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XHR - Xenia Hotels & Resorts Inc
$12.27
-0.10(-0.81%)5:47:14 PM 3/23/2023
Xenia Hotels & Resorts, Inc. is a real estate investment trust that invests in hotels. As of December 31, 2019, it owned 39 hotels comprising 11,245 rooms. In 2014, the company was formed as a corporate spin-off of InvenTrust Properties.

Financials

Quarterly financials
(USD)Sep 2022Q/Q
Revenue240.7MM-15%
Gross Profit68.8MM-
Cost Of Revenue171.9MM-3%
Operating Income16.1MM-68%
Operating Expenses52.7MM-
Net Income-1.7MM-106%
G&A9MM-1%
Amortization34.3MM+0%
Interest Expense20.6MM+1%

Revenue Breakdowns

The above Revenue Breakdowns and below Management Discussion contents are extracted from this specific SEC Edgar 10-K/10-Q filling. The process is fully automated and without human validation. Although we make every effort getting the relevant information, please be advised that We make no representation or warranties of any kind about completeness, accuracy, reliability, suitability or availability of the information exacted from Edgar 10-K/10-Q filings.

Highlights of Management DIscussion and Risk Factors in 10-K/10-Q filling

Positive
1.
We believe this strategy provides us with a broader range of opportunities and allows us to target markets and sub-markets with particular positive characteristics, such as multiple demand generators, favorable supply and demand dynamics and attractive long-term projected RevPAR growth.
2.
We believe assets in the top 25 lodging markets and key leisure destinations in the U.S. present attractive investment opportunities considering the favorable supply and demand dynamics, RevPAR growth trends, attractive valuations and better opportunities for diversification.
3.
We generally pursue uniquely positioned hotels in the luxury and upper upscale segments that are affiliated with leading brands as we believe these segments yield attractive risk-adjusted returns.
4.
We view this as a significant competitive strength relative to many of our peers.
5.
We believe that hotels, which are predominately affiliated with leading brands, such as our portfolio of hotels, will enjoy the competitive advantages associated with operating under such brands, which includes strong health, safety and cleanliness protocols, and are important to our customers.
6.
We believe that brands help to drive demand and increase guest loyalty.
7.
We primarily target markets and sub-markets with particular positive characteristics, such as multiple demand generators, favorable supply and demand dynamics and attractive projected hotel revenue growth.
8.
Through these efforts, we seek to enhance the guest experience, improve property efficiencies, lower costs, maximize revenues, and grow property operating margins which we expect will increase long-term returns to our stockholders.
9.
Ongoing Recovery from COVID-19Our hotel portfolio experienced a broad-based recovery from COVID-19 during 2022 with a continuation of strong leisure bookings and an acceleration of business transient and group demand.
10.
We believe that hotels, such as those in our portfolio, will enjoy the competitive advantages associated with operating under nationally recognized brands.
11.
To the extent we are able to successfully improve the performance of our portfolio, we believe this will result in increased operating cash flows.
12.
We remain committed to increasing total shareholder returns through the following priorities: (1) maximize revenue and profits generated by our existing properties and acquired hotels, including the continued focused management of expenses, (2) further enhance the value of our portfolio and produce an attractive current yield and (3) generate sustainable and predictable cash flow from our operations to distribute to our common stock and unit holders.
13.
The following chart shows our structure as of December 31, 2022:(1)Ownership percentages include vested and unvested LTIP partnership units which may or may not vest based on the passage of time and meeting certain market-based performance objectives.1Ongoing Recovery from COVID-19Our hotel portfolio experienced a broad-based recovery from COVID-19 during 2022 with a continuation of strong leisure bookings and an acceleration of business transient and group demand.
14.
We own and pursue hotels and resorts in the luxury and upper upscale hotel segments that are affiliated with premium leading brands, as we believe that these segments yield attractive risk-adjusted returns.
15.
The increase in demand led to an increase in industry RevPAR of 29.8% for the year ended December 31, 2022 compared to 2021, which was driven by an increase in occupancy of 8.9% coupled with a 19.1% increase in ADR.
16.
On a long-term basis, our objectives are to maximize revenue and profits generated by our existing properties and acquired hotels, to further enhance the value of our portfolio and produce an attractive current yield, as well as to generate sustainable and predictable cash flow from our operations to distribute to our common stock and unit holders.
17.
We believe our breadth of experience and integrated in-house asset management and project management teams are instrumental in our ability to acquire and operate assets and to capitalize on redevelopment opportunities.
18.
By maintaining a dedicated in-house capital planning and project management team, we believe we are able to develop our capital plans and execute each renovation project at a lower cost and in a timelier manner than if we outsourced these services.
19.
We invest at valuation levels that we believe will generate attractive risk-adjusted returns.
20.
In addition, the Company recorded $3.6 million of insurance proceeds in excess of recognized losses related to damage sustained at Loews New Orleans Hotel during Hurricane Ida in August 2021.•In addition to changes in our portfolio composition during 2022, we invested approximately $70.4 million in portfolio improvements, which we believe will drive positive performance at these properties in the future.
21.
RevenuesRevenues increased significantly compared to 2021 driven by increases in occupancy and ADR due to a broad-based recovery from the COVID-19 pandemic.
22.
Adjusted EBITDAre and Adjusted FFO attributable to common stock and unit holders increased 137.8% and 454.0%, respectively, for the year ended December 31, 2022 compared to 2021, which was attributable to a broad-based recovery from the COVID-19 pandemic on the Company's results of operations.
23.
-    Strategic Capital Investment to Enhance Portfolio Performance.
24.
The increase in our total portfolio RevPAR for the year ended December 31, 2022 compared to the same period in 2021 was driven by increases in both occupancy and ADR due to a broad-based recovery from the COVID-19 pandemic.
25.
We believe our focus on uniquely positioned luxury and upper upscale hotel assets allows us to seek appropriate investments that are well-suited for specific markets.
26.
Our management team’s extensive industry experience across multiple brands and management companies coupled with our integrated asset management and project management teams enable us to identify and implement value-add strategies and to prudently invest capital in our assets to optimize operating results while leveraging best practices across our portfolio.-    Aggressive Asset Management.
27.
We also seek properties that exhibit an opportunity for us to enhance operating performance through aggressive asset management and targeted capital investment.
28.
We plan to grow our business through a differentiated acquisition strategy, aggressive asset management and capital investment in our properties.
29.
We pursue both new or recently constructed assets that require limited capital investment, as well as more mature and complex properties with opportunities for our dedicated asset and project management teams to create value through more active operational oversight and targeted capital expenditures.•Drive Growth Through Aggressive Asset Management, In-House Project Management and Strategic Capital Investment.
30.
These principles continuously serve as a reminder to uphold an inclusive, respectful and tolerant work culture; and to always demonstrate the highest standards of professional conduct.
31.
A typical office property, for example, has long-term leases with third-party tenants, which provides a relatively stable long-term stream of revenue.
32.
We have also been recognized as one of America's Most Responsible Companies by Newsweek and by the Orlando Sentinel as a Top 100 Workplace.
33.
Our ability to work with a wide variety of management and franchise companies provides us with the opportunity to benchmark performance across our portfolio in order to share best practices.
34.
As part of our ongoing asset management activities, we continuously review opportunities to reinvest in our hotels to maintain quality, increase long-term value and generate attractive returns on invested capital.
35.
We believe that investing in our properties and employing a proactive asset management approach designed to identify investment strategies will optimize internal growth opportunities.
36.
Demand increased 11.0% and new hotel supply increased by 1.9% during the year ended December 31, 2022 compared to 2021.
37.
Market OutlookThe U.S. lodging industry has historically exhibited a strong correlation to U.S. GDP, which increased at an annual rate of approximately 2.1% during 2022, according to the U.S. Department of Commerce, in comparison to an increase of approximately 5.9% during 2021.
38.
Our experienced asset management team focuses on driving property performance through revenue enhancement and cost containment efforts.
39.
Additionally, the acquisition of W Nashville in March 2022 contributed to the increase in rooms revenue by $23.3 million.
40.
We seek properties with desirable locations within their markets, exceptional facilities, and other competitive advantages that are hard to replicate.
41.
revenues337,792 173,035 164,757 95.2 %Other revenues83,536 66,133 17,403 26.3 %Total revenues$997,607 $616,188 $381,419 61.9 %Rooms revenuesRooms revenues increased by $199.3 million, or 52.9%, to $576.3 million for the year ended December 31, 2022 from $377.0 million for the year ended December 31, 2021 primarily due to increases in occupancy and ADR due to a broad-based recovery from the COVID-19 pandemic.
42.
We maintain policies and programs that provide the framework for fostering and supporting a diverse and inclusive work environment which contribute to the overall corporate culture at Xenia, leading to the recruitment, retention, and growth of a qualified and successful workforce.
43.
Other revenues Other revenues increased by $17.4 million, or 26.3%, to $83.5 million for the year ended December 31, 2022 from $66.1 million for the year ended December 31, 2021 primarily due to a broad-based recovery from the COVID-19 pandemic.
44.
Additionally, the acquisition of W Nashville in March 2022 contributed to the increase in food and beverage revenue by $18.2 million.
45.
Additionally, in January 2023, we amended the mortgage loan collateralized by Andaz Napa to update the variable index on the $55 million loan from LIBOR-based to Term SOFR and extend the maturity date through January 2028.From time to time, we may also seek to create value for our stockholders by opportunistically repurchasing shares of our common stock at valuations we believe are attractive.
46.
This increase includes $5.2 million in additional revenues from cancellation and attrition as well as $2.0 million attributed to the acquisition of W Nashville in March 2022.
47.
We pursue this objective through the following investment and growth strategies:•Follow a Differentiated Investment Strategy Across Targeted Markets.
48.
The Company believes it minimizes the credit risk by transacting with well-known creditworthy financial institutions.
49.
Results of OperationsOperating Results OverviewOur total portfolio RevPAR, which includes the results of hotels sold or acquired for the period of ownership by the Company, increased 57.0% to $162.75 for the year ended December 31, 2022, compared to $103.64 for the year ended December 31, 2021.
50.
During the fourth quarter of 2022, GDP increased at an annual rate of 2.9%, representing an increase from the annual rate of 3.2% in the third quarter of 2022.
51.
We are guided by our core values, which include civility, ethics and integrity, and a commitment to quality.
52.
The net increase to cash provided by operating activities during the year ended December 31, 2022 was primarily due to an increase in hotel operating income attributed to a broad-based recovery from the impact of the COVID-19 pandemic and the acquisition of W Nashville in March 2022, net of reductions from the one hotel sold in 2021 and the three hotels sold in 2022.
53.
In a stable macroeconomic environment, our revenues and operating income have historically been highest in the second quarter of the year followed by the first, third and fourth quarters.
Negative
1.
Difficult economic conditions may continue to adversely affect the hotel industry.
2.
Further, economic conditions could negatively impact commercial real estate fundamentals and result in declining values in our real estate portfolio and in the collateral securing any loan investments we may make, which could have various negative impacts.
3.
If we were to lose a brand license, the underlying value of a particular hotel could decline significantly from the loss of associated name recognition, marketing support, participation in guest loyalty programs and the centralized reservation system provided by the franchisor or brand manager, which could require us to recognize an impairment on the hotel.
4.
The effect of the COVID-19 pandemic on the travel, lodging and hospitality industries and global economy has been unprecedented and has dramatically reduced business and leisure travel, which adversely impacted our business, financial performance, operating results and cash flows, beginning March 2020.While
5.
In addition to general economic conditions, new hotel room supply is an important factor that can affect the lodging industry's performance and overbuilding has the potential to further exacerbate the negative impact of an economic downturn.
6.
Unfavorable ESG ratings could lead to increased negative investor sentiment towards us, which could negatively impact our share price as well as our access to and cost of capital.
7.
Our portfolio consists of luxury and upper upscale hotels and resorts, and consumer preferences tend to shift to lower-cost alternatives during recessionary periods and other periods in which disposable income is adversely affected, which could lead to a decline in reservations and an increase in cancellations, and thus result in lower revenue.
8.
Declines in consumer demand due to adverse general economic conditions, risks affecting or reducing travel patterns, restrictions on travel, lower consumer confidence and adverse political conditions can lower the revenues and profitability of our hotel operations.
9.
Downturns in worldwide or regional economic conditions, such as an economic downturn resulting from the onset of a pandemic, have led to a general decrease in transient business, group business, leisure travel and travel spending, and similar downturns in the future may materially adversely impact demand for our hotels and resorts.
10.
A reduction or slowdown in growth of lodging demand or increased growth in lodging supply could result in returns that are substantially below expectations or result in losses, which could materially and adversely affect our revenues and profitability as well as limit or slow our future growth and impact our ability to service our indebtedness and/or make distributions to stockholders.
11.
However, newly acquired, redeveloped, renovated, repositioned or re-branded hotels may fail to perform as expected and the costs necessary to bring such hotels up to brand standards may exceed our expectations, which may result in the hotels’ failure to achieve projected returns.
12.
The consolidation of these distribution channels may lead to reduced operating profits and/or higher costs of obtaining customers.
13.
Worsening of the U.S. or global economy would likely have an adverse impact on the occupancy, ADR and RevPAR of our hotels, and would therefore adversely impact our results of operations and financial condition.
14.
Our operating risks include decreases in hotel revenues and increases in hotel operating expenses, including but not limited to the increases in wage and benefit costs, repair and maintenance expenses, energy costs, insurance costs and other operating expenses, which would adversely affect our TRS lessees’ ability to pay us rent due under the leases.
15.
Although most of the business for our hotels is expected to be derived from traditional channels, if the amount of the sales made through the intermediaries increases significantly, rooms revenues may be lower than expected, and/or expenses may be higher which would adversely affect our profitability.
16.
As a result of this geographic concentration of hotels, we will face a greater risk of a negative impact on our revenues in the event these areas are more severely impacted by adverse economic and competitive conditions and adverse acts of nature than other areas in the United States.
17.
The result of third-party hotel managers and franchisors consolidating could adversely affect our hotels due to the undefined and unknown costs associated with the integration of property-level point of sale and back-of-house computer systems and other technology related processes, the training and other labor costs associated with the merging of labor forces, and the impact of loyalty reward point program consolidation.
18.
If we were to lose a brand license at one or more of our hotels, the value of the affected hotels could decline significantly and we could incur significant costs to obtain new franchise licenses, which could materially and adversely affect our results of operations and profitability as well as limit or slow our future growth.
19.
To the extent ESG matters negatively impact our reputation, it may also impede our ability to compete as effectively to attract and retain employees or customers, which may adversely impact our operations.
20.
These economic developments include regional economic downturns, significant increases in the number of competitive hotels in these markets and potentially higher local property, sales and income taxes in the geographic markets and jurisdictions in which we are concentrated.
21.
In addition, we may have significant ongoing capital projects and renovations with financial commitments that we are unable to postpone during economic downturns which could put pressure on our liquidity and cash flows.
22.
There is a risk that counterparties could fail, shut down, file for bankruptcy or be unable to pay out contracts.
23.
From time to time, strikes, lockouts, boycotts, public demonstrations or other negative actions and publicity may disrupt hotel operations at any of our hotels, negatively impact our reputation or the reputation of our brands, cause us to lose guests, or harm relationships with the labor forces at our hotels.
24.
Increased competition could harm our occupancy, RevPAR, ADR and consequently our revenue and may require us to provide additional amenities, or make capital improvements that we otherwise would not have to make, and may materially and adversely affect our operating results and liquidity.
25.
Costs associated with, or failure to maintain, brand operating standards may materially and adversely affect our results of operations and profitability.
26.
Uninsured and underinsured losses at our hotels could materially and adversely affect our revenues and profitability.
27.
Our TRS lessee structure subjects us to the risk of increased hotel operating expenses that could adversely affect our operating results and our ability to make distributions to stockholders.
28.
Credit risk is the failure of the counterparty to perform under the terms of the derivative contract.
29.
These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.
30.
REIT distribution requirements could adversely affect our liquidity and may force us to borrow funds or sell assets during unfavorable market conditions.
31.
Over the past twelve months, the Federal Reserve has raised interest rates to combat inflation which has negatively impacted the credit market as well as the capital markets.
32.
There is a history of increases and decreases in demand for and supply of hotel rooms, in occupancy levels and in rates realized by owners of hotels through economic cycles and as a result of periodic demand shocks due to economic or other events outside of the lodging industry, such as the impact of the COVID-19 pandemic on operating results in 2020, 2021 and 2022.
33.
Investments in real estate also are subject to adverse changes in general economic conditions.
34.
Any of the foregoing could cause the market price of our common stock to decline significantly.
35.
Borrowings may reduce the funds available for distribution and increase the risk of loss since defaults may cause us to lose the properties securing the loans.
36.
Adverse environmental conditions at any of our properties could also result in injury to our reputation and reduce our revenues.
37.
We could incur significant, material costs related to government regulation and litigation with respect to environmental matters, which could materially and adversely affect our revenues and profitability as well as limit or slow our future growth.
38.
Any increases would cause our cash flow and our operating results to decrease.
39.
Our business may be affected by market and economic challenges experienced by the U.S. or global economy or real estate industry as a whole or by the local economic conditions in the markets in which our hotels are located, including the dislocations in the credit markets and general global economic recession.
40.
Based on economic conditions or other factors applicable to a specific property, we may be required to take additional impairment losses to reflect further declines in our asset and/or investment values.
41.
Accordingly, if we lose one or more franchise licenses or brand management agreements, it could materially and adversely affect our results of operations and profitability as well as limit or slow our future growth.
42.
If we are unable to decrease these costs significantly or rapidly when demand for our hotels decreases, the resulting decline in our revenues can have an adverse effect on our net cash flow, margins and profits.
43.
Risks Related to the Hotel IndustryWe may be adversely affected by various operating risks common to the lodging industry, including a dependence on business travel and tourism.
44.
This, in turn, could have an adverse effect on our results of operations and our ability to execute our growth strategy.
45.
If any of the foregoing were to occur, it could materially and adversely affect our results of operations and profitability as well as limit or slow our future growth and impair our ability to compete effectively.
46.
Risks Related to the COVID-19
47.
Further, we continue to monitor and evaluate the challenges associated with the evolving workforce landscape, particularly related to industry-wide labor shortages and expected increases in wages as well as ongoing supply chain issues which may impact the hotels' ability to source operating supplies and other materials.
48.
PandemicThe COVID-19 pandemic has had a material adverse impact on the travel, lodging and hospitality industries and, as a result, our business, results of operations, cash flows and financial condition, and the impacts of the pandemic may persist or become more pronounced in the future as the pace and evenness of the recovery remains uncertain.
49.
Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a hotel, as well as the anticipated future revenue from the hotel.
50.
We also may incur increased legal costs and indirect labor costs as a result of contract disputes or other events.
51.
In addition, to the extent that the COVID-19 pandemic and any additional resurgence, as well as the residual effects of the pandemic on global and regional economies, impact or heighten the other risks described in these "Risk Factors" or elsewhere in this Annual Report or other risks that are not currently foreseeable, our business, results of operations, cash flows and financial condition may be adversely affected.
52.
Our future earnings and cash flows could be adversely affected due to the increased requirement to service our indebtedness and could reduce the amount we are able to distribute to our stockholders.
53.
In such a case, we could lose the property securing the loan that is in default, thus reducing the value of our investment.
54.
If the overall cost of borrowing increases, either by increases in the index rates or by increases in lender spreads, the increased costs may result in existing assets or future acquisitions generating lower overall economic returns and potentially reducing future cash flow available for distribution.
55.
The occurrence of any of the foregoing events, among others, could materially and adversely affect our results of operations and profitability as well as limit or slow our future growth.
56.
Under those circumstances, the insurance proceeds we receive might be inadequate to restore our economic position on the damaged or destroyed hotel, which could materially and adversely affect our profitability.
57.
14Operational RisksThe land underlying three of our hotels and/or meeting facilities is subject to a ground lease; if we are found to be in breach of a ground lease or are unable to renew a ground lease, we could be materially and adversely affected.
58.
If we are unable to offset these costs with sufficient revenues across our portfolio, it could materially and adversely affect our results of operations and profitability and lead to cash flow from operations to become negative.
59.
Additionally, opportunities for developing new relationships with additional third-party managers or franchisors may be adversely affected.
60.
If third-party online travel agencies consolidate through merger and acquisitions this may lead to less negotiating power over contracts and/or higher costs of obtaining customers.
61.
Adverse economic conditions could cause the terms on which we borrow or refinance to be unfavorable.
62.
Other unknown or unpredictable factors also could harm our results.
63.
In addition, anticipated downward pressure on our common stock price due to actual or anticipated sales of common stock from this market overhang could cause some institutions or individuals to engage in short sales of our common stock, which may itself cause the price of our common stock to decline.
64.
If we are unable to maintain good relationships with third-party hotel managers and franchisors, profitability could decrease and our growth potential may be adversely affected.
65.
We could be materially and adversely affected if any of our third-party managers fail to provide quality services and amenities, fail to properly and adequately provide staffing for our hotels, fail to maintain a quality brand name or otherwise fail to manage our hotels in our best interest, and we can be financially responsible for the actions and inactions of our third-party managers pursuant to our management agreements.
66.
2022.The U.S. lodging industry has been more acutely impacted by the COVID-19 pandemic than the overall U.S. economy and other industries and has not experienced the same level of recovery as the general U.S. economy which is largely due to the 48persistence of new variants of COVID-19 and sentiment towards business and leisure travel as a result of the pandemic.
67.
Our operating results could be materially and adversely affected if any of our third-party managers fail to provide quality services and amenities, or otherwise fail to manage our hotels in our best interest.
68.
In addition, unless we can purchase a fee interest in the underlying land and improvements or extend the terms of these leases before their expiration, as to which no assurance can be given, we will lose our right to operate these properties and our interest in the improvements upon expiration of the leases.
69.
In August 2021, Hurricane Ida impacted Loews New Orleans Hotel located in New Orleans, Louisiana.
70.
The discovery of material environmental liabilities or other environmental conditions at our properties could subject us to unanticipated significant costs and reduce our revenues, which could significantly reduce or eliminate our profitability and the cash available for distribution to our stockholders.
71.
These factors, and the reputational repercussions of these factors, can materially adversely affect, and from time to time have adversely affected, individual hotels, particular regions and our business, financial condition, results of operations, and/or our ability to make distributions to our stockholders.
72.
In addition, our hotels may be subject to the effects of adverse acts of nature, such as winter storms, hailstorms, strong winds, tropical storms, hurricanes, wildfires, earthquakes, tornadoes, and tsunamis which have in the past caused flooding and other property damage to our hotels in specific geographic locations, including in the Texas, California and Florida markets.
73.
We have also seen that, due to the mix of business, luxury and upper upscale hotels and resorts are more susceptible to a decrease in revenue, as compared to hotels in other categories that have lower room rates.
74.
During the global financial crisis that began in 2008, and following the onset of the COVID-19 pandemic in 2020, the domestic financial markets experienced unusual volatility, uncertainty and a tightening of liquidity in both the debt and equity capital markets.
75.
Consequently, if market recognition or the positive perception of Marriott and/or Hyatt brands is reduced or compromised, the goodwill associated with the Marriott and/or Hyatt branded hotels in our portfolio may be adversely affected.
76.
Our acquisition, redevelopment, repositioning, renovation and re-branding activities are subject to various risks, any of which could, among other things, result in disruptions to our hotel operations, strain management resources and materially and adversely affect our results of operations and profitability as well as limit or slow our future growth.
77.
If there are continued periods of volatility and weakness in the capital and credit markets in the future, the availability of debt and equity financing could decline.
78.
Finally, legal enforceability risks encompass general contractual risks including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract, increasing the risk that we may not realize the benefits of these instruments.
79.
Operating expenses may increase in the future, which may cause our cash flow and our operating results to decrease.
80.
The failure of a counterparty that holds collateral that we post in connection with an interest rate swap agreement could result in the loss of that collateral.
81.
Risks Related to the Real Estate IndustryThere are inherent risks with investments in real estate, including the relative illiquid nature of such investments.
82.
Further, such a loss could be negatively perceived by financial analysts and the investment community, which could reduce the market value of our common stock.
83.
Complying with REIT requirements may force us to forgo and/or liquidate otherwise attractive investment opportunities.
84.
The domestic and international commercial real estate debt markets could become very volatile as a result of, among other things, rising interest rates and the tightening of underwriting standards by lenders and credit rating agencies.
85.
Failure to comply with this requirement would require us to find other managers for future contracts, and, if we hired a management company without knowledge of the failure, it could jeopardize our status as a REIT.Finally, each property with respect to which our TRS lessees pay rent must be a "qualified lodging facility."
86.
If we misjudge or estimate incorrectly or if future operating profitability, market or industry factors differ from our expectations, we may record an impairment charge which is inappropriate, fail to record a charge when we should have done so or the amount of such charges may be inaccurate.
87.
If the funds required to maintain brand operating standards are significant, or if a franchise license is terminated, it could materially and adversely affect our results of operations and profitability.
88.
As a result of the shortened estimated hold period due to the expected sale, we recorded an impairment loss of $15.7 million for this property.
89.
If the fair value of a derivative contract is negative, we owe the counterparty, which creates a risk that we may not be able to pay such amounts.
90.
The insufficiency of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short- and long-term debt or sell equity securities in order to fund distributions required to maintain our qualification as a REIT.The ownership of our TRS and our TRS lessees increases our overall tax liability.
91.
Expectations regarding voluntary ESG initiatives and disclosures may result in increased costs (including but not limited to increased costs related to compliance, stakeholder engagement, contracting and insurance), changes in demand for certain offerings, enhanced compliance or disclosure obligations, or other adverse impacts to our business, financial condition, or results of operations.
92.
If we are unable to refinance our debt on acceptable terms, we may be forced to dispose of hotels on disadvantageous terms or at times which may not permit us to receive an attractive return on our investments, potentially resulting in losses adversely affecting cash flow from operating activities.
93.
If these disruptions in the debt markets were to persist, our ability to borrow monies to finance the purchase of, or other activities related to, real estate assets could be negatively impacted.
94.
In addition to the macroeconomic factors, the U.S. lodging industry was more acutely impacted by the COVID-19 pandemic than the overall U.S. economy and other industries due to the general sentiment towards business and leisure travel.
95.
We may not have adequate coverage for such losses, which could materially and adversely affect our revenues and profitability as well as limit or slow our future growth.
96.
Furthermore, the loss of a franchise license at a particular hotel could harm our relationship with the franchisor or brand manager, which could impede our ability to operate other hotels under the same brand, limit our ability to obtain new franchise licenses or brand management agreements from the franchisor or brand in the future on favorable terms, or at all, and cause us to incur significant costs to obtain a new franchise license or brand management agreement for the particular hotel.
97.
Thus, higher market interest rates could cause the market price of our common stock to decline.
98.
Furthermore, if our relationship with Marriott and/or Hyatt were to deteriorate or terminate as a result of disputes regarding the management of our hotels or for other reasons, Marriott and/or Hyatt could, under certain circumstances, terminate our current franchise licenses with them or decline to provide franchise licenses for hotels that we may acquire in the future.
99.
To the extent climate change causes changes in weather patterns, our coastal markets could also experience increases in storm frequency and/or intensity and rising sea-levels causing damage to our hotel properties.
100.
Thus, our profits are generally more significantly affected by economic downturns and declines in revenues.
101.
As a result, we could become subject to significant losses and/or repair costs that may not be fully covered by insurance.
102.
Specifically, the value of collateral securing any loan investment we may make could decrease below the outstanding principal amounts of such loans, requiring us to pledge more collateral.
103.
In this context, credit risk is the failure of the counterparty to perform under the terms of the derivative contract.
104.
As a result, the presence of significant mold or other airborne contaminants at any of our hotels could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation, as well as make some of our rooms (or, in extreme cases, entire hotels) unavailable for extended periods, adversely affecting our revenues.
105.
Increased labor costs due to factors like minimum wage initiatives and other localized changes to wages and additional taxes or requirements to incur additional employee benefits costs, including the requirements of the Affordable Care Act, may adversely impact our operating costs.
106.
Similarly, if we cannot access the capital we need to fund our operations or implement our growth strategy, we may need to postpone or cancel planned renovations or acquisitions, which could impair our ability to compete effectively and harm our business and relationship with certain third-party management companies and/or brands.
107.
These limitations could cause the market price of our common stock to decline significantly.
108.
These and other risks may reduce demand for our properties or otherwise result in adverse impacts to our business, financial condition, and results of operations.35Increasing attention to, and evolving expectations for, environmental, social, and governance matters may increase our costs, harm our reputation, or otherwise adversely impact our business.
109.
Because of this, in an environment of declining revenues the rate of decline in earnings will be higher than the rate of decline in revenues.
110.
If we incur substantial costs to comply with the ADA or other safety regulations and requirements, it could materially and adversely affect our revenues and profitability.
111.
Our continued ability to borrow under the revolving credit facility and any other credit facility that we may obtain will be subject to compliance with these covenants and our ability to meet these covenants will be adversely affected if U.S. lodging fundamentals do not continue to improve when and to the extent that we expect.
112.
Other markets may experience prolonged variations in temperature or precipitation that limit access to the water needed to operate our hotel properties or significantly increase energy costs, which may subject those properties to additional regulatory burdens, such as limitations on water usage or stricter energy efficiency standards.
113.
Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to our stockholders.
114.
This and other regulations will likely lead to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor.
115.
Inflation may also reduce the demand for travel, levels of spending in transient or group business and leisure segments, and levels of consumer confidence.
116.
Even if we continue to qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
117.
Also, our ability, or the ability of our subsidiaries, to deduct interest may be limited under Section 163(j) of the Code, potentially reducing cash flows.
118.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose viability in the market, which in turn could cause our stock price or trading volume to decline.
119.
In addition, anticipated downward pressure on our common stock price due to actual or anticipated issuances or sales of common stock could cause some institutions or individuals to engage in short sales of our common stock, which may itself cause the price of our common stock to decline.
120.
Similarly, we are insured against the risk of direct physical damage in amounts we believe to be adequate to reimburse us, on a replacement basis, for costs incurred to repair or rebuild each hotel, including loss of income during the reconstruction period.
121.
The loss of services of our senior management team, or any difficulty attracting and retaining other talented and experienced personnel, could adversely affect our ability to source potential investment opportunities, our relationship with global and national hotel brands and other industry participants and the execution of our business strategy.
122.
If third-party hotel managers and/or franchisors consolidate through merger and acquisition transactions, we may experience undefined and unknown costs related to the integration of processes and systems, which may adversely affect our hotels.
123.
Adverse judgments or settlements resulting from legal proceedings in which we may be involved in the normal course of our business could reduce our profits or limit our ability to operate our business.
124.
Demand for products and services provided by the lodging industry generally trails improvement in economic conditions.
125.
Contractual and other disagreements with or involving third-party hotel management companies and franchisors could make us liable to them or result in litigation costs or other expenses.
126.
Additionally, from time to time we may record other losses related to property damage resulting from natural disasters and/or other disaster remediation costs.
127.
Many costs, such as real estate taxes, insurance premiums, maintenance costs and certain hotel operating costs generally are more fixed than variable and as a result, are not reduced even when a hotel is not fully occupied, when operations have been 13suspended, when room rates decrease or other circumstances cause a reduction in revenues.
128.
Market disruptions may adversely impact many aspects of our operating results and operating condition.
129.
Higher interest rates would also likely increase our borrowing costs and decrease our net income and cash available for distribution.
130.
In 21addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions.
131.
Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria.
132.
Specifically, we cannot predict whether business travel for in-person meetings will decrease over the long-term due to technological advancements in and consumer acceptance and adaptation to virtual meetings and/or changes in guest and consumer preferences, or whether the lingering economic effects of the pandemic will have an adverse effect on our ability to execute on our acquisition and disposition strategy.
133.
If we are found to be in breach of a ground lease, we could lose the right to use the hotel.
134.
Further, during periods of rising interest rates, we may be forced to sell one or more of our properties in order to repay existing loans, which may not permit us to maximize the return on the particular properties being sold.
135.
A continuing shift in consumer behavior would materially adversely affect our business, results of operations, and financial condition.
136.
These broad market fluctuations may adversely affect the trading price of our common stock.
137.
If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on a property, then the amount of cash flow from operations available for distributions to stockholders may be reduced or suspended.
138.
If we fail to comply with these requirements, we could incur fines or private damage awards.
139.
Our failure to obtain such insurance could constitute a default under loan agreements, and/or our lenders may force us to obtain such insurance at unfavorable rates, which could materially and adversely affect our profitability and revenues.
140.
Compliance or failure to comply with the Americans with Disabilities Act and other safety regulations and requirements could result in substantial costs.
141.
From time to time, disputes may arise between us and our third-party managers regarding their performance or compliance with the terms of the hotel management agreements, which in turn could adversely affect our results of operations.
142.
The goodwill impairments were directly attributed to existing market weakness due to new supply and the material adverse impact the COVID-19 pandemic had on the results of operations at each hotel.(2)    
143.
The goodwill impairments were directly attributed to existing market weakness due to new supply and the material adverse impact the COVID-19 pandemic had on the results of operations at each hotel.(2)    
144.
Risks Related to Debt FinancingVolatility in the financial markets and challenging economic conditions could adversely affect our ability to secure debt financing on attractive terms and our ability to service any future indebtedness that we may incur.
145.
If we are unable to offset these decreases with sufficient revenue across our portfolio, it could materially and adversely affect our 16results of operations and profitability and our ability to pay distributions and to service our indebtedness could be materially and adversely affected.
146.
The concentration of hotels in a certain region may expose us to risks of adverse legislation or economic developments, such as unfavorable treatment from state authorities, negative trends in the industry sectors that are concentrated in these markets and more severe restrictions 12related to health and safety measures, that are greater than if our portfolio were more geographically diverse.
147.
Further, we may incur costs related to claims for which we have appropriate third-party indemnity, but such third-parties fail to fulfill their contractual obligations.
148.
Additionally, we expect it will take longer for the lodging industry to return to pre-pandemic levels than it will for the broader economy and many other industries.
149.
In addition, the unemployment rate remained flat at 3.5% in December 2022 compared to September 2022 and fell from 3.6% in June
150.
Negotiations of collective bargaining agreements, attempts by labor organizations to organize additional hotels, departments within our hotels or groups of employees or changes in labor laws could disrupt our operations, increase our labor costs or interfere with the ability of our management to focus on executing our business strategies.
151.
In addition, insurance risks associated with potential acts of terrorism and catastrophic and mass casualty events could sharply increase the premiums we pay for coverage against property and casualty claims.
152.
The resolution of labor disputes or new or re-negotiated labor contracts could lead to increased labor costs, either by increases in wages or benefits or by changes in work rules that raise hotel operating costs.
153.
Risks Related to Our Status as a REITFailure to remain qualified as a REIT, would cause us to be taxed as a regular corporation, which would materially increase our expenses and could impair our ability to expand our business and raise capital and reduce potential distributions to stockholders.
154.
While we commit to certain initiatives or goals, we may not ultimately be able to achieve them due to cost, technological, or other constraints.
155.
These gains on insurance recovery are included in other income (loss) on the consolidated statement of operations and comprehensive income (loss) for the period then ended.(3)    During the year ended December 31, 2020, we reduced our corporate office staffing levels in order to preserve capital over the long-term as a result of the material adverse impact the COVID-19 pandemic has had on our results of operations.
156.
A change in our investment strategy may, among other things, increase our exposure to interest rate risk, default risk and commercial real property market fluctuations, all of which could materially and adversely affect our ability to achieve our investment objectives.
157.
We are subject to risks associated with the employment of hotel personnel, particularly with hotels that employ or may employ unionized labor, which could increase our operating costs, reduce the flexibility of our hotel managers to adjust the size of the workforce at our hotels and could materially and adversely affect our revenues and profitability.
158.
Increases in market interest rates may reduce demand for our common stock and result in a decline in the market price of our common stock.
159.
In addition, such loans contain negative covenants that, among other things, preclude certain changes of control, and/or changes in the hotel brand or manager of a collateralized property without lender consent, inhibit our ability to incur additional indebtedness or, under certain circumstances, restrict cash flow necessary to make distributions to our stockholders.
160.
In addition, the total amount of costs and expenses that may be incurred with respect to the unknown or contingent liabilities may exceed our expectations, and we may experience other unanticipated adverse effects, all of which could materially and adversely affect our results of operations and profitability.
161.
If interest rates are higher when we refinance our loans, our expenses will increase, thereby reducing our cash flow and the amount available for distribution to you.
162.
If we are unable to repay or refinance our existing debt, we may be unable to increase distributions to our stockholders and our share price may be adversely affected.
163.
If we default on any purchase contract, we could lose our earnest deposit money and become subject to liquidated or other contractual damages and remedies.
164.
During the year ended December 31, 2021, we recorded an impairment loss of $12.6 million for the 352-room Marriott Charleston Town Center to reduce the carrying value of the long-lived asset to its fair value.
165.
If we were to lose the right to use a hotel due to a breach or non-renewal of the ground lease, we would be unable to derive income from such hotel, which may materially and adversely affect our results of operations and financial condition.
166.
The swaps regulatory provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act could have an adverse effect on our interest rate hedging activities.
167.
As a result, such incidents could have a material impact on our business and adversely affect our financial condition, financial reporting abilities, and results of operations.
168.
If we incur additional debt in the future, our future interest costs could increase, and adversely affect our liquidity, FFO, Adjusted FFO and results of operations.
169.
Changes in distribution channels, including the increasing use of intermediaries by consumers and companies may adversely affect our profitability.
170.
If we are forced to spend larger amounts of cash from operating activities than anticipated to operate, maintain or renovate existing properties, then our ability to use cash for other purposes, including acquisitions of new properties, could be limited and our profits could be reduced.
171.
If bookings shift to higher cost distribution channels, including internet travel intermediaries and meeting procurement firms, it could materially impact our profits.
172.
The presence of contamination or the failure to remediate contamination at our hotels may expose us to third-party liability and materially and adversely affect our ability to sell, lease or develop the real estate or to incur debt using the real estate as collateral.
173.
During the year ended December 31, 2021, we recorded estimated hurricane-related repair and cleanup costs of $1.1 million related to the damage sustained at Loews New Orleans Hotel during Hurricane Ida.
174.
During the year ended December 31, 2021, we recorded estimated hurricane-related repair and cleanup costs of $1.1 million related to the damage sustained at Loews New Orleans Hotel during Hurricane Ida.
175.
If we are unable to borrow monies on terms and conditions that we find acceptable, we likely will have to reduce the number of properties we can purchase, and the return on the properties we do purchase may be lower.
176.
See "Part I-Item 1A. Risk Factors - Risks Related To The Hotel Industry.
177.
In addition, we may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution, and may be unable to pursue investments that would otherwise be advantageous to us in order to satisfy the source of income or asset diversification requirements for qualifying as a REIT.
178.
Our cash available for distribution to stockholders may not be sufficient to pay distributions at expected or required levels, and we may need external sources in order to make such distributions, or we may not be able to make such distributions at all, which could cause the market price of our common stock to decline significantly.
179.
This could result in less availability of credit and increasing costs for what is available.
180.
These evaluations have resulted in impairment losses for certain of these assets, including goodwill, based on the specific facts and circumstances surrounding these assets, and our estimates of the fair value of these assets, including goodwill.
181.
Thus, compliance with the REIT requirements may hinder our ability to make, and, in certain cases, maintain ownership of, certain attractive investments.
182.
Technology and Information Systems RisksWe are increasingly dependent on information technology, and potential cyber-attacks, unauthorized access events, security problems, or other disruptions present risks.
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