels). 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, 2022 (Embassy Suites by Hilton Bethesda, Courtyard New York Manhattan/
Fifth Avenue, Salt Lake City Marriott Downtown at City Creek, Westin Boston Seaport District, Hotel
Clio (formerly JW Marriott Denver Cherry Creek), Orchards Inn Sedona, Hotel Palomar Phoenix, and
Cavallo Point), and the parking areas at two of our hotels (Worthington Renaissance Fort Worth Hotel and
Bourbon Orleans Hotel). We 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.

Labor shortages could slow our growth or harm our business.

Our success depends in part upon our third-party managers’ ability to attract, motivate and retain a

sufficient number of qualified employees. Qualified individuals needed to fill these positions are in
increasingly short supply in some areas. The inability to recruit and retain these individuals may adversely
impact hotel operations and guest satisfaction, which could harm our business. Additionally, competition for
qualified employees may require us to pay meaningfully higher wages to attract enough employees than
has historically been the case, and continued tightness in labor markets could result in continued escalation
of labor costs. In addition, we could face additional challenges meeting workforce requirements due to changes
in workforce dynamics, such as remote work arrangements or more flexibility in work schedules, which
could result in increased labor costs in the future.

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. 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. In each of 2020, 2021 and 2022, we executed
amendments to the credit agreements in place at the time in order to waive the quarterly tested financial
covenants and make certain other modifications to the covenants contained therein. We exited the covenant
waivers and modifications as of the second quarter of 2022, and we are in compliance with all financial
covenants, but there can be no assurance that we will be able to meet our financial covenants in the future
or that we will be able to obtain additional waivers from our lenders, if needed. 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.

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 to a certain level.
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, 2022, we had $2.9 million held in cash traps. 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.
Borrowing costs increased throughout 2022 and may continue to increase near-term as the Federal Reserve
acts to address rising inflation and, as a result, 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.

Interest rates are highly sensitive to many factors that are beyond our control, including general
economic conditions and policies of various governmental and regulatory agencies. 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.

We expect that all LIBOR settings relevant to us will cease to be published or will no longer be
representative after June 30, 2023. The discontinuation of LIBOR will not affect our ability to borrow or
maintain already outstanding borrowings or hedging transactions, but if our contracts indexed to LIBOR,
including contracts governing our interest rate swaps, are converted to the Secured Overnight Financing Rate
(“SOFR”), the differences between LIBOR and SOFR, plus the recommended spread adjustment, could
result in interest or hedging costs that are higher than if LIBOR remained available. Additionally, although
SOFR is the recommended replacement rate, it is also possible that lenders may instead choose alternative
replacements that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher
interest or hedging costs for us. 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. As of December 31,
2022, all of our variable rate debt and interest rate swaps have been transitioned to SOFR.

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, 2022, and we expect to continue to qualify as a REIT for future
taxable years, but we cannot assure you that we have qualified, or will remain qualified, as a REIT. 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. 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 U.S. 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 U.S. 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
U.S. 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 U.S. 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.

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 U.S. 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 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, some non-REIT corporations may choose 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. 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 represent 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 quarterly dividend that would have been paid in April 2020 and
resumed quarterly common dividends beginning with the quarterly dividend that was paid in October 2022.
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 were at historically low levels for an extended period of time but increased
during the year ending December 31, 2022 and may continue to increase in the near term. 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. 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, 2022,
4,760,000 shares of our Series A Preferred Stock were issued and outstanding. The aggregate liquidation
preference with respect to the outstanding preferred stock is approximately $119.0 million and aggregate
annual dividends on these shares are approximately $9.8 million. 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, 2022, 4,760,000 shares of our Series A Preferred Stock were outstanding and
could be converted, upon the occurrence of limited specified change in control transactions, into shares of
our common stock. 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 our share repurchase program or
that our 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.

The timing, manner, price and actual number of shares repurchased under our share repurchase
program will depend on a variety of factors including stock price, corporate and regulatory requirements,
market conditions, and other corporate liquidity requirements and priorities. Our share repurchase program
may be limited, suspended or terminated at any time without prior notice. In addition, repurchases of our
common stock pursuant to our share repurchase program could affect our stock price and increase its
volatility. The existence or use of our share repurchase program may cause our stock price to be higher than
it would otherwise be, and could potentially reduce the market liquidity for our stock. Additionally, our
share repurchase program could diminish our cash reserves, which may impact our ability to finance future
growth and to pursue possible any future strategic opportunities or 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 our 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.

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, the risk
of a cybersecurity incident or cyber-attack has generally increased as the number, intensity and sophistication
of attempted attacks and intrusions from around the world has increased.

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. Any compromise of the function, security and
availability of our network and systems or the network and systems of our hotel managers or our third-party
vendors could result in disruptions to operations, misappropriated or compromised confidential hotel or
guest information, systems disruptions, the shutdown of our hotels, exploited security vulnerability of our
respective networks, delayed sales or bookings, lost guest reservations and damage to our reputation or the
reputations of our hotel managers and third-party vendors. 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. The costs to us to eliminate or alleviate cybersecurity incidents
or cyber-attacks could be significant and may increase as the number, intensity and sophistication of such
attacks increases. Disruptions in service, system shutdowns and security breaches in either the information
technologies and systems of our hotel managers, our third-party vendors or our own information technologies
and 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,

2022.

Hotel

Chicago Marriott
Downtown Magnificent
Mile

Westin Boston Seaport
District

Salt Lake City Marriott
Downtown at City Creek

Worthington Renaissance
Fort Worth Hotel

City

State

Chain Scale
Segment(1)

Service
Category

Rooms

Manager

Chicago

Illinois

Upper Upscale

Full Service

1,200 Marriott

Boston

Massachusetts

Upper Upscale

Full Service

793

Aimbridge Hospitality

Salt Lake City

Utah

Upper Upscale

Full Service

510

HEI Hotels & Resorts

Fort Worth

Texas

Upper Upscale

Full Service

504 Marriott

Westin San Diego Bayview

San Diego

California

Upper Upscale

Full Service

Fort Lauderdale

Florida

Upper Upscale

Full Service

436

433

Aimbridge Hospitality

HEI Hotels & Resorts

Washington

District of
Columbia

Upper Upscale

Full Service

410

Sage Hospitality

Boston

Massachusetts

Upper Upscale

Full Service

403

Aimbridge Hospitality

Vail

New York

Chicago

New York

Colorado

New York

Georgia

Illinois

New York

Upper Upscale

Full Service

Upscale

Select Service

Upper Upscale

Full Service

Luxury

Upscale

Full Service

Select Service

344

321

318

311

282

Vail Resorts

HEI Hotels & Resorts

Aimbridge Hospitality

HEI Hotels & Resorts

Highgate Hotels

Bethesda

Maryland

Upper Upscale

Full Service

272

Sage Hospitality

Burlington

Vermont

Upper Upscale

Full Service

258

Aimbridge Hospitality

Hotel Palomar Phoenix

Phoenix

Arizona

Upper Upscale

Full Service

Henderson Beach Resort

Destin

Bourbon Orleans Hotel

New Orleans

Denver

Florida

Louisiana

Colorado

Luxury

Full Service

242

233

220

199

Kimpton Hotels &
Restaurants

Aimbridge Hospitality

Sage Hospitality

New York

Upscale

Select Service

189

Highgate Hotels

Key West

Florida

Upper Upscale

Full Service

186

Ocean Properties

Sonoma

California

Upper Upscale

Full Service

182

Sage Hospitality

Denver

Colorado

Upscale

Select Service

177

Sage Hospitality

Charleston

South Carolina

Upper Upscale

Full Service

167

Aimbridge Hospitality

Kimpton Shorebreak Resort Huntington Beach California

Upper Upscale

Full Service

157

Kimpton Hotels &
Restaurants

Atlanta Marriott Alpharetta Atlanta

Westin Fort Lauderdale
Beach Resort

Westin Washington D.C.
City Center

Hilton Boston Downtown/
Faneuil Hall

The Hythe Vail

Courtyard New York
Manhattan/Midtown East

The Gwen Hotel

Hilton Garden Inn New
York/Times Square Central

Embassy Suites by Hilton
Bethesda

Hilton Burlington Lake
Champlain

Hotel Clio (formerly JW
Marriott Denver Cherry
Creek)

Courtyard New York
Manhattan/Fifth Avenue

Margaritaville Beach House
Key West

The Lodge at Sonoma
Resort

Courtyard Denver
Downtown

Renaissance Charleston
Historic District Hotel

Hotel

City

State

Chain Scale
Segment(1)

Service
Category

Rooms

Manager

Cavallo Point, The Lodge at
the Golden Gate

Sausalito

California

Luxury

Full Service

142

Passport Resorts

Havana Cabana Key West

Key West

Tranquility Bay Beachfront
Resort

Marathon

Florida

Upscale

Luxury

Select Service

Full Service

106

103

EOS Hospitality

Hotel Emblem San
Francisco

Kimpton Shorebreak Fort
Lauderdale Beach Resort

San Francisco

California

Upper Upscale

Full Service

Fort Lauderdale

Florida

Upper Upscale

Full Service

L’Auberge de Sedona

Sedona

Arizona

The Landing Lake Tahoe
Resort & Spa

Orchards Inn Sedona

Lake Austin Spa Resort

Henderson Park Inn

Total

South Lake Tahoe

California

Sedona

Austin

Destin

Arizona

Texas

Florida

Luxury

Upscale

Luxury

Full Service

Upper Midscale Full Service

Viceroy Hotels & Resorts

HEI Hotels & Resorts

Evolution Hospitality

EOS Hospitality

Aimbridge Hospitality

9,607

(1) As defined by STR, Inc.

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, 2022. 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

Atlanta Marriott Alpharetta

Aimbridge Hospitality

At will with no fee

Embassy Suites by Hilton Bethesda

Sage Hospitality

At will with no fee

Bourbon Orleans Hotel

Aimbridge Hospitality

At will with no fee

Cavallo Point, The Lodge at the
Golden Gate

Ft. Baker Management
LLC

At will with fee

Expiration
Date of
Current
Term

9/2025

2/2027

7/2026

6/2023

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

None

One five-year period

Month-to-month

One five-year period

Chicago Marriott Downtown
Magnificent Mile

Courtyard Denver Downtown

Courtyard New York Manhattan/Fifth
Avenue

Courtyard New York Manhattan/
Midtown East

Marriott

12/2038

Two ten-year periods

Sage Hospitality

Highgate Hotels

At will with fee

At will with no fee

7/2026

One five-year period

10/2025

None

HEI Hotels & Resorts

At will with fee

8/2027

None

The Gwen Hotel

HEI Hotels & Resorts

At will with fee

Havana Cabana Key West

EOS Hospitality

Henderson Beach Resort

Aimbridge Hospitality

At will with fee until 5/2023;
at will with no fee thereafter

At will with fee until 2/2023;
at will with no fee thereafter

Henderson Park Inn

Aimbridge Hospitality

At will with no fee

Hilton Boston Downtown/Faneuil
Hall

Aimbridge Hospitality

At will with no fee

Hilton Burlington Lake Champlain

Aimbridge Hospitality

At will with no fee

Highgate Hotels

6/2026

5/2032

None

Month-to-month

2/2032

Month-to-month

7/2026

7/2025

Month-to-month

None

N/A

12/2024

Month-to-month
One five-year period(2)

Sage Hospitality

At will with fee

5/2026

One five-year period

Hotel Emblem San Francisco

Viceroy Hotels & Resorts

At will with fee

2023 upon sale with no fee

12/2027

One five-year period
One five-year period(3)

Hilton Garden Inn New York/Times
Square Central

Hotel Clio (formerly JW Marriott
Denver Cherry Creek)

Hotel Palomar Phoenix

The Hythe Vail

Kimpton Shorebreak Fort Lauderdale
Beach Resort

Kimpton Shorebreak Resort

Lake Austin Spa Resort

Kimpton Hotel &
Restaurant Group

Vail Resorts

HEI Hotels & Resorts

Kimpton Hotel &
Restaurant Group

EOS Hospitality

At will with fee

At will with fee until 3/2023;
at will with no fee thereafter

1/2024

3/2028

None

At will with fee

2/2025

None

At will with fee until
11/2023; at will with no fee
thereafter

11/2032 Month-to-month

The Landing Lake Tahoe Resort &
Spa

Evolution Hospitality

At will with fee

9/2024

One five-year period

L’Auberge de Sedona

Evolution Hospitality

At will with fee

10/2024

One five-year period

The Lodge at Sonoma Resort

Sage Hospitality

At will with fee

Margaritaville Beach House Key West Ocean Properties

9/2025

7/2027

None

Orchards Inn Sedona

Evolution Hospitality

At will with fee

10/2024

One five-year period

Renaissance Charleston Historic
District Hotel

Salt Lake City Marriott Downtown at
City Creek

Aimbridge Hospitality

At will with no fee

9/2025

None

HEI Hotels & Resorts

At will with no fee

9/2025

None

Property

Manager

Terminable

Tranquility Bay Beachfront Resort

EOS Hospitality

At will with fee until 3/2023;
at will with no fee thereafter

Expiration
Date of
Current
Term

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

4/2032

Month-to-month

Westin Boston Seaport District

Aimbridge Hospitality

At will with fee

Westin Fort Lauderdale Beach Resort HEI Hotels & Resorts

At will with no fee

1/2025

12/2024

None

Westin San Diego Bayview

Aimbridge Hospitality

At will with no fee

N/A

Month-to-month

Westin Washington D.C. City Center

Sage Hospitality

At will with fee

11/2026

One five-year period

Worthington Renaissance Fort Worth
Hotel

Marriott

12/2031

Two ten-year periods

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

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

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

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

management fee in both 2026 and 2027. The manager did not earn an incentive management fee in
2022.

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

certain financial thresholds are met or exceeded, an incentive management fee. The base management fee is
generally payable as a percentage of gross hotel revenues for each fiscal year. The 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, 2022:

Property

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

Embassy Suites by Hilton Bethesda . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . .
Henderson Park Inn . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hilton Boston Downtown/Faneuil Hall . . . . . . . . . . . . . . . .

Hilton Burlington Lake Champlain . . . . . . . . . . . . . . . . . .
Hilton Garden Inn New York/Times Square Central . . . . . . .

Hotel Clio (formerly JW Marriott Denver Cherry Creek)

. . .

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

Base Management
Fee(1)

Incentive
Management Fee(2)

FF&E Reserve
Contribution(1)

2%
1.5%(4)
1%(5)

2.5%

3%
1.5%(4)
2.5%(7)
1.75%
2.25%
2.5%
2.25%
2.5%
1.25%
1.5%(9)
3%

2.75%

15%(3)
10%
15%(3)
20%
15%(6)
10%
15%(3)
15%
15%
15%(3)(8)
15%(3)
15%(3)
15%(3)
10%

20%
15%(3)
15%

4%
4%
4%

4%
5%

None

4%
4%
1%
4%
4%

4%
4%

Base Management
Fee(1)

Incentive
Management Fee(2)

FF&E Reserve
Contribution(1)

Property

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

The Hythe Vail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Kimpton Shorebreak Fort Lauderdale Beach Resort . . . . . . .

Kimpton Shorebreak Resort

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

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

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

The Lodge at Sonoma Resort . . . . . . . . . . . . . . . . . . . . . . .
Margaritaville Beach House Key West . . . . . . . . . . . . . . . . .

3.5%

2.5%

2.5%
1.25%

2.25%

2%
3%

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

2.25%

Renaissance Charleston Historic District Hotel
. . . . . . . . . .
Salt Lake City Marriott Downtown at City Creek . . . . . . . . .
Tranquility Bay Beachfront Resort . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . .
Westin Boston Seaport District
Westin Fort Lauderdale Beach Resort . . . . . . . . . . . . . . . . .

Westin San Diego Bayview . . . . . . . . . . . . . . . . . . . . . . . .
Westin Washington D.C. City Center . . . . . . . . . . . . . . . . .

Worthington Renaissance Fort Worth Hotel

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

2%
2%
2.5%

1%
2%
1.5%(9)
1.5%(4)
3%

20%
15%(3)
15%(3)
15%
15%(3)(8)
15%

15%
15%(3)
10%

15%
15%(3)
15%(3)
15%(3)(8)
15%(3)
15%
10%

10%

25%

4%
1%

4%
4%

4%
4%
4%

1%
4%

4%
4%

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

management fees are capped at 3% of gross revenues.

(5) The base management fee decreased to 2% (from 2.5%) of gross revenues in July 2022 and further

decreased to 1% for the period of September 2022 through December 2022. The base management fee
increased back to 2% beginning January 2023 for the remainder of the term.

(6) Calculated as 15% of net operating income. There is no owner’s priority; however, the Company’s

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

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

(8) The incentive management fee increases to 1.5% of gross revenues if the gross operating profit exceeds

a specified amount plus any owner’s priority.

(9) 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 20 franchised hotels

as of December 31, 2022:

Franchised Hotels

Expiration
Date of
Agreement

Franchise Fee

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

9/2040(1) 6% of gross room sales and 3% of gross food and

Embassy Suites by Hilton Bethesda . . . .

2/2037

Courtyard Denver Downtown . . . . . . . .

10/2027

Courtyard New York Manhattan/Fifth

beverage sales

3.5% of gross room sales; program fee of 4% of
gross room sales(2)
5.5% of gross room sales

Avenue . . . . . . . . . . . . . . . . . . . . . .

12/2035

6% of gross room sales

Courtyard New York Manhattan/

Midtown East . . . . . . . . . . . . . . . . . .

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

Hilton Boston Downtown/Faneuil Hall . .

8/2042

9/2035

7/2023

6% of gross room sales

5% of gross room sales

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

Hilton Burlington Lake Champlain . . . .

7/2032(3) 5% of gross room sales and 3% of gross food and
beverage sales; program fee of 4% of gross room
sales(3)

Hilton Garden Inn New York/Times

Square Central

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

6/2033

Hotel Clio (formerly JW Marriott Denver
Cherry Creek) . . . . . . . . . . . . . . . . . .

10/2036

The Hythe Vail

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

12/2041

Kimpton Shorebreak Fort Lauderdale

Beach Resort

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

4/2041

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

6% of gross room sales and 3% of gross food and
beverage sales(4)
4% 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

The Lodge at Sonoma Resort

. . . . . . . .

12/2035

5% of gross room sales

Margaritaville Beach House Key West

. .

4/2041

5% of gross revenues

Renaissance Charleston Historic District

Hotel . . . . . . . . . . . . . . . . . . . . . . . .

12/2031

5% of gross room sales

Salt Lake City Marriott Downtown at

City Creek . . . . . . . . . . . . . . . . . . . .

9/2040(1) 6% of gross room sales and 3% of gross food and

Westin Boston Seaport District

. . . . . . .

12/2026

Westin Fort Lauderdale Beach Resort . . .

12/2034

Westin San Diego Bayview . . . . . . . . . .

12/2040

Westin Washington D.C. City Center . . .

12/2040

beverage sales

5% of gross room sales and 1% of gross food and
beverage sales(6)
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)

In February 2026, the franchise fee will increase to 5.5% of gross room sales through the remainder of
the term.

(3) On August 22, 2022, we entered into a franchise agreement to convert the brand to a Curio Collection
Hotel. The new franchise agreement has a term of ten years, and the brand conversion will be effective
upon the completion of an agreed-upon renovation. The franchise fees will be 4% of gross rooms
sales for the first four years and then increase to 5% through the remainder of the term. There will also
be a program fee of 4% of gross rooms sales.

(4)

(5)

(6)

In January 2030, the franchise fees will decrease to 5% of gross room sales and 2% 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.

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

Additional information regarding fees incurred under franchise agreements can be found in Note 12 to

our accompanying consolidated financial statements.

Mortgage Debt

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

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

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.

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

Part II

Equity Securities

Market Information

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

stock on the NYSE on December 31, 2022 was $8.19 per share.

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, 2017 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.

5 Year Total Returns Graph

DiamondRock Hospitality Company Total

Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100.00 $83.10 $107.75 $ 80.23 $ 93.45 $ 80.55

S&P 500 Total Return . . . . . . . . . . . . . . . . . . . $100.00 $95.62 $125.72 $148.85 $191.58 $156.88
Dow Jones U.S. Hotel Hotels Total Return . . . . . $100.00 $83.21 $ 91.28 $ 60.95 $ 72.44 $ 67.72

2017

2018

2019

2020

2021

2022

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 quarterly
dividend that would have been paid in April 2020 and resumed quarterly common dividends beginning in
the third quarter of 2022. The timing and frequency of future dividends will be determined by our board of
directors after considering 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.

Stockholder Information

As of February 21, 2023, there were 14 record holders of our common stock and we believe we have
more than one thousand beneficial holders. As of February 21, 2023, there were 11 holders of common OP
units (in addition to the Company and executive officers of the Company).

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, 2022 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 . . . . . . . . . . . . . . . . . .

2,908,956(1)

Equity compensation plans not approved

by security holders

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

—

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

2,908,956

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)

947,469

—

947,469

(1)

Includes 1,958,303 shares of common stock issuable pursuant to our deferred compensation plan and
950,653 shares of common stock issuable upon the achievement of certain performance conditions.

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

Fourth Quarter 2022 Repurchases of Equity Securities

Period

Total Number
of Shares
Purchased

(a)

October 1 – October 31, 2022 . . . . . . . . . . .

1,569,687

November 1 – November 30, 2022 . . . . . . . .

December 1 – December 31, 2022 . . . . . . . .

—

Maximum
Approximate
Dollar Value of
Shares that May
Yet be Purchased
Under the Plans
or Programs (in
thousands)(1)

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

(c)

(d)

1,569,687

$187,744

—

Average Price
Paid per Share

(b)

$7.81

$ —

(1) Represents amounts available under the Company’s $200.0 million share repurchase program approved

by the board of directors on September 29, 2022 (the “Share Repurchase Program”). The Share
Repurchase Program does not obligate the Company to acquire any particular amount of shares, and
may be suspended or discontinued at any time at the Company’s discretion. The Share Repurchase
Program expires on February 28, 2025.

Fourth Quarter 2022 Sales of Unregistered Securities

None.

Item 6. Reserved

Not applicable.

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
U.S. federal income tax purposes that owns a portfolio of premium hotels and resorts. As of December 31,
2022, we owned a portfolio of 35 premium hotels and resorts that contain 9,607 guest rooms located in
24 different markets in the United States.

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 68% of our total revenues for
the year ended December 31, 2022 and is dictated by demand, as measured by occupancy percentage,
pricing, as measured by ADR, and our available supply of hotel rooms.

Our ADR, occupancy percentage and RevPAR performance may be impacted by macroeconomic

factors such as U.S. economic conditions generally, increasing inflation, rising interest rates, regional and
local employment growth, personal income and corporate earnings, office vacancy rates and business
relocation decisions, airport and other business and leisure travel, increased use of lodging alternatives, new
hotel construction and the pricing strategies of our competitors. 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” for further discussion on
these financial measures.

COVID-19 Pandemic

COVID-19 has had and continues to have a significant effect on our industry in general and our
business in particular. The demand for lodging materially decreased beginning in March 2020 and remained
low throughout 2021. During 2022, demand significantly improved as a result of vaccinations, lifting of
governmental restrictions, and an overall increase in public demand for leisure travel, among other factors.

Four of our hotels (one of which was sold on June 30, 2021) had suspended operations for a period of

time during the year ended December 31, 2021. All of our hotels were open during the year ended
December 31, 2022.

The COVID-19 pandemic is expected to continue to contribute to uncertainty and volatility with
respect to our results of operations, financial position and cash flows for 2023 as the recovery continues. We
expect that the pace will vary from market to market and may be uneven in nature. Although leisure travel
has rebounded and there were signs of a robust recovery in business travel in 2022 relative to 2021, there
remains significant uncertainty regarding the future pace of recovery and whether and when business
travel and larger group meetings will return to pre-pandemic levels. The emergence of new variant strains of
COVID-19 has the potential to slow or reverse positive trends expected in 2023 and beyond.

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

Overview of 2022

Key highlights for 2022 include the following:

Hotel Acquisitions. On January 6, 2022, we acquired the Tranquility Bay Beachfront Resort located in
Marathon, Florida, for $62.4 million, including prorations and transaction costs. This acquisition included
income from 84 units owned by third parties and the majority of the intervals in three units structured as
vacation ownership. Subsequent to this purchase, we acquired four of the 84 units. On April 1, 2022, we

acquired the Kimpton Shorebreak Fort Lauderdale Beach Resort located in Fort Lauderdale, Florida, for
$35.6 million, including prorations and transaction costs. On November 21, 2022, we acquired the Lake
Austin Spa Resort located in Austin, Texas, for $75.8 million, including prorations and transaction costs.

Financing Activity. On September 27, 2022, we entered into an amended and restated credit agreement

that provides for a $400 million senior unsecured revolving credit facility and two term loan facilities in the
aggregate amount of $800 million. We used the proceeds from the new term loans to repay our previously
existing terms loans and amounts outstanding on our prior revolving credit facility, as well as four of our
outstanding mortgage loans that were schedule to mature in 2023.

Share Repurchases. On September 29, 2022, our board of directors approved a share repurchase
program authorizing us to repurchase up to $200.0 million of our common stock through February 28,
2025. As of December 31, 2022, we have repurchased 1.6 million shares of common stock.

Common Dividends.

In the third quarter, we resumed the payment of quarterly common dividends.

Outlook for 2023

Many economists expect that the U.S. economy may contract in the second half of 2023 as a result of

actions by the Federal Reserve to restrain inflation. The ultimate timing and magnitude of a potential
recession, however, is unknown. Travel demand is highly sensitive to changes in macroeconomic factors and
the threat of even a mild recession creates a backdrop of uncertainty for the hospitality industry. The
effect is compounded because the industry experienced a disproportionate impact from the COVID-19
pandemic and the subsequent recovery has been uneven across markets and customer segments.

Our portfolio is composed primarily of luxury and upper-upscale resorts and hotels located in popular

leisure destinations and major urban markets. Our destination resorts have outperformed the recovery of
the broader U.S. hospitality market and, depending on the macroeconomic environment, we expect the strong
consumer preference for drive-to destinations will support strong sales and profits at our resorts in 2023.
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. Urban hotels comprise the majority of our portfolio and we believe these hotels are well
positioned for outsized growth in 2023 as employers encourage return-to-office and business travel for
their employees. Corporate travel across our portfolio has increased steadily from the depths of the global
pandemic and is poised to exceed pre-pandemic levels in 2023 based on strong group booking pace and recent
business transient demand patterns. We anticipate industry profitability will be challenged by a short
booking window and emerging and shifting travel patterns, as well as pressures on property taxes, insurance
and overall labor costs. We continue to work closely with our hotel managers to maximize revenue and
identify operating efficiencies.

We expect the expansion of corporate travel demand will enable the industry to improve profits in 2023
and we enter the year with several favorable factors, including: (1) ownership of a high-quality portfolio, with
a meaningful concentration of experiential destination resorts, (2) internal growth from five recent and two
pending hotel upbrandings, (3) internal growth from the continuation of our asset management initiatives and
return on investment projects, (4) expense savings from the conversion of six formerly Marriott-managed
contracts to Marriott franchises, (5) conservative debt capital structure with limited near-term debt maturities,
and (6) liquidity of over $550 million as of December 31, 2022.

Results of Operations

The following table sets forth certain operating information for the year ended December 31, 2022 for

each of the hotels we owned during 2022. The table indicates the operating status of each hotel and the
occupancy percentage, ADR and RevPAR for each hotel for the portion of the year ended December 31,
2022 that the hotel was owned by the Company.

Property

Location

Chicago Marriott Downtown Magnificent

Number
of
Rooms

Occupancy
(%)

ADR
($)

RevPAR
($)

% Change
from
2021
RevPAR

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

1,200

54.6% $ 242.34 $132.20

114.9%

Westin Boston Seaport District

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

793

75.3%

240.49

181.09

106.9%

Salt Lake City Marriott Downtown at City

Creek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Salt Lake City, Utah

Worthington Renaissance Fort Worth Hotel

. . . Fort Worth, Texas

Westin San Diego Bayview . . . . . . . . . . . . . . . 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 . . . . . . . Boston, Massachusetts

The Hythe Vail . . . . . . . . . . . . . . . . . . . . . . . . Vail, Colorado

Courtyard New York Manhattan/Midtown

East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New York, New York

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

The Gwen Hotel . . . . . . . . . . . . . . . . . . . . . . . Chicago, Illinois

Hilton Garden Inn New York/Times Square

Central

. . . . . . . . . . . . . . . . . . . . . . . . . . . New York, New York

Embassy Suites by Hilton Bethesda . . . . . . . . . Bethesda, Maryland

Hilton Burlington Lake Champlain . . . . . . . . . Burlington, Vermont

Hotel Palomar Phoenix . . . . . . . . . . . . . . . . . . Phoenix, Arizona

Henderson Beach Resort . . . . . . . . . . . . . . . . . Destin, Florida

Bourbon Orleans Hotel . . . . . . . . . . . . . . . . . . New Orleans, Louisiana

Hotel Clio . . . . . . . . . . . . . . . . . . . . . . . . . . . Denver, Colorado

Courtyard New York Manhattan/Fifth

Avenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . New York, New York

Margaritaville Beach House Key West . . . . . . . . Key West, Florida

The Lodge at Sonoma Resort . . . . . . . . . . . . . . Sonoma, California

Courtyard Denver Downtown . . . . . . . . . . . . . Denver, Colorado

Renaissance Charleston Historic District

Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charleston, South Carolina

Kimpton Shorebreak Resort

. . . . . . . . . . . . . . Huntington Beach,

California

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

Havana Cabana Key West . . . . . . . . . . . . . . . . Key West, Florida
Tranquility Bay Beachfront Resort(1) . . . . . . . . . Marathon, Florida
Hotel Emblem San Francisco . . . . . . . . . . . . . . San Francisco, California
Kimpton Shorebreak Fort Lauderdale Beach

Resort(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . Fort Lauderdale, Florida

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

The Landing Lake Tahoe Resort & Spa . . . . . . . South Lake Tahoe, California

Orchards Inn Sedona . . . . . . . . . . . . . . . . . . . Sedona, Arizona
Lake Austin Spa Resort(3)

. . . . . . . . . . . . . . . . Austin, Texas

510

504

436

433

410

403

344

321

318

311

282

272

258

242

233

220

199

189

186

182

177

167

157

142

106
103

96
88

70
40

59.4%

68.9%

72.8%

75.9%

60.1%

77.7%

53.2%

83.8%

56.0%

73.0%

93.2%

52.2%

73.7%

65.8%

61.8%

67.1%

69.7%

93.3%

79.8%

62.6%

74.2%

85.4%

80.7%

51.1%

85.3%
73.3%

72.4%

62.8%
71.4%

49.0%

176.24

104.70

188.68

129.95

201.64

146.88

269.09

204.22

66.1%

55.9%

75.9%

39.9%

214.53

128.87

190.6%

293.11

227.79

431.18

229.35

85.2%

42.3%

328.22

275.05

150.24

84.16

297.88

217.59

77.3%

64.6%

59.2%

276.71

257.91

121.4%

143.75

75.01

245.87

181.23

221.10

145.48

473.56

292.87

90.5%

26.0%

45.9%

3.2%

236.79

158.86

131.7%

304.01

211.87

27.0%

277.34

258.80

124.9%

449.79

358.95

462.85

289.59

204.49

151.80

10.3%

35.8%

61.5%

360.02

307.37

345.17

278.42

22.3%

33.8%

700.56

358.26

20.6%

327.22
742.42

279.15
544.46

8.3%
3.4%

223.96

162.14

130.4%

207.24
995.34

130.24
710.81

18.8%
(3.5)%

509.26

249.63

14.6%

303.69
66.5%
49.0% 1,367.03

201.95
670.18

(7.7)%
(3.0)%

Property

Location

Number
of
Rooms

Occupancy
(%)

ADR
($)

RevPAR
($)

% Change
from
2021
RevPAR

Henderson Park Inn . . . . . . . . . . . . . . . . . . . . Destin, Florida

73.1%

642.69

469.90

4.3%

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

9,607

68.3% $ 286.50 $195.69

51.5%

(1) The operating statistics reflect our ownership period from January 6, 2022 to December 31, 2022 and

the comparable period of 2021.

(2) The operating statistics reflect our ownership period from April 1, 2022 to December 31, 2022 and the

comparable period of 2021.

(3) The operating statistics reflect our ownership period from November 21, 2022 to December 31, 2022

and the comparable period of 2021.

Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021

Our results of operations for the year ended December 31, 2022 improved relative to the year ended

December 31, 2021 as all of our hotels were open for the entire year and travel increased.

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

from our hotels, as follows (in millions):

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

$ 681.3

$399.1

70.7%

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

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

238.2

82.0

117.7

50.3

102.4

63.0

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

$1,001.5

$567.1

76.6%

Year Ended December 31,

2022

2021

% Change

Our total revenues increased $434.4 million from $567.1 million for the year ended December 31, 2021

to $1.0 billion for the year ended December 31, 2022.

Rooms revenues increased by $282.2 million from the year ended December 31, 2021 to the year ended

December 31, 2022 primarily due to increases in occupancy and ADR primarily at our resort hotels.
Additionally, the acquisitions of the Bourbon Orleans Hotel and Henderson Park Inn in July 2021, Henderson
Beach Resort in December 2021, Tranquility Bay Beachfront Resort in January 2022, the Kimpton
Shorebreak Fort Lauderdale Beach Resort in April 2022 and Lake Austin Spa Resort in November 2022
(collectively, our “2021/2022 Acquisitions”) accounted for $51.9 million of the increase in rooms revenue.

The following are key hotel operating statistics for the years ended December 31, 2022 and 2021.
The 2021 operating statistics reflect the period in 2021 comparable to our ownership period in 2022 for our
2021/2022 Acquisitions.

Year Ended December 31,

2022

2021

% Change

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

68.3%

$286.50
$195.69

51.5% 16.8%
14.3%
51.5%

$250.73
$129.18

Food and beverage revenues increased $120.5 million from the year ended December 31, 2021 to the

year ended December 31, 2022, primarily due to increases in occupancy which resulted in an increase in
outside the room spend at our hotels. Additionally, our 2021/2022 Acquisitions contributed $16.9 million to
the increase in food and beverage revenues.

Other revenues, which primarily represent spa, parking, resort fees and attrition and cancellation fees,

increased $31.7 million from the year ended December 31, 2021 to the year ended December 31, 2022,
primarily due to increases in occupancy as our hotels continued to recover from the COVID-19 pandemic,
as well as increases in resort fees, spa revenues, and attrition and cancellation fees. Additionally, our 2021/2022
Acquisitions contributed $9.9 million to the increase in other revenues.

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

Year Ended December 31,

2022

2021

% Change

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

$163.1

$102.2

59.6%

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

163.6

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 . . . .

22.8

84.4

23.8

39.3

63.2

32.7

18.6

4.8

33.6

34.1

—

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

12.8

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

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

$696.8

$461.7

82.2

85.4

43.3

30.1

28.0

67.6

74.9

91.8

860.0

(33.5)

75.8

100.0

(100.0)

9.4

50.9%

Our hotel operating expenses increased $235.1 million from $461.7 million for the year ended
December 31, 2021 to $696.8 million for the year ended December 31, 2022 primarily due to increases in
occupancy as our hotels continued to recover from the COVID-19 pandemic and other related operating costs
stemming from the timing and extent of the COVID-19 pandemic. Additionally, our 2021/2022 Acquisitions
contributed to $58.2 million of the increase in hotel operating expenses. The increase in hotel operating
expenses was partially offset by a $5.6 million decrease due to our dispositions of Frenchman’s Reef &
Morning Star Marriott Beach Resort in April 2021 and The Lexington Hotel in June 2021.

Depreciation and amortization. Depreciation and amortization is recorded on our hotel buildings over
40 years for the periods subsequent to acquisition. Depreciable lives of hotel furniture, fixtures and equipment
are estimated as the time period between the acquisition date and the date that the hotel furniture, fixtures
and equipment will be replaced. Our depreciation and amortization expense increased $5.9 million from the
year ended December 31, 2021 primarily due to our 2021/2022 Acquisitions, as well as the renovations
and rebrandings that were completed in 2021 and 2022.

Impairment losses. During the year ended December 31, 2022, we recorded impairment losses of
$2.8 million on the right-to-manage intangible asset related to the rental management agreements acquired
as part of our acquisition of Tranquility Bay Beachfront Resort. This impairment was a result of the purchase
of four third-party owned units subsequent to the purchase of the hotel. During the year ended
December 31, 2021, we recorded impairment losses of $126.7 million related to the dispositions of
Frenchman’s Reef & Morning Star Marriott Beach Resort and The Lexington Hotel.

Corporate expenses. Corporate expenses principally consist of employee-related costs, including base

payroll, bonus, restricted stock and severance. Corporate expenses also include corporate operating costs,
professional fees and directors’ fees. Our corporate expenses decreased $0.8 million, from $32.6 million for the
year ended December 31, 2021 to $31.8 million for the year ended December 31, 2022. The decrease is
primarily due to a decrease in employee-related compensation and other employee-related expenses.

Business interruption insurance income. For the years ended December 31, 2022 and 2021, we
recognized $0.5 million and $0.7 million, respectively, of business interruption insurance income related to
the Caldor wildfires at The Landing Lake Tahoe Resort & Spa, which caused the hotel to be closed for 21 days
in 2021.

Interest expense. Our interest expense increased $1.3 million from $37.0 million for the year ended

December 31, 2021 to $38.3 million for the year ended December 31, 2022, and was comprised of the
following (in millions):

Year Ended December 31,

Mortgage debt interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 23.3

Term loan interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

21.2

5.3

2.4

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

(13.9)

2022

$ 38.3

2021

$24.9

14.8

2.4

2.6

(7.7)

$37.0

The increase in interest expense is primarily related to the increase in term loan interest due to rising

interest rates, partially offset by the mark-to-market of our interest rate swaps.

Loss on early extinguishment of debt. On September 27, 2022, we refinanced our senior unsecured
credit facility and unsecured term loans. As a result, we recognized a $9.7 million loss on early extinguishment
of debt related to the write-off of certain unamortized debt issuance costs and fees paid to the lenders in
consideration for our refinancing. We also recognized $0.1 million of loss on early extinguishment of debt
related to the write-off of certain unamortized debt issues costs related to the payoff of four mortgage loans
during the year ended December 31, 2022.

Income taxes. We recorded income tax expense of $2.6 million in 2022 and $3.3 million in 2021.
The 2022 income tax expense was incurred on the $11.6 million pre-tax income of our TRSs. The 2022
income tax provision includes a change in our valuation allowance of $3.9 million. The 2021 income tax
provision includes a change in our valuation allowance of $1.4 million. The valuation allowance was initially
recognized based on assessments of our ability to utilize our net operating loss carryforwards in future years.

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):

Rooms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Food and beverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Year Ended December 31,

2021

$399.1
117.7
50.3

$567.1

2020

% Change

$196.7
68.6
34.2

$299.5

102.8%
71.7
47.1

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