Pebblebrook Hotel Trust (PEB) FY 2022 MD&A

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

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report. Pebblebrook Hotel Trust is a Maryland real estate investment trust that conducts its operations so as to qualify as a REIT under the Code. Substantially all of the operations are conducted through Pebblebrook Hotel, L.P. (our "Operating Partnership"), a Delaware limited partnership of which Pebblebrook Hotel Trust is the sole general partner. In this report, we use the terms "the Company", "we" or "our", to refer to Pebblebrook Hotel Trust and its subsidiaries, unless the context indicates otherwise.

Overview

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") to be a global pandemic and the virus spread throughout the United States and the world. As a result of this pandemic and subsequent government mandates, health official recommendations, corporate policy changes and individual responses, hotel demand dramatically declined and we implemented significant cost controls, salary reductions and the temporary suspension of operations at 47 of our properties in 2020, along with other actions to improve liquidity. All of our properties reopened in 2021 with the exception of 1 Hotel San Francisco (formerly Hotel Vitale), whose operations remained suspended until the completion of its renovations and repositioning in June 2022. Demand has significantly improved throughout 2022 led by strong leisure travel demand with a significant improvement in business travel compared to 2021. Recent inflation and the expectation of future inflation have caused labor, capital and other costs to increase and the reaction by the Federal Reserve to rapidly and substantially increase interest rates has created economic uncertainty and significant concerns and risk of an economic downturn, softening or recession.

During 2022, we acquired Inn on Fifth in Naples, Florida and Newport Harbor Island Resort (formerly Gurney's Newport Resort & Marina) in Newport, Rhode Island for a gross purchase price of $330.0 million and we sold four hotels in separate transactions for aggregate sales prices of $260.9 million. In addition, as of December 31, 2022 we have entered into an agreement to sell The Heathman Hotel in Portland, Oregon for $45.0 million, however, no assurances can be given that the sale will be completed on these terms or at all.

On October 13, 2022, we refinanced our senior unsecured revolving credit facility and all of the term loans. Our new $2.0 billion credit facility provides for a $650.0 million senior unsecured revolving credit facility and three $460.0 million unsecured term loan facilities totaling $1.38 billion.

During the fourth quarter of 2022, we repurchased 4,559,839 common shares for an aggregate purchase price of $69.6 million under our existing common share repurchase programs. In addition, following an unsolicited private inquiry, we repurchased 1,000,000 shares of outstanding 5.70% Series H Cumulative Redeemable Preferred Shares for $16.0 million which was a discount to their $25.0 million liquidation value.

In September 2022, our LaPlaya Beach Resort & Club sustained damage as a result of Hurricane Ian and closed. We have continued to make progress completing significant repairs and rebuilding at the property. The resort will be reopened in stages through the middle of 2023. The first building reopened for guests in January 2023.

38

While we do not operate our hotel properties, both our asset management team and our executive management team monitor and work cooperatively with our hotel managers by advising and making recommendations in all aspects of our hotels’ operations, including property positioning and repositioning, revenue and expense management, operations analysis, physical design, renovation and capital improvements, guest experience and overall strategic direction. Through these efforts, we seek to improve property efficiencies, lower costs, maximize revenues and enhance property operating margins, which we expect will enhance returns to our shareholders.

Key Indicators of Financial Condition and Operating Performance

We measure hotel results of operations and the operating performance of our business by evaluating financial and non-financial metrics such as room revenue per available room ("RevPAR"); total revenue per available room ("Total RevPAR"); average daily rate ("ADR"); occupancy rate ("Occupancy"); funds from operations ("FFO"); earnings before interest, income taxes, depreciation and amortization ("EBITDA"); and EBITDA for real estate ("EBITDAre"). We evaluate individual hotel and company-wide performance with comparisons to budgets, prior periods and competing properties. ADR, occupancy and RevPAR may be impacted by macroeconomic factors as well as regional and local economies and events. See Non-GAAP Financial Measures for further discussion of FFO, EBITDA and EBIDTAre.

Hotel Operating Statistics

The following table represents the key same-property hotel operating statistics for our hotels for the years ended December 31, 2022 and 2021:

The above table of hotel operating statistics includes information from all hotels owned as of December 31, 2022 except for 1 Hotel San Francisco (formerly Hotel Vitale) for 2022 and 2021 due to its closure for renovation from the third quarter of 2021 to the second quarter of 2022, Inn on Fifth for the first quarter of 2022 and 2021 due to its acquisition on May 11, 2022, Newport Harbor Island Resort (formerly Gurney's Newport Resort & Marina) for the first and the second quarters of 2022 and 2021 due to its acquisition on June 23, 2022 and LaPlaya Beach Resort & Club for the fourth quarter of 2022 and 2021 due to its closure following Hurricane Ian. Additionally, the schedule excludes The Marker San Francisco for the second, third and fourth quarters of 2022 and 2021 due to its sale on June 28, 2022, Sofitel Philadelphia at Rittenhouse Square for the third and fourth quarters of 2022 and 2021 due to its sale on August 2, 2022, Hotel Spero for the third and fourth quarters of 2022 and 2021 due to its sale on August 25, 2022 and Hotel Vintage Portland for the third and fourth quarters of 2022 and 2021 due to its sale on September 14, 2022.

Results of Operations

This section includes comparisons of certain 2022 financial information to the same information for 2021. Year-to-year comparisons of the 2021 financial information to the same information for 2020 are contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 22, 2022.

39

At December 31, 2022 and 2021, our consolidated financial statements included the operations of 51 and 53 hotel properties, respectively, which have been included in our results of operations during the respective periods since their dates of acquisition or through their dates of disposition. Based on when a property was acquired or disposed, operating results for certain properties are not comparable for the years ended December 31, 2022 and 2021. The properties listed in the table below are hereinafter referred to as "non-comparable properties" for the periods indicated and all other properties are referred to as "comparable properties":

Comparison of the year ended December 31, 2022 to the year ended December 31, 2021

Revenues — Total revenues increased by $658.8 million, of which $157.9 million was due to non-comparable properties, and the balance was primarily due to an increase in leisure and business travel in 2022. In addition, several of our hotels remained temporarily suspended throughout the first quarter of 2021.

Hotel operating expenses — Total hotel operating expenses increased by $386.9 million, of which $93.9 million was due to non-comparable properties, and the balance was primarily due to resuming operations at our comparable properties and returning demand in 2022.

Depreciation and amortization — Depreciation and amortization expense increased by $15.3 million primarily due to our property acquisitions in 2021 and 2022, offset by a decrease in depreciation from the properties sold in 2021 and 2022.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent increased by $14.5 million primarily due to an increase at our three non-comparable properties acquired in 2021.

General and administrative — General and administrative expense increased by $1.0 million due to compensation expense, offset by a decrease in legal fees. General and administrative expense consists of employee compensation costs, legal and professional fees, insurance and other expenses.

Impairment and other losses — We recognized impairment and other losses of $89.9 million in 2022 related to three properties as well as an impairment related to damage caused by Hurricane Ian at LaPlaya Beach Resort & Club in Naples, Florida and Southernmost Beach Resort in Key West, Florida. We recognized an impairment loss of $14.9 million in 2021 related to one hotel.

Gain on sale of hotel properties — We recognized a gain on sale of $6.2 million related to the sales of Sofitel Philadelphia Rittenhouse Square and Hotel Vintage Portland in 2022. We recognized a gain on sale of $64.7 million in 2021 primarily due to the sale of Sir Francis Drake.

Other operating expenses — Other operating expenses increased by $3.1 million primarily due to an increase in pre-opening expenses and hotel management transition costs.

Interest expense — Interest expense increased by $3.4 million due to the refinancing costs incurred in conjunction with the refinancing of our senior unsecured credit facility on October 13, 2022.

Non-controlling interests — Non-controlling interests represent the allocation of income or loss of the Operating Partnership to third-party common OP unit holders and to the preferred OP unit holders. In 2022, this amount includes $3.0 million in preferred distributions to the holders of Series Z Preferred Units which were issued in May 2022.

40

Distributions to preferred shareholders — Distributions to preferred shareholders increased as a result of the issuance of the Series G Preferred Shares and Series H Preferred Shares in May 2021 and July 2021, respectively, being outstanding for all of 2022.

Redemption of preferred shares — Redemption of preferred shares in 2022 relates to the repurchase of one million Series H Preferred Shares for a repurchase amount below the carrying value, net of issuance costs of the shares redeemed. The Company redeemed the Series C and Series D Cumulative Redeemable Preferred Shares in August 2021 at the carrying value and therefore the redemption of preferred shares in 2021 represented the issuance costs associated with the shares redeemed. These costs are included in the determination of net income (loss) attributable to common shareholders.

Non-GAAP Financial Measures

Non-GAAP financial measures are measures of our historical or future financial performance that are different from measures calculated and presented in accordance with U.S. GAAP. We report FFO, EBITDA and EBITDAre, which are non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance.

We calculate FFO in accordance with standards established by Nareit, formerly known as the National Association of Real Estate Investment Trusts, which defines FFO as net income (calculated in accordance with U.S. GAAP), excluding real estate related depreciation and amortization, gains (losses) from sales of real estate, impairments of real estate assets (including impairment of real estate related joint ventures), the cumulative effect of changes in accounting principles and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. By excluding the effect of real estate related depreciation and amortization including our share of the joint venture depreciation and amortization, gains (losses) from sales of real estate and impairments of real estate assets (including impairment of real estate related joint ventures), all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, we believe that FFO provides investors a useful financial measure to evaluate our operating performance.

The following table reconciles net income (loss) to FFO and FFO available to common share and unit holders for the years ended December 31, 2022, 2021 and 2020 (in thousands):

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. The white paper issued by Nareit entitled “Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate” defines EBITDAre as net income or loss (computed in accordance with U.S. GAAP), excluding interest expense, income tax, depreciation and amortization, gains or losses on the disposition of depreciated property (including gains or losses on change of control), impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and after comparable adjustments for our portion of these items related to unconsolidated affiliates. We believe that EBITDA and EBITDAre provide investors useful financial measures to evaluate our operating performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).

41

The following table reconciles net income (loss) to EBITDA and EBITDAre for the years ended December 31, 2022, 2021 and 2020 (in thousands):

FFO, EBITDA and EBITDAre do not represent cash generated from operating activities as determined by U.S. GAAP and should not be considered as alternatives to U.S. GAAP net income (loss), as indications of our financial performance, or to U.S. GAAP cash flow from operating activities, as measures of liquidity. In addition, FFO, EBITDA and EBITDAre are not indicative of funds available to fund cash needs, including the ability to make cash distributions.

Critical Accounting Policies

We consider these 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 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 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.

Investment in Hotel Properties

Estimation and judgment are required to determine the fair values of our acquired hotel properties. Upon acquiring a business or hotel property, we measure and recognize the fair value of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets and assumed liabilities. Identifiable intangible assets or liabilities typically arise from contractual arrangements assumed in connection with the transaction, including terms that are above or below market compared to an estimated market agreement at the acquisition date. We determine the acquisition-date fair values of all assets and assumed liabilities using a combination of the market, cost and income approaches. These valuation methodologies are based on significant Level 2 and Level 3 inputs in the fair value hierarchy, such as estimates of future income growth, capitalization rates, discount rates, capital expenditures and cash flow projections, including hotel revenues and net operating income, at the respective hotel properties. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. Transaction costs are expensed for acquisitions that are considered business combinations and capitalized for asset acquisitions.

Impairment

We review our investments in hotel properties for impairment whenever events or changes in circumstances indicate that the carrying value of the hotel properties may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, when a hotel property experiences a current or projected loss from operations, when it becomes more likely than not that a hotel property will be sold before the end of its useful life, adverse changes in the demand for lodging at the properties due to declining national or local economic conditions and/or new hotel construction in markets where the hotels are located. When such conditions exist, we perform an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel exceed its carrying value. If the estimated undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related hotel's estimated fair market value is recorded and an impairment loss recognized. In the evaluation of impairment of our hotel properties, we make many assumptions and estimates including projected cash flows both from operations and eventual disposition, expected useful life and holding period, future required capital expenditures, and fair values, including consideration of capitalization rates, discount rates, and comparable selling prices. We will adjust our assumptions with respect to the remaining useful life of the hotel property when circumstances change, such as an expiring ground lease or it is more likely than not that the hotel property will be sold prior to its previously expected useful life.

42

New Accounting Pronouncements

See Note 2. Summary of Significant Accounting Policies to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for recently issued accounting pronouncements that may affect us.

Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by our operations, borrowings under our credit facilities, net proceeds from equity and debt offerings, and net proceeds from property sales. Our primary cash requirements in the short term (i.e., those requiring cash before January 1, 2024) will be to fund property lease obligations, interest and current principal on debt, capital improvements, dividends on common and preferred shares, and working capital of our property operations. We believe our cash and cash equivalents, restricted cash and the amount available on our senior unsecured revolving credit facility, which totaled $689.7 million as of December 31, 2022, along with cash generated from ongoing operations will be sufficient to satisfy our short-term cash requirements. As of December 31, 2022 we had no off-balance sheet arrangements.

In order to maintain our qualification as a REIT, we must pay dividends to our shareholders of at least 90% of our taxable income. As a result of this requirement, we cannot rely on retained earnings to fund long-term liquidity requirements such as hotel property acquisitions, redevelopements and repayments of long-term debt. As such, we expect to continue to raise capital through equity and debt offerings to fund our growth.

Our material cash requirements include the following contractual and other obligations.

Debt

Our outstanding debt consisted of floating- and fixed-rate unsecured term loans, convertible senior notes, senior unsecured notes and mortgage loans with varying maturities. Our total debt had an aggregate face value of $2.4 billion as of December 31, 2022, as summarized below.

For further discussion on the components of our debt, see Note 5. Debt to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

We have the option to extend certain of our current debt maturities with the payment of extension fees. Assuming we exercise all extension options available in our debt agreements, we expect that future principal and interest payments associated with our debt obligations outstanding as of December 31, 2022 will be $2.7 billion through their maturity, with $49.6 million of principal and $93.0 million of interest payable on or before January 1, 2024. We intend to pay amounts due with available cash, borrowings under our revolving credit facility, or refinance with long term debt.

We are in compliance with all covenants governed by our existing credit facilities, term loan and senior note facilities.

Our mortgage loans contain customary provisions regarding events of default, as well as customary cash management, cash trap and lockbox provisions. Cash trap provisions may be triggered if the hotel's performance is below a certain threshold. Once triggered, all of the cash flow generated by the hotel is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our lender. As of December 31, 2022, none of the mortgage loans were in a cash trap.

Hotel, ground and finance lease obligations

Our properties that are subject to hotel, ground or finance leases, as noted in Note 11. Commitment and Contingencies to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent. Minimum fixed rent may be adjusted annually by increases in consumer price index ("CPI") and may be subject to minimum and maximum increases.

Future fixed minimum payments associated with our hotel, ground and finance leases total $1.8 billion as of December 31, 2022, with $20.8 million payable on or before December 31, 2023.

43

Purchase commitments

As of December 31, 2022, we had $5.5 million of outstanding purchase commitments, all of which will be paid on or before December 31, 2023. These purchase commitments represent outstanding purchase orders and contracts that have been executed for capital and renovation projects at our properties. See Capital Investments for discussion on planned capital investments.

Preferred dividends and Series Z operating partnership units

We expect to pay aggregate annual dividends and distributions of approximately $48.6 million on our outstanding Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares and Series Z Cumulative Perpetual Preferred Units on or before December 31, 2023 and in future years until the shares/units are redeemed. For further discussion on our preferred shares and preferred units, see Note 7. Equity to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Sources and Uses of Cash

Our principal sources of cash are cash from operations, draws on our credit facilities, net proceeds from equity and debt offerings, and net proceeds from property sales. Our principal uses of cash are asset acquisitions, debt service payments, the redemption of equity securities, capital investments, operating costs, corporate expenses and dividends.

Operating Activities. Our net cash provided by operating activities was $278.7 million for the year ended December 31, 2022 and $70.8 million for the year ended December 31, 2021. Fluctuations in our net cash provided by operating activities are primarily the result of changes in hotel revenues, operating cash requirements and corporate expenses. The increase in cash provided by operations in 2022 as compared to 2021 is due to the resumption of operations at our hotels and continued improvement in travel demand. In addition, the operations at several of our hotels were temporarily suspended throughout the first quarter of 2021 but were operating in 2022.

Investing Activities. Our net cash used in investing activities was $109.4 million for the year ended December 31, 2022 and $81.6 million for the year ended December 31, 2021. Fluctuations in our net cash used in investing activities are primarily the result of acquisition and disposition activities, as well as capital improvements and additions to our properties.

•During the year ended December 31, 2022, we invested $116.7 million in improvements to our hotel properties, received $248.9 million from the sale of four hotel properties and purchased two hotel properties using cash of $247.2 million.

•During the year ended December 31, 2021, we invested $83.8 million in improvements to our hotel properties, received $255.9 million from the sale of three hotel properties and purchased three hotel properties using cash of $253.5 million.

Financing Activities. Our net cash used in financing activities was $209.3 million for the year ended December 31, 2022 and $33.3 million for the year ended December 31, 2021. Fluctuations in our net cash used in financing activities are primarily the result of our issuance and repurchase of debt and equity securities and distributions paid on our preferred and common shares.

•During the year ended December 31, 2022, we borrowed and repaid $190.2 million of revolving credit facility borrowings, repaid and borrowed $1.4 billion in other debt, repurchased $70.7 million of common shares through our common share repurchase program, paid $52.7 million in preferred and common distributions, used $16.0 million to redeem one million Series H Preferred Shares and paid $12.4 million in financing fees.

•During the year ended December 31, 2021, we received gross proceeds of $480.0 million from the issuance of our Series G and Series H Preferred Shares, which was partially offset by the payment $15.9 million in offering costs, received proceeds from the issuance of convertible notes and other debt of $268.6 million, repaid $392.2 million in other debt and $40.0 million of revolving credit facilities borrowings, used $250.0 million to redeem all our Series C and Series D Preferred Shares, paid $44.7 million in preferred and common distributions, purchased $21.0 million in Capped Call Transactions and paid $14.5 million in financing fees.

44

Capital Investments

We maintain and intend to continue maintaining all of our hotels in good repair and condition, in conformity with applicable laws and regulations, in accordance with franchisor standards when applicable and in accordance with agreed-upon requirements in our management agreements. Routine capital investments will be administered by the hotel management companies. However, we maintain approval rights over the capital investments as part of the annual budget process and as otherwise required from time to time.

Certain of our hotel properties may undergo renovations as a result of our decision to upgrade portions of the hotels, such as guest rooms, meeting space and restaurants, in order to better compete with other hotels in our markets. In addition, after we acquire a hotel property, we are often required by the franchisor or brand manager, if any, to complete a property improvement plan (“PIP”) in order to bring the hotel property up to the franchisor’s or brand’s standards. Generally, we expect to fund renovations and improvements with available cash, restricted cash, borrowings under our credit facility or proceeds from new debt or equity offerings.

For the year ended December 31, 2022, we invested $116.7 million in capital investments to reposition and improve our properties, including the renovations of 1 Hotel San Francisco (formerly Hotel Vitale), Hotel Ziggy (formerly Grafton on Sunset) and Skamania Lodge.

Depending on market conditions, and in some instances subject to approval from governmental authorities, we expect to invest an additional $145.0 million to $155.0 million in capital investments in 2023, which includes normal hotel capital refurbishments, return of investment projects and major capital projects. We have the following significant capital projects that are expected to be completed in 2023 or 2024:

•$25.0 million comprehensive redevelopment and renovation of Hilton San Diego Gaslamp Quarter, which commenced in 2022 and is expected to be completed in the second quarter of 2023;

•$27.0 million comprehensive redevelopment and repositioning of Solamar Hotel into Margaritaville Hotel San Diego Gaslamp Quarter, which commenced in 2022 and is expected to be completed in the second quarter of 2023;

•$20.0 million to $22.0 million comprehensive renovation at Jekyll Island Club Resort, which commenced in 2022 and is expected to be completed in the second quarter of 2023;

•$20.0 million to $25.0 million comprehensive renovation of Estancia La Jolla Hotel & Spa, which commenced in 2022 and is expected to be completed in the second quarter of 2024; and

•$11.0 million first phase of a multi-phase master plan at Skamania Lodge, which commenced in 2022 and is expected to be completed in the third quarter of 2023.

Common Share Repurchase Programs, Preferred Share Repurchase Program and ATM Program

On February 22, 2016, we announced that our Board of Trustees authorized a share repurchase program of up to $150.0 million of the Company's outstanding common shares. Under this program, we may repurchase common shares from time to time in transactions on the open market or by private agreement. We may suspend or discontinue this program at any time. Upon repurchase by the Company, common shares cease to be outstanding and become authorized but unissued common shares. For the year ended December 31, 2022, the Company made $56.6 million in repurchases under this program and, as of December 31, 2022, no common shares remained available for repurchase under this program.

On July 27, 2017, we announced that our Board of Trustees authorized a new share repurchase program of up to $100.0 million of the Company's outstanding common shares. Under this program, we may repurchase common shares from time to time in transactions on the open market or by private agreement. We may suspend or discontinue this program at any time. For the year ended December 31, 2022, the Company made $13.0 million in repurchases under this program and, as of December 31, 2022, $87.0 million of common shares remained available for repurchase under this program.

On February 21, 2023, we announced that our Board of Trustees authorized a new share repurchase program of up to $150.0 million of the Company's outstanding common shares. Under this program, we may repurchase common shares from time to time in transactions on the open market or by private agreement. This $150.0 million common share repurchase program will commence upon the completion of the Company's $100.0 million common share repurchase program, under which approximately $74.0 million of common shares remained available for repurchase as of February 21, 2023. The timing, manner, price and amount of any repurchases under the program will be determined by us in our discretion and will depend on a variety of factors, including legal requirements, price, liquidity and economic considerations, and market conditions. The program does not require us to repurchase any specific number of common shares. The program does not have an expiration date and may be suspended, modified or discontinued at any time.

On February 21, 2023, we announced that our Board of Trustees approved a repurchase program of up to $100.0 million of our outstanding preferred shares (the “Preferred Share Repurchase Program”). Under the terms of the program, we may repurchase up to an aggregate of $100.0 million of our 6.375% Series E Cumulative Redeemable Preferred Shares, 6.30%

45

Series F Cumulative Redeemable Preferred Shares, 6.375% Series G Cumulative Redeemable Preferred Shares and 5.70% Series H Cumulative Redeemable Preferred Shares from time to time in transactions on the open market or by private agreement. The aggregate liquidation value of our preferred shares that may be repurchased pursuant to the Preferred Shares Repurchase Program, as of February 21, 2023, was $715.0 million. The timing, manner, price and amount of any repurchases will be determined by us in our discretion and will depend on a variety of factors, including legal requirements, price, liquidity and economic considerations, and market conditions. The program does not require us to repurchase any specific number of preferred shares. The program does not have an expiration date and may be suspended, modified or discontinued at any time.

On April 29, 2021, we filed a prospectus supplement with the SEC to sell up to $200.0 million of common shares under an "at the market" offering program (the "ATM program"). No common shares were issued or sold under the ATM program during the year ended December 31, 2022. As of December 31, 2022, $200.0 million of common shares remained available for issuance under the ATM program.

Inflation

We rely on the performance of the hotels to increase revenues to keep pace with inflation. Generally, our hotel operators possess the ability to adjust room rates daily, except for group or corporate rates contractually committed to in advance, although competitive pressures may limit the ability of our operators to raise rates faster than inflation or even at the same rate.

Seasonality

For discussion on the seasonality of our hotels' operations, see Part I, Item 1 of this Annual Report on Form 10-K.

Derivative Instruments

In the normal course of business, we are exposed to the effects of interest rate changes. We may enter into derivative instruments including interest rate swaps, caps and collars to manage or hedge interest rate risk. Derivative instruments are subject to fair value reporting at each reporting date and the increase or decrease in fair value is recorded in net income (loss) or accumulated other comprehensive income (loss), based on the applicable hedge accounting guidance. Derivatives expose the Company to credit risk in the event of non-performance by the counter parties under the terms of the interest rate hedge agreements. We believe we minimize the credit risk by transacting with major credit-worthy financial institutions.

As of December 31, 2022, we have interest rate swap agreements with an aggregate notional amount of $1.0 billion to hedge variable interest rates on our unsecured term loans. We have designated these pay-fixed, receive-floating interest rate swap derivatives as cash flow hedges. For a further discussion of our derivative instruments see Note 5, Debt, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.