Chatham Lodging Trust (CLDT)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2025. In this report, we use the terms “the Company,” “we” or “our” to refer to Chatham Lodging Trust and its consolidated subsidiaries, unless the context indicates otherwise.

Statement Regarding Forward-Looking Information

The following information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include information about possible or assumed future results of the lodging industry and our business, financial condition, liquidity, results of operations, cash flow and plans and objectives. These statements generally are characterized by the use of the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may,” “will,” “could” or similar expressions. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, such forward-looking statements relate to future events, our plans, strategies, prospects and future financial performance, and involve known and unknown risks that are difficult to predict, uncertainties and other factors that are, in some cases, beyond our control and which could differ materially from those set forth in the forward-looking statements. Important factors that we think could cause our actual results to differ materially from expected results are summarized below. Some factors that might cause such a difference include the following: local, national and global economic conditions, uncertainty surrounding the financial stability of the United States, Europe and China, increased direct competition, changes in government regulations or accounting rules, changes in local, national and global real estate conditions, declines in lodging industry fundamentals, increased operating costs, a potential recessionary environment, seasonality of the lodging industry, our ability to obtain debt and equity financing on satisfactory terms, changes in interest rates, our ability to identify suitable investments, our ability to close on identified investments, inaccuracies of our accounting estimates, the uncertainty and economic impact of pandemics like COVID-19, epidemics or other public health emergencies or fear of such events, the impact of and changes to various government programs, and our ability to dispose of selected hotel properties on the terms and timing we expect, if at all. Given these uncertainties, undue reliance should not be placed on such statements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances or to reflect the occurrence of unanticipated events. The forward-looking statements should also be read in light of the risk factors identified in the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 as updated by the Company's subsequent filings with the SEC under the Exchange Act.

Overview

We are a self-advised hotel investment company organized in October 2009 that commenced operations in April 2010. Our investment strategy is to invest in upscale extended-stay and premium-branded select-service hotels in geographically diverse markets with high barriers to entry near strong demand generators. We may acquire portfolios of hotels or single hotels. We expect that a significant portion of our portfolio will consist of hotels in the upscale extended-stay or select-service categories, including brands such as Homewood Suites by Hilton®, Residence Inn by Marriott®, Hyatt Place®, Courtyard by Marriott®, SpringHill Suites by Marriott®, Hilton Garden Inn by Hilton®, Embassy Suites®, Hampton Inn®, Hampton Inn and Suites®, Home2 Suites by Hilton® and TownePlace Suites by Marriott®.

The Company's future hotel acquisitions may be funded by issuances of both common and preferred shares or the issuance of partnership interests in our operating partnership, Chatham Lodging, L.P. (the "Operating Partnership"), draw-downs under our revolving credit facility, the incurrence or assumption of debt, available cash, or proceeds from dispositions of assets. We intend to acquire quality assets at attractive prices and improve their returns through knowledgeable asset management and seasoned, proven hotel management while remaining prudently leveraged.

At June 30, 2026, our leverage ratio was 24.1% measured as the ratio of our net debt (total debt outstanding before deferred financing costs less unrestricted cash and cash equivalents) to hotel investments at cost. Over the past several years, we have maintained a leverage ratio between the low 20s and the low 50s. As of June 30, 2026, we have total debt of $418.2 million at a weighted-average interest rate of approximately 5.84%.

We are a real estate investment trust (“REIT”) for federal income tax purposes. In order to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), we cannot operate our hotels. Therefore, the Operating Partnership and its subsidiaries lease our hotel properties to taxable REIT subsidiary lessees (“TRS Lessees”), who in turn engage eligible independent contractors to manage the hotels. Each of the TRS Lessees is treated as a taxable REIT subsidiary for federal income tax purposes and is consolidated within our financial statements for accounting purposes. However, since we control both the Operating Partnership and the TRS Lessees, our principal source of funds on a consolidated basis is from the operations of our hotels. The earnings of the TRS Lessees are subject to taxation as regular C corporations, as defined in the Code, potentially reducing the TRS Lessees’ cash available to pay dividends to us, and therefore our funds from operations and the cash available for distribution to our shareholders.

Key Indicators of Operating Performance and Financial Condition

We measure financial condition and hotel operating performance by evaluating non-financial and financial metrics and measures such as:

We evaluate the hotels in our portfolio and potential acquisitions using these metrics to determine each hotel’s contribution toward providing income to our shareholders through increases in distributable cash flow and increasing long-term total returns through appreciation in the value of our common shares. RevPAR, ADR and Occupancy are hotel industry measures commonly used to evaluate operating performance.

See “Non-GAAP Financial Measures” for further discussion of FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA.

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Results of Operations

Industry Outlook

Smith Travel Research reported that U.S. lodging industry RevPAR increased 5.7% for the three months ended June 30, 2026, with RevPAR up 4.4% in April 2026, up 4.0% in May 2026 and up 8.4% in June 2026. We expect that during the remainder of 2026, lodging industry RevPAR will continue to increase modestly.

Comparison of the three months ended June 30, 2026 to the three months ended June 30, 2025

Results of operations for the three months ended June 30, 2026 include the operating activities of the hotels we owned during the period. We sold one hotel located in Houston, TX on April 22, 2025, and sold one hotel located in Billerica, MA on December 23, 2025. We acquired a portfolio of six hotels on March 3, 2026, which were located in Paducah, KY, Joplin, MO, and Effingham, IL. The changes in results described below were driven primarily by an increase in RevPAR, the sales of two hotels, the acquisition of six hotels and inflationary cost increases.

Revenues

Revenue, which consists primarily of room, food and beverage and other operating revenues from our hotels, was as follows for the periods indicated (dollars in thousands):

Total revenue was $87.8 million for the three months ended June 30, 2026, up $7.5 million compared to total revenue of $80.3 million for the corresponding 2025 period. The increase in total revenue primarily was related to the 3.3% increase in same property RevPAR and the acquisition of six hotels in 2026, which contributed $7.3 million of revenue during the three months ended June 30, 2026. The increase was partially offset by the two hotels sold in 2025, which contributed zero revenue during the three months ended June 30, 2026, down from the $2.1 million that the sold hotels contributed for the corresponding 2025 period. Since all of our hotels are select-service or limited-service hotels, room revenue is the primary revenue source as these hotels do not have significant food and beverage revenue or large group conference facilities. Room revenue comprised 91.8% and 91.4% of total revenue for the three months ended June 30, 2026 and 2025, respectively.

Food and beverage revenue was $1.6 million for the three months ended June 30, 2026, down $0.3 million compared to $1.9 million for the corresponding 2025 period.

Other operating revenue is comprised of parking, meeting room, gift shop, in-room movie and other ancillary amenities revenue. Other operating revenue was $5.3 million and $4.8 million for the three months ended June 30, 2026 and 2025, respectively.

Reimbursable costs from related parties were $0.3 million and $0.2 million for the three months ended June 30, 2026 and 2025, respectively. The cost reimbursements were offset by the reimbursed costs from related parties included in operating expenses.

In the table below, we present both actual and same property room revenue metrics. Actual Occupancy, ADR and RevPAR metrics reflect the performance of the hotels for the actual days such hotels were owned by the Company during the periods presented. Same property Occupancy, ADR and RevPAR reflect results for the hotels owned by us as of June 30, 2026 that have been in operation for a full year regardless of our ownership during the period presented. Results for the hotels for perio

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

Overview

Chatham Lodging Trust (“we,” “us” or the “Company”) was formed as a Maryland real estate investment trust on October 26, 2009. The Company is internally managed and was organized to invest primarily in upscale extended-stay and premium-branded select-service hotels. The Company has elected to be taxed as a real estate investment trust for federal income tax purposes ("REIT").

The Company had no operations prior to the consummation of its initial public offering ("IPO") in April 2010. The net proceeds from our share offerings are contributed to Chatham Lodging, L.P., our operating partnership (the “Operating Partnership”), in exchange for partnership interests. Substantially all of the Company’s assets are held by, and all operations are conducted through, the Operating Partnership. The Company is the sole general partner of the Operating Partnership and owns 100% of the common units of limited partnership interest in the Operating Partnership ("common units"). Certain of the Company’s executive officers hold vested and unvested long-term incentive plan units in the Operating Partnership ("LTIP units"), which are presented as non-controlling interests on our consolidated balance sheets.

As of December 31, 2025, the Company owned 33 hotels with an aggregate of 5,021 rooms located in 15 states and the District of Columbia.

To qualify as a REIT, the Company cannot operate its hotels. Therefore, the Operating Partnership and its subsidiaries lease the Company's hotels to taxable REIT subsidiary lessees (“TRS Lessees”), which are wholly owned by the Company’s taxable REIT subsidiary (“TRS”) holding company. Each hotel is leased to a TRS Lessee under a percentage lease that provides for rental payments equal to the greater of (i) a fixed base rent amount or (ii) a percentage rent based on hotel revenue. Lease revenue from each TRS Lessee is eliminated in consolidation.

The TRS Lessees have entered into management agreements with third-party management companies that provide day-to-day management for the hotels. As of December 31, 2025, Island Hospitality Management Inc. (“IHM”), which is 100% owned by Jeffrey H. Fisher, the Company's Chairman, President and Chief Executive Officer, managed all of the Company’s hotels.

Key Indicators of Operating Performance and Financial Condition

We measure financial condition and hotel operating performance by evaluating non-financial and financial metrics and measures such as:

We evaluate the hotels in our portfolio and potential acquisitions using these metrics to determine each hotel’s contribution toward providing income to our shareholders through increases in distributable cash flow and increasing long-term total returns through appreciation in the value of our common shares. RevPAR, ADR and Occupancy are hotel industry measures commonly used to evaluate operating performance.

See “Non-GAAP Financial Measures” for further discussion of FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA and Adjusted Hotel EBITDA.

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Results of Operations

Comparison of the year ended December 31, 2025 to the year ended December 31, 2024

The section below provides a comparative discussion of our consolidated results of operations between fiscal year 2025 and 2024. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for comparative a discussion of our consolidated results of operations between fiscal 2024 and fiscal 2023.

Results of operations for the year ended December 31, 2025 include the operating activities of the hotels we owned during the period. We sold one hotel located in Denver, CO on January 9, 2024, one hotel located in Maitland, FL on December 6, 2024, one hotel located in Bloomington, MN on December 16, 2024, one hotel located in Brentwood, TN on January 30, 2025, one hotel located in Houston, TX on March 17, 2025, one hotel located in Houston, TX on April 22, 2025, and one hotel located in Billerica, MA on December 23, 2025. We acquired one hotel located in Phoenix, AZ on May 30, 2024. The changes in results described below were driven primarily by the sales of seven hotels, the acquisition of one hotel and inflationary cost pressures.

Revenue

Revenue, which consists primarily of room, food and beverage and other operating revenues from our hotels, was as follows for the periods indicated (dollars in thousands):

Total revenue decreased $22.1 million to $295.1 million for the year ended December 31, 2025 compared to total revenue of $317.2 million for the 2024 period. The decrease in total revenue primarily was related to the decrease in revenue from the sales of seven hotels that contributed $8.9 million in revenue for the year ended December 31, 2025, down $24.6 million from the $33.5 million that the sold hotels contributed for the corresponding 2024 period. Same property RevPAR also decreased by 0.1%. This was partially offset by the increase in revenue from the acquisition of one hotel that contributed $8.6 million of revenue during the year ended December 31, 2025, up $4.9 million from the $3.7 million that the acquired hotel contributed for the corresponding 2024 period. Since all of our hotels are select-service or limited-service hotels, room revenue is the primary revenue source as these hotels do not have significant food and beverage revenue or large group conference facilities. Room revenue comprised 91.2% and 91.5% of total revenue for the years ended December 31, 2025 and 2024, respectively. Room revenue was $269.2 million and $290.3 million for the years ended December 31, 2025 and 2024, respectively, and the decrease in room revenue primarily was related to the same factors discussed above.

Food and beverage revenue was $6.9 million and $7.7 million for the years ended December 31, 2025 and 2024, respectively.

Other revenue, comprised of parking, meeting room, gift shop, in-room movie and other ancillary amenities revenue, decreased $0.2 million for the year ended December 31, 2025.

Reimbursed costs from related parties were $1.1 million and $1.1 million for the years ended December 31, 2025 and 2024, respectively. The cost reimbursements were offset by the reimbursed costs from related parties included in operating expenses.

As reported by Smith Travel Research, U.S. lodging industry RevPAR for the years ended December 31, 2025 and 2024 decreased 0.3% and increased 1.8%, respectively, as compared to the years ended December 31, 2024 and 2023. Smith Travel Research reported that U.S. lodging industry RevPAR increased 2.2% in the first quarter of 2025, decreased 0.5% in the second quarter of 2025, decreased 1.4% in the third quarter of 2025 and decreased 1.1% in the fourth quarter of 2025. Smith Travel Research currently projects industry RevPAR growth of 0.6% in 2026.

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In the table below, we present both actual and same property room revenue metrics. Actual Occupancy, ADR and RevPAR metrics reflect the performance of the hotels for the actual days such hotels were owned by the Company during the periods presented. Same property Occupancy, ADR, and RevPAR reflect results for the hotels owned by the Company as of December 31, 2025 that have been in operation for a full year regardless of our ownership during the period presented, which is a non-GAAP financial measure. Results for the hotels for the periods prior to our ownership were provided to us by prior owners and have not been adjusted by us.

For the year ended December 31, 2025, same property RevPAR decreased 0.1% due to an increase in occupancy of 0.5% and a decrease in ADR of 0.7%.

Hotel Operating Expenses

Hotel operating expenses consisted of the following for the periods indicated (dollars in thousands):

Hotel operating expenses decreased $12.0 million, or 6.6%, to $169.2 million for the year ended December 31, 2025 from $181.2 million for the year ended December 31, 2024. The seven sold hotels contributed $6.0 million in operating expenses for the year ended December 31, 2025, down $15.9 million from the $21.9 million that the sold hotels contributed for the corresponding 2024 period. This was partially offset by the increase in operating expenses from the acquisition of one hotel that contributed $4.5 million in operating expenses for the year ended December 31, 2025, up $2.3 million fro

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