Summit Hotel Properties, Inc. (INN) FY 2024 MD&A

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

Industry Trends and Outlook

Room-night demand in the U.S. lodging industry is generally correlated to certain macroeconomic trends. Key drivers of demand, and therefore lodging revenues, include changes in gross domestic product, corporate profits, capital investments, and employment. From a cost perspective, elevated inflation increased the cost of salaries, wages, supplies, material, freight, insurance and energy in recent years. A portion of these costs were partially offset by lodging price increases. While certain costs remain above historical levels, expense growth has moderated to a pace consistent with historical long-term inflation rates.

During 2024, we experienced same-store revenue growth as a result of strong group and improved business transient demand which was partially offset by normalization in leisure demand. The long-term outlook for industry revenue growth remains favorable as forecasted room night demand growth and increases in average daily rate, combined with minimal supply growth, are expected to drive continued industry RevPAR growth over the next several years.

Operating Performance Metrics

We use a variety of performance indicators 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 GAAP, as well as other financial information that is not prepared in accordance with 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 lodging properties, groups of lodging properties 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:

•Hotel EBITDA — Hotel EBITDA is a measure of the operating performance of our lodging properties after excluding the effects of financing decisions, tax systems, and non-cash expenses such as depreciation and amortization.

•Hotel Gross Operating Profit — Hotel Gross Operating Profit ("GOP") is a measure of the profitability of our lodging properties from core operations and represents Hotel EBITDA exclusive of property taxes, insurance, and management fees.

•Occupancy — Occupancy represents the total number of guestrooms occupied divided by the total number of guestrooms available.

•Average Daily Rate — ADR represents total room revenues divided by the total number of paid occupied guestrooms.

•Revenue Per Available Room — RevPAR is the product of ADR and Occupancy.

Occupancy, ADR and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important metric for monitoring operating performance at the individual lodging property level and across our business as a whole. We evaluate individual lodging property RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a company-wide and market-by-market basis. ADR and RevPAR are based only on room revenue. Room revenue depends on demand (as measured by occupancy), pricing (as measured by ADR), and our available supply of lodging property guestrooms. Our ADR, occupancy and RevPAR performance may be affected by macroeconomic factors such as regional and local employment growth, personal income and corporate earnings, office vacancy rates and business relocation decisions, air travel and other business and leisure travel, new lodging property construction, and the pricing strategies of competitors. In addition, our ADR, occupancy and RevPAR performance is dependent on the continued success of our partners, franchisors and brands.

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Lodging Property Portfolio Activity

We continually evaluate alternatives to refine our portfolio to drive growth and create value. In the normal course of business, we evaluate opportunities to acquire additional properties that meet our investment criteria and opportunities to recycle capital through the disposition of properties. As such, the composition and size of our portfolio of properties may change materially over time. Significant changes to our portfolio of properties could have a material effect on our Consolidated Financial Statements.

In May 2023, we completed the sale of four lodging properties for an aggregate gross selling price of $28.1 million. The sale included two Hyatt Place hotels in the Chicago area containing a total of 277 guestrooms, a Hilton Garden Inn in the Minneapolis area containing 97 guestrooms, and a Holiday Inn Express & Suites in the Minneapolis area containing 93 guestrooms. These lodging properties were classified as Assets held for sale at December 31, 2022 and their carrying values during the year then ended were reduced by $2.9 million to write-down the carrying value of the properties to their net selling price less estimated costs to sell.

In June 2023, the GIC Joint Venture acquired the Residence Inn by Marriott located in Scottsdale, AZ containing 120 guestrooms for a purchase price of approximately $29.0 million. GIC made a capital contribution of $13.7 million, or 49% of the cash paid at closing, to the GIC Joint Venture, and the Operating Partnership made a capital contribution of $14.3 million, or 51% of the cash paid at closing to the GIC Joint Venture, along with $1.0 million of earnest money that was paid from available cash of the GIC Joint Venture to fund the purchase price. The Operating Partnership made its capital contribution to the GIC Joint Venture with available cash on hand and borrowings on our corporate revolving line of credit.

In June 2023, the GIC Joint Venture acquired the Nordic Lodge located in Steamboat Springs, CO containing 47 guestrooms for a purchase price of approximately $13.7 million. GIC made a capital contribution of $6.7 million, or 49% of the purchase price, to the GIC Joint Venture and the Operating Partnership made a capital contribution of $7.0 million, or 51% of the purchase price, to the GIC Joint Venture to fund the purchase price. The Operating Partnership made its capital contribution to the GIC Joint Venture with available cash on hand and borrowings on our corporate revolving line of credit.

In December 2023, we completed the sale of the 123-guestroom Hyatt Place in Baltimore (Owings Mills), MD for a gross selling price of $8.3 million. The net selling price less costs to sell approximated the net book value of the hotel property on the sale date resulting in a nominal gain that was recorded in the fourth quarter of 2023.

During the fourth quarter of 2023, the GIC Joint Venture entered into a purchase and sale agreement with a third-party to sell the 127-guestroom Hyatt Place Dallas (Plano), TX for $10.3 million. We reclassified the property in Assets held for sale, net at December 31, 2023 and recorded a write-down of $4.0 million in the fourth quarter of 2023 for the excess of the net carrying amount of the portfolio of properties over the net selling price less estimated costs to sell. We completed the sale of the property in February 2024 under the terms described above.

In April 2024, we completed the sale of the 202-guestroom Courtyard by Marriott and the 208-guestroom SpringHill Suites by Marriott, both located in New Orleans, LA, for an aggregate selling price of $73.0 million, which resulted in a gain of approximately $28.3 million.

In April 2024, the GIC Joint Venture completed the sale of the 119-guestroom Hilton Garden Inn - Bryan (College Station), TX for $11.0 million. The net selling price of the lodging property approximated its net book value on the closing date.

In October 2024, we completed the sale of the 101-guestroom Four Points by Marriott San Francisco Airport for $17.7 million, which resulted in a gain of approximately $0.4 million.

In December 2024, the GIC Joint Venture acquired the Hampton Inn located in Revere (Boston), MA and the Hilton Garden Inn located in Tysons Corner (Vienna), VA with an aggregate total of 399 guestrooms for a combined purchase price of $96.0 million. The purchase price (including approximately $0.3 million of acquisition costs) was funded through a combination of a $2.9 million escrow deposit, capital contributions from our GIC Joint Venture partner totaling $21.5 million, $49.5 million of borrowings on our expanded GIC Joint Venture Credit Facility (See “Part II – Item 8. – Financial Statements and Supplementary Data – Note 6 - Debt"), and our capital contribution of $22.4 million from proceeds from the sale of the Four Points by Marriott San Francisco Airport and cash on hand.

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During the first quarter of 2023, we entered into a purchase and sale agreement with a third-party to sell a 5.99-acre parcel of undeveloped land in San Antonio, TX for $1.3 million. The property was recorded in Assets held for sale, net at December 31, 2024. In February 2025, we closed the sale of the property.

See “Part II – Item 8. – Financial Statements and Supplementary Data –Note 3 - Investments in Lodging Property, net” to the Consolidated Financial Statements for additional information concerning our asset acquisitions, development, and dispositions.

Revenues and Operating Expenses

Our revenues are derived from lodging operations and consist of room revenue, food and beverage revenue and other revenue. As a result of our focus on lodging properties with efficient operating models, substantially all of our revenues are related to the sales of guestrooms. Our other revenue consists of ancillary revenues related to meeting rooms, parking and other guest services provided at certain of our properties.

Our property operating expenses consist primarily of expenses incurred in the day-to-day operation of our lodging properties. Many of our expenses are fixed, such as essential lodging property staff, real estate taxes, insurance, and depreciation. These expenses generally do not decrease even if the revenues at our lodging properties decrease. Room expense includes housekeeping and front office wages and payroll taxes, room supplies, laundry services and other costs. Food and beverage expense primarily includes the cost of food, the cost of beverages and associated labor costs. Other operating expenses include labor and other costs associated with administrative departments, sales and marketing, repair and maintenance, utility costs and franchise fees.

Results of Operations

The comparisons that follow should be reviewed in conjunction with the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

Comparison of 2024 to 2023

The following table contains key operating metrics for our total portfolio and our same-store portfolio for the year ended December 31, 2024 compared with the year ended December 31, 2023 (dollars in thousands, except ADR and RevPAR). Our same-store portfolio consists of properties that we owned as of December 31, 2024 and that we have owned at all times since January 1, 2023.

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The total portfolio information above for the years ended December 31, 2024 and 2023 reflects operating results for various portions of each year for certain lodging properties as a result of the sales and acquisitions of lodging properties. The following table details how the acquisition and disposition transactions affect each reporting year:

Changes from the year ended December 31, 2024 compared with the year ended December 31, 2023 were due to the following:

•Revenues and RevPAR. Room revenues for our total portfolio decreased by $5.4 million for the year ended December 31, 2024 compared with the year ended December 31, 2023 as a result of a $17.5 million decrease in room revenues due to the net effect of the sale of five lodging properties during the year ended December 31, 2024 (the "2024 Sold Properties") and five properties during the year ended December 31, 2023 (the "2023 Sold Properties), and the acquisition of two lodging properties during the year ended December 31, 2024 (the "2024 Acquired Properties") and two lodging properties during the year ended December 31, 2023 (the "2023 Acquired Properties"), partially offset by a $12.1 million increase in same-store revenues driven by improving business transient and group demand which mitigated the effect of the normalization in leisure demand.

On a same store basis, the improvements in our business resulted in an increase of approximately 1.2% in occupancy and a 0.4% in ADR during the year ended December 31, 2024, which resulted in an 1.7% increase in same-store RevPAR. For the total portfolio, we experienced an increase of approximately 2.2% in occupancy and an increase of 1.5% in ADR during the year ended December 31, 2024. This resulted in an increase in RevPAR of 3.7% for the year ended December 31, 2024 compared with the year ended December 31, 2023. The increase in RevPAR was primarily due to net effect of the sales of lodging properties during the years ended December 31, 2024 and 2023 with lower nominal RevPAR and the acquisition of lodging properties over the same period with higher nominal RevPAR.

•Room Expenses. Room expenses for our total portfolio decreased by $1.2 million for the year ended December 31, 2024 compared with the year ended December 31, 2023 as a result of a $5.7 million decrease in room expenses due to the net effect of the sale of the 2024 Sold Properties and the 2023 Sold Properties, and the acquisition of the 2024 Acquired Properties and the 2023 Acquired Properties, partially offset by a $4.5 million increase in same-store room expenses primarily driven by a 1.2% increase in same-store occupancy.

•Food and Beverage Revenues and Expenses. Total portfolio food and beverage revenues decreased by $0.6 million for the year ended December 31, 2024 compared with the year ended December 31, 2023 primarily as a result of a $0.6 million decrease in same-store revenues.

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•Other Hotel Operating Revenues and Expenses. Other lodging property operating revenues for our total portfolio increased by $1.7 million for the year ended December 31, 2024 compared with the year ended December 31, 2023 as a result of a $2.5 million increase in same-store Other lodging property and operating revenues primarily related to an increase in parking and resort fees due to higher occupancy, partially offset by a $0.8 million decrease in Other lodging property operating revenues driven by the net effect the sale of the 2024 Sold Properties and the 2023 Sold Properties, and the acquisition of the 2024 Acquired Properties and the 2023 Acquired Properties.

The $0.5 million decrease in total portfolio Other lodging property operating expenses for the year ended December 31, 2024 in comparison with the year ended December 31, 2023 was driven by a $7.5 million decrease in Other lodging property operating expenses due to the net effect of the sale of the 2024 Sold Properties and the 2023 Sold Properties, and the acquisition of the 2024 Acquired Properties and the 2023 Acquired Properties, partially offset by a $7.0 million increase in same-store Other lodging property operating expenses that resulted from increased labor costs, credit card commissions, sales and marketing costs, and utilities.

The following table includes other consolidated income and expenses for 2024 compared with 2023 (dollars in thousands):

(1)    Not meaningful

Changes from the year ended December 31, 2024 compared with the year ended December 31, 2023 were due to the following:

•Property Taxes, Insurance and Other. The $1.1 million decrease in Property taxes, insurance and other during the year ended December 31, 2024 is primarily the result of greater reductions in property tax expenses during the year ended December 31, 2024 compared with the prior year due to successful appeal efforts, coupled with a reduction of state franchise taxes and other tax accruals during the period, partially offset by an increase in insurance costs.

•Management Fees. Management fees decreased during the year ended December 31, 2024 by $2.6 million due to the net effect of the sale of the 2024 Sold Properties and the 2023 Sold Properties, and the acquisition of the 2024 Acquired Properties and the 2023 Acquired Properties, and lower management fees due to amendments to certain property management agreements during the year ended December 31, 2024.

•Depreciation and Amortization. Depreciation and amortization decreased by $4.5 million for the year ended December 31, 2024 compared with the year ended December 31, 2023 primarily due to a net reduction of depreciation and amortization expense of $5.1 million as a result of the combined effect of the sale of the 2024 Sold Properties and the 2023 Sold Properties, and the acquisition of the 2024 Acquired Properties and the 2023 Acquired Properties, partially offset by a $0.6 million increase in same-store depreciation and amortization due to assets placed in service as a result of completed renovations.

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•Corporate General and Administrative. Corporate general and administrative expenses decreased by $0.6 million for the year ended December 31, 2024 compared with the year ended December 31, 2023 primarily due to a decrease in legal and professional fees of $1.0 million, partially offset by a $0.4 million increase in corporate employee-related costs.

•Loss on Impairment and Write-down of Assets. During the year ended December 31, 2024, the Company recorded a loss on impairment related to a lodging property totaling $6.7 million to reduce the carrying amount of the property to its estimated fair value.

During the year ended December 31, 2023, the Company recorded a Loss on write-down of assets of $16.7 million to reduce the carrying amounts of the three lodging properties that were under contract to sell or being marketed for sale to their expected net selling prices less estimated costs to sell.

•Recoveries of Credit Losses. Recoveries of credit losses for the year ended December 31, 2023 related to the payment in full of our seller-financing loan that was fully reserved. See "Part II – Item 8. – Financial Statements and Supplementary Data – Note 4 – Investment in Real Estate Loans" to the accompanying Consolidated Financial Statements for further information.

•Gain (loss) on Disposal of Assets, net. The gain on disposal of assets, net of $28.9 million for the year ended December 31, 2024 was primarily the result of a $28.3 million gain recorded on the sale of a portfolio of two lodging properties in New Orleans, LA, a $0.4 million gain recorded on the sale of the Four Points by Marriott San Francisco Airport and an aggregate $0.2 million gain recorded on the sale of Hilton Garden Inn - Bryan (College Station), TX and the Hyatt Place - Dallas (Plano), TX.

•Interest Expense. Interest expense decreased by $4.2 million primarily due to lower average outstanding debt and a reduction in interest rates for the year ended December 31, 2024 compared with the year ended December 31, 2023.

•Interest Income. Interest income increased by $0.2 million during the year ended December 31, 2024 primarily due to higher weighted average invested cash balances related to the proceeds from the sale of properties.

•Gain on Extinguishment of Debt. The gain on extinguishment of debt for the year ended December 31, 2024 was the result of the repayment of the MetaBank Loan (as defined in "Part II - Item 8. - Financial and Supplementary Data - Note 6 - Debt" to the accompanying Consolidated Financial Statements) in June 2024 prior to its scheduled maturity date, which resulted in a gain on extinguishment of debt of $3.0 million after legal fees and unamortized debt issuance costs that were written-off on the closing date.

•Other Income, net. Other income, net for the year ended December 31, 2024 consists primarily of third-party tenant income of $2.2 million, the realization of $2.0 million of tax rebates related to the NCI Transaction (as defined in "Part II - Item 8. - Financial and Supplementary Data - Note 6 - Debt" to the accompanying Consolidated Financial Statements) and miscellaneous income of $1.0 million, partially offset by debt transaction costs of $0.6 million and net casualty losses of $0.2 million.

Other income, net for the year ended December 31, 2023 consists primarily of third-party tenant income of $1.5 million and the realization of $1.8 million of tax rebates related to the NCI Transaction during the period, partially offset by net casualty losses of $2.1 million, and other costs of $0.2 million.

•Income Tax Benefit (Expense). We recorded an $8.7 million income tax benefit during the year ended December 31, 2024, primarily due to the reversal of a significant portion of our valuation allowance totaling $12.1 million, partially offset by current federal and state income tax expenses of $2.6 million, and deferred tax expense of $0.8 million for the year ended December 31, 2024. We reversed the valuation allowance during the year ended December 31, 2024 based on our determination that it is probable that we will realize the tax benefits related to a significant portion of our deferred tax assets. Income tax expense amounted to $2.8 million during the year ended December 31, 2023 and was primarily related to federal and state income taxes on our TRSs.

For information about our key operating metrics and results of operations for the year ended December 31, 2023 compared with the year ended December 31, 2022, refer to "Part II – Item 7. – Management's Discussion and Analysis of Financial Conditions and Results of Operations - Results of Operations" of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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Non-GAAP Financial Measures

We disclose certain “non-GAAP financial measures,” which are measures of our historical financial performance. Non-GAAP financial measures are financial measures not prescribed by GAAP. These measures are as follows: (i) Funds From Operations (“FFO”) and Adjusted Funds from Operations ("AFFO"), (ii) EBITDA, Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre") and Adjusted EBITDAre (as described below). We caution investors that amounts presented in accordance with our definitions of non-GAAP financial measures may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP financial measures in the same manner. Our non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of our operating performance. Our non-GAAP financial measures may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, debt service obligations and other commitments and uncertainties. Although we believe that our non-GAAP financial measures can enhance the understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily better indicators of any trend as compared to a comparable measure prescribed by GAAP such as net income (loss).

FFO and AFFO

As defined by Nareit, FFO represents net income or loss (computed in accordance with GAAP), excluding preferred dividends, gains (or losses) from sales of real property, impairment losses on real estate assets, items classified by GAAP as extraordinary, the cumulative effect of changes in accounting principles, plus depreciation and amortization related to real estate assets, and adjustments for unconsolidated partnerships, and joint ventures. AFFO represents FFO excluding amortization of deferred financing costs, franchise fees, equity-based compensation expense, transaction costs, debt transaction costs, premiums on redemption of preferred shares, losses from net casualties, non-cash interest income and non-cash income tax related adjustments to our deferred tax asset. Unless otherwise indicated, we present FFO and AFFO applicable to our common shares and common units. We present FFO and AFFO because we consider FFO and AFFO an important supplemental measure of our operational performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of REITs, many of which present FFO and AFFO when reporting their results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and AFFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, and certain transaction costs related to lodging property acquisition activities and debt, FFO and AFFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. Our computation of FFO differs slightly from the computation of Nareit-defined FFO related to the reporting of depreciation and amortization expense on assets at our corporate offices, which is de minimus. Our computation of FFO may also differ from the methodology for calculating FFO used by other equity REITs and, accordingly, may not be comparable to such other REITs. FFO and AFFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP), as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. Where indicated in this Annual Report on Form 10-K, FFO is based on our computation of FFO and not the computation of Nareit-defined FFO unless otherwise noted.

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The following is a reconciliation of our GAAP net income to FFO and AFFO for the years ended December 31, 2024, 2023 and 2022 (in thousands, except per common share/Common Unit amounts):

(1)      The total equity-based compensation expense for the year ended December 31, 2022 includes $1.3 million of incremental expense related to the modification of certain restricted stock awards as a result of the departure of our Chief Operating Officer.

(2)    During the year ended December 31, 2022, we earned a $0.4 million promote related to the sale by the GIC Joint Venture of the sale of a 169-guestroom Hilton Garden Inn San Francisco Airport North in San Francisco, CA for a gross selling price of $75.0 million. The sale of this property resulted in a net gain of $20.5 million to the GIC Joint Venture. Our promote is earned when the internal rate of return to GIC related to capital transactions exceeds a specified investment hurdle rate. We have adjusted this amount from our calculation of AFFO because it relates to the gain on the sale of the property and not on-going operations.

(3)      AFFO for the years ended December 31, 2024, 2023 and 2022 has not been adjusted for interest related to the Convertible Notes for purposes of calculating AFFO per common share/Common Unit because we intend to settle the principal portion of the Convertible Notes in cash and we did not include in the denominator of our calculation of AFFO per common share/Common Unit the potential dilutive effect of shares that would be issued if the principal portion of the Convertible Notes were converted into shares of our common stock.

(4)       Includes Common Units in the Operating Partnership held by limited partners (other than us and our subsidiaries) because the Common Units are redeemable for cash or, at our election, shares of our common stock.

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(5)      The weighted average diluted common shares/common units used to calculate FFO and AFFO per common share/Common Unit for the years ended December 31, 2024, 2023 and 2022 includes the dilutive effect of our outstanding restricted stock awards. These shares were excluded from our weighted average shares outstanding used to calculate net income (loss) per share for the years ended December 31, 2023 and 2022 because they would have been antidilutive. The weighted average common shares/Common Unit used to calculate FFO and AFFO per common share/Common Unit exclude the potential dilution related to our Convertible Notes as we intend to settle the principal of the Convertible Notes in cash.

A reconciliation of weighted average diluted common shares to non-GAAP weighted average diluted common shares/Common Units for FFO and AFFO is as follows (in thousands):

(1)    Adjustment reflects the difference between the total weighted-average unvested restricted time-based shares outstanding as of the reporting date and the weighted-average restricted time-based shares computed for diluted earnings per share under the treasury stock method in accordance with GAAP, plus the difference between the estimated total weighted average unvested restricted performance-based shares expected to vest based on achievement of the performance measures as if the vesting date were the reporting date and the estimated weighted-average unvested restricted performance-based shares computed for diluted earnings per share under the treasury stock method in accordance with GAAP.

AFFO applicable to common stock and Common Units increased by $6.3 million for the year ended December 31, 2024 compared with the year ended December 31, 2023 due to modest growth in same-store RevPAR and hotel EBITDA and lower interest expense, partially offset by a decrease in hotel EBITDA from the net effect of the acquisition of the 2024 Acquired Properties and the 2023 Acquired Properties, and the sale of the 2024 Sold Properties and the 2023 Sold Properties.

For information about our AFFO for the year ended December 31, 2023 compared with the year ended December 31, 2022, refer to "Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures" of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

EBITDA, EBITDAre and Adjusted EBITDAre

EBITDA

EBITDA represents net income or loss, excluding: (i) interest, (ii) income tax expense and (iii) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

EBITDAre and Adjusted EBITDAre

In September 2017, Nareit proposed a standardized performance measure, called EBITDAre, which is based on EBITDA and is expected to provide additional relevant information about REITs as real estate companies in support of growing interest among generalist investors. The conclusion was reached that, while dedicated REIT investors have long been accustomed to utilizing the industry’s supplemental measures such as FFO and net operating income to evaluate the investment quality of REITs as real estate companies, it would be helpful to generalist investors for REITs as real estate companies to also present EBITDAre as a more widely known and understood supplemental measure of performance. EBITDAre is intended to be a supplemental non-GAAP performance measure that is independent of a company’s capital structure and will provide a uniform basis for one measurement of the enterprise value of a company compared to other REITs.

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EBITDAre, as defined by Nareit, is calculated as EBITDA, excluding: (i) loss and gains on disposition of property and (ii) asset impairments, if any. We believe EBITDAre is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

We make additional adjustments to EBITDAre when evaluating our performance because we believe that the exclusion of certain additional non-recurring or unusual items described below provides useful supplemental information to investors regarding our ongoing operating performance. We believe that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income, is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

The following is a reconciliation of our GAAP net income to EBITDAre for the years ended December 31, 2024, 2023 and 2022 (in thousands):

(1)      The total equity-based compensation expense for the year ended December 31, 2022 includes $1.3 million of incremental expense related to the modification of certain restricted stock awards as a result of the departure of our Chief Operating Officer.

(2)    During the year ended December 31, 2022, we earned a $0.4 million promote related to the sale by the GIC Joint Venture of the sale of a 169-guestroom Hilton Garden Inn San Francisco Airport North in San Francisco, CA for a gross selling price of $75.0 million. The sale of this property resulted in a net gain of $20.5 million to the GIC Joint Venture. Our promote is earned when the internal rate of return to GIC related to capital transactions exceeds a specified investment hurdle rate. We have adjusted this amount from our calculation of AFFO because it relates to the gain on the sale of the property and not on-going operations.

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Adjusted EBITDAre increased $2.2 million for the year ended December 31, 2024 in comparison with the year ended December 31, 2023 due to modest growth in same-store RevPAR and Hotel EBITDA driven by improving demand for business transient and group travel, which mitigated some of the effect of the normalization in leisure demand, partially offset by a decrease in hotel EBITDA from the net effect of the acquisition of the 2024 Acquired Properties and the 2023 Acquired Properties, and the sale of the 2024 Sold Properties and the 2023 Sold Properties.

For information about our Adjusted EBITDAre for the year ended December 31, 2023 compared with the year ended December 31, 2022, refer to "Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures" of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Liquidity and Capital Resources

Our short-term cash obligations consist primarily of operating expenses and other expenditures directly associated with our lodging properties, recurring maintenance and capital expenditures necessary to maintain our lodging properties in accordance with internal and brand standards, capital expenditures to improve our lodging properties, interest payments, settlement of any applicable interest rate swaps, scheduled principal payments on outstanding indebtedness, restricted cash funding obligations, our joint venture acquisitions and capital requirements, contractual lease payments, corporate overhead, and distributions to our stockholders and holders of Common and Preferred Units in our Operating Partnership when declared. Our corporate overhead primarily consists of employee compensation expenses, professional fees, corporate insurance and rent expenses. Cash requirements for our corporate overhead expenses (excluding non-cash stock-based compensation), which are generally paid from operating cash flows, were $23.8 million, $24.8 million and $22.3 million for the years ended December 31, 2024, 2023 and 2022, respectively. We generally expect our corporate overhead expenses to remain consistent with the level of our operating activities and market conditions for goods and services.

Our long-term cash obligations consist primarily of the costs of acquiring additional lodging properties, renovations and other non-recurring capital expenditures that periodically are made with respect to our lodging properties, dividends and distributions to our stockholders and holders of Common and Preferred Units in our Operating Partnership when declared, and scheduled debt payments, including maturing loans.

Our property acquisition and disposition activity for the years ended December 31, 2024 and 2023 was as follows:

•In May 2023, the Company completed the disposition of four wholly owned hotels containing an aggregate of 467 guestrooms for a gross sales price of $28.1 million.

•In June 2023, the GIC Joint Venture acquired the Residence Inn by Marriott located in Scottsdale, AZ containing 120 guestrooms for a purchase price of approximately $29.0 million. GIC made a capital contribution of $13.7 million, or 49% of the purchase price, to the GIC Joint Venture, and the Operating Partnership made a capital contribution of $14.3 million, or 51% of the purchase price, to the GIC Joint Venture to fund the purchase price. The Operating Partnership made its capital contribution to the GIC Joint Venture with available cash on hand and borrowings on the $400 Million Revolver.

•In June 2023, the GIC Joint Venture acquired the Nordic Lodge containing 47 guestrooms located in Steamboat Springs, CO for a purchase price of approximately $13.7 million. GIC made a capital contribution of $6.7 million, or 49% of the purchase price, to the GIC Joint Venture and the Operating Partnership made a capital contribution of $7.0 million, or 51% of the purchase price, to the GIC Joint Venture to fund the purchase price. The Operating Partnership made its capital contribution to the GIC Joint Venture with available cash on hand and borrowings on the $400 Million Revolver.

•In December 2023, we completed the sale of the 123-guestroom Hyatt Place in Owings Mills (Baltimore), MD for a gross selling price of $8.3 million. The net selling price less costs to sell approximated the net book value of the lodging property on the sale date resulting in a nominal gain that was recorded in the fourth quarter of 2023.

•In February 2024, the GIC Joint Venture completed the sale of the 127-guestroom Hyatt Place Dallas (Plano), TX for $10.3 million. At December 31, 2023, we reclassified the property in Assets held for sale and recorded a write-down of $4.0 million to reduce the carrying amount of the lodging property to the selling price less estimated costs to sell. As such, the net selling proceeds approximated the net carrying amount of the Sale Portfolio at closing.

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•In April 2024, we completed the sale of the 202-guestroom Courtyard by Marriott and the 208-guestroom SpringHill Suites by Marriott, both located in New Orleans, LA, for an aggregate selling price of $73.0 million, which resulted in a gain of approximately $28.3 million.

•In April 2024, the GIC Joint Venture completed the sale of the 119-guestroom Hilton Garden Inn - Bryan (College Station), TX for $11.0 million. The net selling price of the lodging property approximated its net book value on the closing date.

•In October 2024, we completed the sale of the 101-guestroom Four Points by Marriott San Francisco Airport for $17.7 million, which resulted in a gain of approximately $0.4 million.

•In December 2024, the GIC Joint Venture acquired the Hampton Inn located in Revere (Boston), MA and the Hilton Garden Inn located in Tysons Corner (Vienna), VA with an aggregate total of 399 guestrooms for a combined purchase price of $96.0 million. The purchase price (including approximately $0.3 million of acquisition costs) was funded through a combination of a $2.9 million escrow deposit, capital contributions from our GIC Joint Venture partner totaling $21.5 million, $49.5 million of borrowings on our expanded GIC Joint Venture Credit Facility and our capital contribution of $22.4 million using the proceeds from the sale of the Four Points by Marriott San Francisco Airport and cash on hand.

In July 2023, we entered into the 2023 Senior Credit Facility to refinance our prior senior credit facility, including certain key financial covenants, and renewal of our full access to our $400 Million Revolver. The 2023 Senior Credit Facility has an initial maturity of June 2027, which may be extended for a single 12-month period at our option, subject to certain conditions. See “Part II - Item 8. – Financial Statements and Supplementary Data – Note 6 – Debt,” for additional information concerning our prior senior credit facility and subsequent amendments thereto.

In September 2023, the GIC Joint Venture refinanced the GIC Joint Venture Credit Facility (the "GIC Joint Venture Credit Refinance"). The GIC Joint Venture Credit Refinance extends the maturity of the $125 Million Revolver and the $125 Million Term Loan (both as defined in “Part II - Item 8. – Financial Statements and Supplementary Data – Note 6 – Debt,”) to an initial maturity date of September 2027, which may be extended for a single 12-month period at the option of the GIC Joint Venture, subject to certain conditions. As such, the GIC Joint Venture Credit Refinance has a fully extended maturity date of September 2028.

In February 2024, our Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the term loan document as a subsidiary guarantor, entered into a $200 million senior unsecured term loan financing (the “2024 Term Loan”) with Regions Bank. Proceeds from the 2024 Term Loan financing and advances on our $400 Million Revolver were used to repay in full the Company’s $225 million term loan that was scheduled to mature in February 2025. The 2024 Term Loan has an initial maturity date of February 2027 and can be extended for two 12-month periods by the Company, subject to certain conditions. At December 31, 2024, the 2024 Term Loan was fully funded.

In May 2024, we repaid the outstanding principal of the Bank of the Cascades loan that was scheduled to mature in December 2024 with no prepayment penalty. This repayment resulted in the release of the lodging property that was pledged as collateral for this mortgage loan.

In 2017, the Operating Partnership entered into a $47.6 million secured, non-recourse loan with MetaBank (the "MetaBank Loan"). In June 2024, the outstanding balance of the loan was $42.3 million at which time we repaid the MetaBank Loan for $39.1 million prior to its scheduled maturity date, which represented a discount of $3.2 million and resulted in a gain on extinguishment of debt of $3.0 million after legal fees and unamortized debt issuance costs that were written-off on the closing date. As a result of this repayment, the three lodging properties previously held as collateral for the MetaBank Loan were released.

In June 2022, the Brickell Joint Venture, as borrower, and the Operating Partnership, as the non-recourse guarantor, entered into a $47.0 million mortgage loan and non-recourse guaranty with City National Bank of Florida to finance the dual-branded 264-guestroom AC Hotel by Marriott and Element Miami Brickell Hotel in Miami, FL (together the "AC/Element Hotel"). The outstanding balance of the City National Bank Loan was $46.1 million at December 31, 2024. The City National Bank Loan is prepayable at any time without penalty. We expect to complete the refinancing of this loan prior to its maturity date.

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To satisfy the requirements for qualification as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute annually at least 90% of our REIT taxable income to our stockholders, determined without regard to the deduction for dividends paid and excluding any net capital gains. We intend to distribute a sufficient amount of our taxable income to maintain our status as a REIT and to avoid tax on undistributed income. Because we anticipate distributing a substantial amount of our available cash from operations, if sufficient funds are not available to us from lodging property dispositions, our senior revolving credit and term loan facilities and other loans, we may need to raise additional capital to grow our business.

Outstanding Indebtedness

At December 31, 2024, we had $10.0 million outstanding on our $400 Million Revolver, $200.0 million outstanding on our $200 Million Term Loan and $200.0 million outstanding on our 2024 Term Loan (as defined under "Part II - Item 8. - Financial Statements and Supplementary Data - Note 6 – Debt”). Each of the credit facilities is currently supported by the 53 lodging properties included in the credit facility borrowing base. We also had $287.5 million of Convertible Notes outstanding. The Convertible Notes become due in February 2026. We expect to complete the refinancing of the Convertible Notes prior to their maturity date.

At December 31, 2024, the GIC Joint Venture had $250.0 million outstanding under our GIC Joint Venture Credit Facility consisting of borrowings on a $125.0 million term loan (after giving effect to an additional $50.0 million of borrowings under the accordion feature of the loan, which was used in the purchase of two lodging properties in December 2024) and a $125.0 million revolving line of credit. The GIC Joint Venture Credit Facility is secured primarily by a first priority pledge of the equity interests in the subsidiaries that hold the 15 lodging property borrowing base assets, and the related TRS entities that wholly own the TRS Lessees.

To complete the NCI Transaction, the GIC Joint Venture entered into the GIC Joint Venture Term Loan, which is currently secured by the remaining 25 lodging properties and two parking garages acquired in the transaction and assumed a PACE loan totaling $6.5 million. The GIC Joint Venture Term Loan has an accordion feature which will permit an increase in the total commitments by up to $190.0 million, for aggregate potential borrowings of up to $600.0 million. The GIC Joint Venture Term Loan will mature in January 2026 and can be extended for a single 12-month period at the Company’s option, subject to certain conditions. As such, the GIC Joint Venture Term Loan has a fully extended maturity date of January 2027. The GIC Joint Venture Term Loan is interest-only and provides for a floating interest rate equal to SOFR plus 2.75%. In February 2023, we entered into an amendment to the GIC Joint Venture Term Loan to amend certain definitions, revise the minimum borrowing base interest coverage ratio thresholds and make certain other changes. The outstanding balances of the GIC Joint Venture Term loan and the PACE loan were $396.0 million and $5.9 million, respectively, at December 31, 2024.

Additionally, the GIC Joint Venture has a mortgage loan outstanding totaling $12.5 million at December 31, 2024 related to the acquisition of the Embassy Suites in Tucson, AZ in December 2021.

In June 2022, the Brickell Joint Venture, as borrower, and the Operating Partnership, as the non-recourse guarantor, entered into a $47.0 million mortgage loan and non-recourse guaranty with City National Bank of Florida to finance the AC/Element Hotel. The City National Bank Loan provides for an interest rate equal to one-month term SOFR plus 300 basis points. Payment terms include an interest-only period through June 30, 2024 and the loan will amortize on a 25-year schedule from July 1, 2024 through the maturity date of June, 2025. The outstanding balance of the City National Bank Loan was $46.1 million at December 31, 2024. The City National Bank Loan is prepayable at any time without penalty. We expect to complete the refinancing of this loan prior to its maturity date.

At December 31, 2024, we have scheduled debt principal payments during the next 12 months totaling $46.6 million, primarily as a result of the maturity of the loan with City National Bank of Florida in June 2025.

Currently, we have the capacity to pay scheduled principal payments using cash on hand or draws under our $400 Million Revolver. We have obtained financing through debt instruments having staggered maturities and intend to continue to do so in the future. Our debt includes, and may include in the future, debt secured by first priority mortgage liens on certain lodging properties, debt secured by equity pledges, and unsecured debt. We believe that we will have adequate liquidity to meet the requirements for scheduled maturities and principal repayments. However, we can provide no assurance that we will be able to refinance our indebtedness as it becomes due and, if refinanced, whether such refinancing will be available on favorable terms.

At December 31, 2024, we and our GIC Joint Venture are in compliance with all of our loan agreements. See "Part II – Item 8. – Financial Statements and Supplementary Data – Note 6 – Debt" for additional information concerning our loans, loan amendments and our financing arrangements.

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A summary of our debt at December 31, 2024 is as follows (dollars in thousands):

(1) The 2023 Senior Credit Facility and Term Loans are supported by a borrowing base of 53 unencumbered hotel properties.

(2) The $125 Million Revolver and the $125 Million Term Loan are secured by pledges of the equity in the entities (and affiliated entities) that own 15 lodging properties.

(3) The $410 million term loan with Bank of America, N.A. is secured by pledges of the equity in the entities (and affiliated entities) that own 25 lodging properties and two parking garages. The balance of the loan is $396.0 million at December 31, 2024.

(4) As part of the NCI Transaction, a subsidiary of the GIC Joint Venture assumed a PACE loan of approximately $6.5 million. The loan bears fixed interest at 6.10%, has an amortization period of 20 years, and matures on July 31, 2040. The PACE loan is secured by an assessment lien imposed by the County of Tarrant, Texas for the benefit of the lender.

(5) Pro rata debt represents our portion of total debt taking into consideration only our pro rata share of the joint venture debt.

Capital Expenditures

During the year ended December 31, 2024, we funded $89.3 million of capital expenditures and $5.2 million of development expenditures on a consolidated basis. When taking into consideration only our pro rata portion related to our joint ventures, capital and development expenditures for the year ended December 31, 2024 were $75.6 million and $4.6 million, respectively.

We anticipate spending an estimated $65.0 million to $85.0 million in capital expenditures across our portfolio (excluding the pro rata portion related to our joint venture partners) during the year ended December 31, 2025. We expect to fund these expenditures through a combination of cash on hand, working capital, cash flows from operations, restricted cash, borrowings under our $400 Million Revolver, or other potential sources of capital, to the extent available to us.

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Cash Flow Analysis

The following table summarizes changes in cash flows for the years ended December 31, 2024 and December 31, 2023 (in thousands):

Changes from the year ended December 31, 2024 compared with the year ended December 31, 2023 were due to the following:

•Net cash provided by operating activities. Cash provided by operating activities for the year ended December 31, 2024 was the result of net income of $164.3 million, after adjusting for non-cash items such as depreciation and amortization, equity-based compensation, reversal of our valuation allowance on deferred tax assets, gain on the disposition of assets, and gain on extinguishment of debt, coupled with a net change in working capital of $2.1 million.

Cash provided by operating activities for the year ended December 31, 2023 was the result of net income of $153.0 million, after adjusting for non-cash items such as depreciation and amortization, loss on write-down of assets, recovery of credit losses, and equity-based compensation, coupled with a net change in working capital of $0.7 million.

•Net cash used in investing activities. Cash used in investing activities for the year ended December 31, 2024 was primarily due to the acquisition of the 2024 Acquired Properties and $89.3 million of renovation expenditures and $5.2 million of development expenditures, partially offset by the sale of the 2024 Sold Properties, and the collection of a $9.9 million tax incentive related to the NCI Transaction.

Cash used in investing activities for the year ended December 31, 2023 was due to the acquisition of the 2023 Acquired Properties, the funding of the Onera Mezzanine Loan (as defined in "Part II - Item 8. - Note 4 - Investment in Real Estate Loans" to the accompanying Consolidated Financial Statements) of $4.6 million, and $89.6 million of renovation expenditures, partially offset by the sale of the 2023 Sold Properties.

•Net cash used in financing activities. Cash used in financing activities for the year ended December 31, 2024 was primarily due to the repayment of the MetaBank and Bank of the Cascades term loans with an aggregate total of $94.7 million, the payment of dividends and distributions of approximately $77.6 million, financing costs of approximately $3.5 million related to the 2024 Term Loan and our GIC Joint Venture Credit Facility, and $0.9 million related to shares acquired for employee withholding requirements, partially offset by net borrowings on our $400 Million Revolver of $10.0 million, contributions by our GIC Joint Venture partner of $22.5 million and borrowings on our GIC Joint Venture term loan of $50.0 million for the acquisition of the 2024 Acquired Properties.

Cash used in financing activities during the year ended December 31, 2023 was primarily the result of net repayments on our outstanding debt of $17.3 million, financing fees of approximately $10.4 million primarily related to the amendment of our prior senior credit facility that was in effect during the year ended December 31, 2023 that was replaced by the 2024 Senior Credit Facility, dividends and distributions of approximately $58.2 million, and $1.4 million related to shares acquired for employee withholding requirements, partially offset by contributions by our GIC Joint Venture partner of $20.6 million, and net proceeds from the sale of non-controlling interests of $1.0 million.

For information about our consolidated cash flows for the year ended December 31, 2023 compared with the year ended December 31, 2022, refer to "Part II – Item 7. – Management's Discussion and Analysis of Financial Conditions and Results of Operations – Cash Flow Analysis" of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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Critical Accounting Policies and Estimates

We consider the following policies critical because they require estimates about matters that are inherently uncertain, involve various assumptions and require significant management judgment, and because they are important for understanding and evaluating our reported consolidated financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Applying different estimates or assumptions may result in materially different amounts reported in our financial statements.

Acquisitions of Lodging Property and Purchase Price Allocation

Our acquisitions generally consist of land, land improvements, buildings, building improvements, furniture, fixtures and equipment, inventory, and assumed debt. We analyze the acquisition of a lodging property to determine if it qualifies as the purchase of a business or an asset acquisition. If substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, the asset or asset group is not considered a business and we would record the transaction as an asset acquisition, which includes the capitalization of acquisition costs. For an asset acquisition, we allocate the purchase price paid to the assets acquired and the liabilities assumed in the transaction based on their relative fair values. For a business combination, we would record the assets and liabilities acquired at their respective estimated fair values.

When we acquire a lodging property, we estimate the fair values of the assets acquired and the liabilities assumed using all available information to make these fair value determinations, including discounted cash flow analyses and market comparable data. In addition, we make significant estimates regarding replacement costs for the buildings and furniture, fixtures and equipment, including estimated useful lives and judgements related to certain market assumptions. We also may engage independent valuation specialists to assist in the fair value determinations of the assets acquired and the liabilities assumed. Fair value determinations required numerous estimates and assumptions, such as estimates of future income growth, replacement cost per unit, value per acre or buildable square foot, capitalization rates, discount rates, borrowing rates, market rental rates, capital expenditures and cash flow projections at the respective lodging properties. The determination of fair value is subjective and is based on assumptions and estimates that could differ materially from actual results in future periods.

The Company allocates the purchase price of acquired lodging properties based on the relative fair values of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets and assumed liabilities. Intangible assets may include certain value associated with the on-going operations of the lodging business being acquired as part of the property acquisition. Acquired intangible assets that derive their values from real property, or an interest in real property, are inseparable from that real property or interest in real property, do not produce or contribute to the production of income other than consideration for the use or occupancy of space, and are recorded as a component of the related real estate asset in our Consolidated Financial Statements.

Investments in Lodging Property, net

Our lodging properties and related assets are recorded at cost, less accumulated depreciation. We capitalize development costs and the costs of significant additions and improvements that materially upgrade, increase the value or extend the useful life of the property. These costs may include development, refurbishment, renovation, and remodeling expenditures, as well as certain indirect internal costs related to construction projects. If an asset requires a period of time in which to carry out the activities necessary to bring it to the condition necessary for its intended use, the interest cost incurred during that period as a result of expenditures for the asset is capitalized as part of the cost of the asset. We expense the cost of repairs and maintenance as incurred.

We generally depreciate our lodging properties and related assets using the straight-line method over their estimated useful lives as follows:

We periodically re-evaluate asset lives based on current assessments of remaining utilization, which may result in changes in estimated useful lives. Such changes are accounted for prospectively and will increase or decrease future depreciation expense.

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When depreciable property and equipment is retired or disposed, the related costs and accumulated depreciation are removed from the balance sheet and any gain or loss is reflected in current operations.

On a limited basis, we provide financing to developers of lodging properties for development projects. We evaluate these arrangements to determine if we participate in residual profits of the lodging property through the loan provisions or other agreements. Where we conclude that these arrangements are more appropriately treated as an investment in the real property, we reflect the loan in Investments in lodging property, net in our Consolidated Balance Sheets.

Asset Impairment

Each quarter, we evaluate the net carrying amounts of our long-term assets for impairment when impairment indicators are present. We evaluate for impairment triggers based on qualitative factors such as macroeconomic trends, trends related to demand for travel and lodging, and current and projected trends related to local market conditions. We also evaluate for impairment triggers based on quantitative factors such as historical and projected revenue and profitability performance trends. When an impairment indicator is identified, we perform a recoverability analysis based on estimated future undiscounted cash flows for the asset. Forecasted undiscounted cash flows require substantial management judgment related to estimates of future revenues, which is based on historical results, our expectations related to revenue trends and future performance of the asset, our assessment of current and future market conditions and competition, our expectations related to performance of the overall economy, and third-party industry published forecasts. If we determine that an asset impairment exists, we will estimate the fair value of the asset and record a loss on impairment to record the asset at the lower of cost or fair value.

Segment Disclosure

Accounting Standards Codification (“ASC”) No. 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have determined that we have one reportable segment for activities related to investing in lodging properties. An operating segment is defined as the component of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (the "CODM") in order to allocate resources and assess performance. Our investments in lodging properties are geographically diversified and the CODM allocates resources and assesses performance based upon discrete financial information at the individual lodging property level. However, because each of our lodging properties have similar economic characteristics, facilities, and services, the lodging properties have been aggregated into a single reportable segment.

See "Part II – Item 8. – Financial Statements and Supplementary Data – Note 2 – Basis of Presentation and Significant Accounting Policies" for significant accounting policies and new accounting standards.

Recent Developments

None.