DiamondRock Hospitality Co (DRH)

CIK: 0001298946. SIC: 6798 Real Estate Investment Trusts. Latest 10-K as of: 2026-02-27.

SIC breadcrumb: Finance, Insurance, And Real Estate > Holding And Other Investment Offices > SIC 6798 Real Estate Investment Trusts

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1298946. Latest filing source: 0001298946-26-000013.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-27. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001298946.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-30. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001298946.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001298946-26-000027.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-04-30. Report date: 2026-03-31.

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

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. These forward-looking statements are generally identifiable by use of the words “will,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions, whether in the negative or affirmative. Forward-looking statements are based on management’s current expectations and assumptions and are not guarantees of future performance. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, the risks discussed herein and the risk factors discussed from time to time in our periodic filings with the Securities and Exchange Commission, including in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025 as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Accordingly, there is no assurance that the Company’s expectations will be realized. Except as otherwise required by the federal securities laws, the Company disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this report to reflect events, circumstances or changes in expectations after the date of this report.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

•negative developments in the economy, including, but not limited to elevated interest rates and costs due to recent inflation, job loss or growth trends, an increase in unemployment, other macroeconomic effects due to global instability or conflict or a decrease in corporate earnings and investment;

•increased competition in the lodging industry and from alternative lodging channels or third party internet intermediaries in the markets in which we own properties;

•failure to effectively execute our long-term business strategy and successfully identify and complete acquisitions and dispositions;

•risks and uncertainties affecting hotel management, operations and renovations (including, without limitation, elevated inflation, construction delays, increased construction costs, disruption in hotel operations and the risks associated with our management and franchise agreements);

•risks associated with the availability and terms of financing and the use of debt to fund acquisitions and renovations or refinance existing indebtedness, including the impact of higher interest rates on the cost and/or availability of financing;

•risks associated with our level of indebtedness and our ability to satisfy our obligations under our debt agreements;

•risks associated with the lodging industry overall, including, without limitation, decreases in the frequency of travel and increases in operating costs;

•risks and uncertainties associated with our obligations under our management agreements;

•risks associated with natural disasters and other unforeseen catastrophic events;

•the adverse impact of any future pandemic, epidemic or outbreak of any highly infectious disease on the U.S., regional and global economies, travel, the hospitality industry, and on our financial condition and results of operations and our hotels;

•costs of compliance with government regulations, including, without limitation, the Americans with Disabilities Act;

•potential liability for uninsured losses and environmental contamination;

•risks associated with security breaches through cyber-attacks or otherwise, as well as other significant disruptions of our and our hotel managers’ information technologies and systems, which support our operations and those of our hotel managers;

•risks associated with our potential failure to maintain our qualification as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”);

•possible adverse changes in tax and environmental laws; and

•risks associated with our dependence on key personnel whose continued service is not guaranteed.

Overview

DiamondRock Hospitality Company is a self-managed and self-administered lodging-focused REIT that owns a portfolio of premium hotels and resorts. As of March 31, 2026, we owned a portfolio of 35 premium hotels and resorts that contain 9,595 guest rooms located in 26 different markets in the United States. The markets that we target for ownership are those that we believe align with our strategic objectives, which include those in destination markets with constrained supply trends, those that provide geographic diversity relative to our existing portfolio, and those we consider to have high demand growth potential.

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Each hotel is positioned to maximize its cash flow and value; accordingly, we choose to operate nearly 40% of our portfolio as independent hotels, with the remainder operating under a brand owned by one of the leading global lodging brand companies.

Our primary business is to acquire, own, renovate and asset manage premium hotel properties in the United States. All of our hotels are managed by a third party, either an independent operator or a brand operator, such as Marriott. We are an owner, as opposed to an operator, of the hotels in our portfolio. As an owner, we receive all operating profits or losses generated by our hotels after we pay fees to the hotel managers, which are based on the revenues and profitability of the hotels, and the hotel brands, in the case of franchised hotels, which are based on the revenues of the hotels.

Our strategy is to apply aggressive asset management, prudent financial strategy, and disciplined capital allocation to high quality lodging properties in U.S. urban and resort markets with superior growth prospects and high barriers-to-entry. Our goal is to drive long-term stockholder returns that exceed those generated by our peers by growing free cash flow per share through disciplined capital allocation, including reinvestment in our portfolio and capital recycling, while returning capital through share repurchases and dividends.

We critically evaluate each of our hotels to ensure that we own a portfolio of hotels that conforms to our vision, supports our mission and corresponds with our strategy. On a regular basis, we analyze our portfolio to identify opportunities to invest capital in certain projects or market non-core assets for sale to increase our portfolio quality. We are committed to a conservative capital structure with prudent leverage. We regularly assess the availability and affordability of capital in order to maximize stockholder value and minimize enterprise risk. In addition, we are committed to following sound corporate governance practices and to being open and transparent in our communications with our stockholders.

Our Revenues and Expenses

Our revenue is primarily derived from hotel operations, including but not limited to, rooms revenue, food and beverage revenue and other operating revenue, which consists of parking, spa, resort fees, other guest services, and tenant leases.

Our operating costs and expenses consist of the costs to provide hotel services, including rooms expense, food and beverage expense, other departmental and support expenses, management and franchise fees, and other property-level expenses. Rooms expense includes housekeeping and front office wages and payroll taxes, room supplies, laundry services and other costs. Food and beverage expense includes the cost of food, beverages, and associated labor costs. Other departmental and support expenses include labor and other costs associated with the other operating department revenue, as well as labor and other costs associated with administrative departments, sales and marketing, information technology systems, repairs and maintenance and utility costs. Our hotels that are subject to franchise agreements are charged a royalty fee, plus additional fees for marketing, central reservation systems and other franchisor costs, in order for the hotel properties to operate under the respective brands. Franchise fees are based on a percentage of room revenue, and for certain hotels, additional franchise fees are charged for food and beverage revenue. We enter into management agreements with independent third-party management companies to operate our hotels. The management companies typically earn base and incentive management fees based on the levels of revenues and profitability of each individual hotel. Other property-level expenses include property taxes, insurance, ground lease expense, and other fixed costs.

Key Indicators of Financial Condition and Operating Performance

We use a variety of operating and other information to evaluate the financial condition and operating performance of our business. These key indicators include financial information that is prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), as well as other financial information that is not prepared in accordance with U.S. GAAP. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the performance of individual hotels, groups of hotels and/or our business as a whole. We periodically compare historical information to our internal budgets as well as industry-wide information. These key indicators include:

•Occupancy percentage;

•Average Daily Rate (“ADR”);

•Rooms Revenue per Available Room (“RevPAR”);

•Total Revenue per Available Room (“Total RevPAR”);

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•Earnings Before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), Earnings Before Interest, Income Taxes, Depreciation and Amortization for real estate (“EBITDAre”), Adjusted EBITDA, and Hotel Adjusted EBITDA; and

•Funds From Operations (“FFO”) and Adjusted FFO.

Occupancy, ADR, RevPAR, and Total RevPAR are commonly used measures within the hotel industry to evaluate operating performance. RevPAR, which is calculated as the product of ADR and occupancy percentage, and Total RevPAR, which is calculated as total revenues divided by room nights available, are important statistics for monitoring operating performance at the individual hotel level and across our portfolio. We evaluate individual hotel RevPAR and Total RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a company-wide and regional basis. Room revenue comprised approximately 64% of our total revenues for the three months ended March 31, 2026 and is dictated by demand, as measured by occupancy percentage, pricing, as measured by ADR, and our available supply of hotel rooms.

Our ADR, occupancy percentage, RevPAR, and Total RevPAR performance may be impacted by macroeconomic factors such as U.S. economic conditions generally, inflation, interest rates, tariffs, regional and local employment growth, personal income and corporate earnings, office vacancy rates and business relocation decisions, airport and other business and leisure travel, increased use of lodging alternatives, new hotel construction and the pricing strategies of our competitors. In addition, our ADR, occupancy percentage, RevPAR, and Total RevPAR performance is dependent on the continued success of our hotels' global brands and our hotel

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-27. Report date: 2025-12-31.

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

The following discussion should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements about our business. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed in "Special Note About Forward-Looking Statements" and "Risk Factors" contained in this Annual Report on Form 10-K and in our other reports that we file from time to time with the SEC.

Overview

DiamondRock Hospitality Company (the “Company”, “we”, or "our") is a self-managed and self-administered lodging-focused real estate investment trust ("REIT") that owns a portfolio of premium hotels and resorts. As of December 31, 2025, we owned 35 hotels with 9,595 rooms located in 26 markets in the United States. The markets that we target for ownership are those that we believe align with our strategic objectives, which include those in destination markets with constrained supply trends, those that provide geographic diversity relative to our existing portfolio, and those we consider to have high demand growth potential. We are an owner, as opposed to an operator, of the hotels in our portfolio. As an owner, we receive all operating profits or losses generated by our hotels after we pay fees to the hotel managers, which are based on the revenues and profitability of the hotels, and the hotel brands, in certain cases, which are based on the revenues of the hotels. Each hotel is positioned to maximize its cash flow and value; accordingly, we choose to operate nearly 40% of our portfolio as an independent hotel and the remainder are operated under a brand owned by one of the leading global lodging brand companies (Marriott International, Hilton Worldwide, or IHG Hotels & Resorts).

We are a REIT for U.S. federal income tax purposes. We conduct our business through a traditional umbrella partnership REIT, or UPREIT, in which our hotel properties are owned by our operating partnership, DiamondRock Hospitality Limited Partnership, or subsidiaries of our operating partnership. The Company is the sole general partner of our operating partnership and owns 99.5% of the limited partnership units (“common OP units”) of our operating partnership as of December 31, 2025. The remaining 0.5% of the common OP units are held by third parties and current and former executive officers of the Company. See Note 9 for additional disclosures related to common OP units.

Key Indicators of Financial Condition and Operating Performance

We use a variety of operating and other information to evaluate the financial condition and operating performance of our business. These key indicators include financial information that is prepared in accordance with U.S. Generally Accepted

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Accounting Principles (“U.S. GAAP”), as well as other financial information that is not prepared in accordance with U.S. GAAP. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the performance of individual hotels, groups of hotels and/or our business as a whole. We periodically compare historical information to our internal budgets as well as industry-wide information. These key indicators include:

•Occupancy percentage;

•Average Daily Rate (“ADR”);

•Rooms Revenue per Available Room (“RevPAR”);

•

•Total Revenue per Available Room (“Total RevPAR”);

•Earnings Before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), Earnings Before Interest, Income Taxes, Depreciation and Amortization for real estate (“EBITDAre”), Adjusted EBITDA, and Hotel Adjusted EBITDA; and

•Funds From Operations (“FFO”) and Adjusted FFO.

Occupancy, ADR, RevPAR, and Total RevPAR are commonly used measures within the hotel industry to evaluate operating performance. RevPAR, which is calculated as the product of ADR and occupancy percentage, and Total RevPAR, which is calculated as total revenues divided by room nights available, are important statistics for monitoring operating performance at the individual hotel level and across our portfolio. We evaluate individual hotel RevPAR and Total RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a company-wide and regional basis. Room revenue comprised approximately 65% of our total revenues for the year ended December 31, 2025 and is dictated by demand, as measured by occupancy percentage, pricing, as measured by ADR, and our available supply of hotel rooms.

Our ADR, occupancy percentage, RevPAR, and Total RevPAR performance may be impacted by macroeconomic factors such as U.S. economic conditions generally, inflation, interest rates, tariffs, regional and local employment growth, personal income and corporate earnings, office vacancy rates and business relocation decisions, airport and other business and leisure travel, increased use of lodging alternatives, new hotel construction and the pricing strategies of our competitors. In addition, our ADR, occupancy percentage, RevPAR, and Total RevPAR performance is dependent on the continued success of our hotels' global brands and our hotel operators.

We also use EBITDA, EBITDAre, Adjusted EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO as measures of the financial performance of our business. See “Non-GAAP Financial Measures” for further discussion on these financial measures.

Our Hotels

The following table sets forth certain operating information for the year ended December 31, 2025 for each of the hotels we owned during 2025.

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Property

Location

Number of

Rooms

Occupancy (%)

ADR ($)

RevPAR($)

Total RevPAR ($)

% Change

from 2024 Total RevPAR

Chicago Marriott Downtown Magnificent Mile

Chicago, Illinois

1,200 

63.2 

%

$

262.61 

$

166.04 

$

276.52 

2.0 

%

Westin Boston Seaport District

Boston, Massachusetts

793 

82.1 

%

274.08 

224.97 

347.67 

(0.2)

%

Salt Lake City Marriott Downtown at City Creek

Salt Lake City, Utah

510 

68.5 

%

203.47 

139.47 

193.65 

6.8 

%

Worthington Renaissance Fort Worth Hotel

Fort Worth, Texas

504 

71.8 

%

202.16 

145.12 

271.37 

0.7 

%

Westin San Diego Bayview

San Diego, California

436 

77.7 

%

224.08 

174.05 

241.98 

8.8 

%

Westin Fort Lauderdale Beach Resort

Fort Lauderdale, Florida

432 

74.9 

%

253.60 

190.03 

410.86 

(3.8)

%

Westin Washington D.C. City Center (1)

Washington, D.C.

410 

45.4 

%

254.66 

115.57 

153.18 

4.9 

%

The Dagny Boston

Boston, Massachusetts

403 

85.4 

%

295.92 

252.62 

281.05 

6.6 

%

The Hythe Vail

Vail, Colorado

344 

57.1 

%

434.91 

248.32 

389.33 

(1.3)

%

Courtyard New York Manhattan/Midtown East

New York, New York

321 

90.9 

%

356.47 

323.96 

333.80 

(2.3)

%

Atlanta Marriott Alpharetta

Atlanta, Georgia

318 

65.5 

%

164.41 

107.65 

157.03 

6.0 

%

The Gwen

Chicago, Illinois

311 

74.1 

%

318.29 

235.78 

351.57 

5.7 

%

Hilton Garden Inn New York/Times Square Central

New York, New York

282 

90.7 

%

295.95 

268.52 

298.73 

3.5 

%

Embassy Suites by Hilton Bethesda

Bethesda, Maryland

272 

65.6 

%

166.35 

109.18 

128.26 

(8.4)

%

Hotel Champlain Burlington

Burlington, Vermont

258 

69.6 

%

225.25 

156.74 

229.32 

(5.1)

%

Henderson Beach Resort

Destin, Florida

270 

56.2 

%

379.44 

213.40 

432.04 

7.3 

%

AC Hotel Minneapolis Downtown (2)

Minneapolis, Minnesota

245 

59.7 

%

157.50 

94.04 

109.19 

(2.7)

%

Kimpton Hotel Palomar Phoenix

Phoenix, Arizona

242 

67.7 

%

240.60 

162.92 

274.61 

(1.8)

%

Bourbon Orleans Hotel

New Orleans, Louisiana

220 

68.0 

%

239.49 

162.87 

213.33 

(1.9)

%

Hotel Clio

Denver, Colorado

199 

77.8 

%

315.61 

245.52 

419.90 

4.5 

%

Courtyard New York Manhattan/Fifth Avenue

New York, New York

189 

97.7 

%

326.23 

318.72 

324.42 

13.1 

%

L'Auberge de Sedona (3)

Sedona, Arizona

158 

49.6 

%

733.64 

363.88 

674.38 

(3.5)

%

Margaritaville Beach House Key West

Key West, Florida

186 

82.7 

%

376.79 

311.50 

425.03 

(4.1)

%

The Lodge at Sonoma Resort

Sonoma, California

182 

70.9 

%

420.81 

298.30 

474.93 

7.2 

%

Courtyard Denver Downtown

Denver, Colorado

177 

78.8 

%

212.38 

167.44 

188.38 

7.6 

%

The Lindy Renaissance Charleston Hotel

Charleston, South Carolina

167 

88.0 

%

346.00 

304.47 

394.72 

5.0 

%

Kimpton Shorebreak Huntington Beach Resort

Huntington Beach, California

157 

79.7 

%

301.02 

239.87 

362.58 

(2.7)

%

Cavallo Point, The Lodge at the Golden Gate

Sausalito, California

142 

59.7 

%

591.24 

352.90 

927.11 

1.9 

%

Chico Hot Springs Resort & Day Spa

Pray, Montana

117 

67.1 

%

225.43 

151.32 

355.89 

(1.4)

%

Havana Cabana Key West

Key West, Florida

106 

62.9 

%

269.13 

169.29 

247.74 

(20.3)

%

Tranquility Bay Beachfront Resort

Marathon, Florida

103 

70.2 

%

598.88 

420.39 

539.69 

(5.5)

%

Hotel Emblem San Francisco

San Francisco, California

96 

61.3 

%

205.47 

126.04 

154.10 

3.8 

%

Kimpton Shorebreak Fort Lauderdale Beach Resort

Fort Lauderdale, Florida

96 

71.6 

%

202.63 

145.12 

287.08 

5.5 

%

The Landing Lake Tahoe Resort & Spa

South Lake Tahoe, California

82 

60.9 

%

421.17 

256.68 

468.60 

2.9 

%

Lake Austin Spa Resort

Austin, Texas

40 

52.0 

%

1,041.28 

541.54 

1,330.79 

(3.1)

%

Henderson Park Inn

Destin, Florida

37 

68.8 

%

574.13 

394.77 

658.31 

9.3 

%

TOTAL/WEIGHTED AVERAGE

10,005 

71.9 

%

$

287.51 

$

206.86 

$

318.12 

1.2 

%

________________

(1)The percentage change from 2024 RevPAR reflects the comparable period in 2024 to our 2025 ownership period from January 1, 2025 until the hotel was sold on February 19, 2025.

(2)The hotel was acquired on November 12, 2024. The percentage change from 2024 RevPAR reflects the comparable period in 2024 to our 2025 ownership period.

(3)During the fourth quarter 2025, Orchards Inn Sedona and L'Auberge de Sedona were combined and operate as one hotel. Amounts presented have been adjusted to reflect the combination.

Outlook for 2026

The U.S. economy is projected to deliver moderate growth in 2026, broadly comparable to that of 2025. Growth is supported by easing financial conditions, fiscal stimulus and incremental investment in technology, while constrained by a softening labor market, affordability pressures, and the impacts of an uncertain trade policy. Inflation has moderated from the peak levels observed in recent years but is forecasted to remain above the Federal Reserve's long-term target of 2% in 2026. While interest rate reductions are anticipated this year, the Federal Reserve has continued to signal a cautious, data-dependent approach to monetary policy as it assesses progress towards price stability and conditions in the labor market. Consumer spending, which has been a key source of economic resilience, is expected to remain positive in 2026 but with growth decelerating from 2025 levels. Spending patterns are likely to remain uneven, with higher‑income households continuing to

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account for a disproportionate share of demand, while lower‑income consumers face persistent affordability challenges that may constrain their discretionary spending.

Travel demand remains sensitive to macroeconomic conditions, and uncertainty surrounding economic growth continues to influence the hospitality industry. Travel demand is expected to remain relatively steady in 2026 with RevPAR growth driven primarily by higher rates; however, elevated operating costs, particularly related to labor, utilities, and property taxes are expected to continue to pressure hotel profitability and operating margins. Changes in labor market conditions and broader economic uncertainty may also influence consumer confidence and discretionary spending.

Our portfolio, which consists primarily of luxury and upper upscale hotels and resorts in major urban centers and desirable leisure destinations, is well positioned for continued resilient performance. Our portfolio is relatively insulated from competitive new supply and the majority of our hotels are marketed to higher-income consumers. While certain markets may experience moderating demand trends, as consumers adjust discretionary spending in response to evolving economic conditions, we do expect pricing power to be maintained and ancillary revenues to continue to increase in the portfolio.

In 2026, we expect to benefit from: (1) the ownership of a high-quality portfolio, (2) return on investments from recently completed renovations, rebrandings, and repositionings, and limited earnings disruption from ongoing renovations, (3) incremental travel demand from a favorable holiday calendar and one-time events, such as the FIFA World Cup, (4) asset management initiatives, and (5) a conservative debt capital structure.

Results of Operations

Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024

All properties owned during these periods have been included in our results of operations during the respective periods since their date of acquisition. Based on when a property was acquired, operating results for certain properties are not comparable for the year ended December 31, 2025 and 2024. The AC Hotel Minneapolis Downtown was acquired on November 12, 2024 and will hereinafter be referred to as our “2024 Acquisition.” The Westin Washington D.C. City Center was sold on February 19, 2025, and will hereinafter be referred to as our “2025 Disposition.”

Revenue. Revenue consists of the following (in thousands):

Year Ended December 31,

Change

2025

2024

$

%

Rooms

$

728,606 

$

742,626 

$

(14,020)

(1.9)

%

Food and beverage

281,793 

281,682 

111

— 

Other

110,092 

105,575 

4,517

4.3 

Total revenues

$

1,120,491 

$

1,129,883 

$

(9,392)

(0.8)

%

The following are key hotel operating statistics for the years ended December 31, 2025 and 2024. The 2024 operating statistics reflect the period in 2024 comparable to our ownership period in 2025 for the 2024 Acquisition and 2025 Disposition.

Year Ended December 31,

2025

2024

% Change

Occupancy %

71.9 

%

72.6 

%

(0.7)

%

ADR

$

287.51 

$

283.80 

1.3 

%

RevPAR

$

206.86 

$

206.12 

0.4 

%

Total RevPAR

$

318.12 

$

314.33 

1.2 

%

Rooms revenues decreased by $14.0 million from the year ended December 31, 2024 to the year ended December 31, 2025. A decrease of $22.6 million was attributable to our 2025 Disposition, which was partially offset by an increase of $8.4 million due to our 2024 Acquisition. The remaining increase in rooms revenues of $0.2 million was due to a modest decline in lodging demand offset by ADR growth in group and business transient segments.

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Food and beverage revenues increased $0.1 million from the year ended December 31, 2024 to the year ended December 31, 2025. The increase was attributable to growth in banquets, catering, and service charge revenues, offset by a decrease of $5.7 million due to our 2025 Disposition.

Other revenues, which primarily represent spa, parking, resort fees and attrition and cancellation fees, increased $4.5 million from the year ended December 31, 2024 to the year ended December 31, 2025, primarily due to an increase in spa revenue, parking revenue, and resort fees, including the implementation of a resort fee at the Bourbon Orleans Hotel and The Lindy Renaissance Charleston Hotel.

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

Year Ended December 31,

Change

2025

2024

$

%

Rooms

$

182,694 

$

186,131 

$

(3,437)

(1.8)

%

Food and beverage

191,172 

193,331 

(2,159)

(1.1)

Other departmental and support expenses

270,698 

268,563 

2,135 

0.8 

Management fees

25,838 

27,149 

(1,311)

(4.8)

Franchise fees

38,360 

39,724 

(1,364)

(3.4)

Other property-level expenses

100,542 

103,347 

(2,805)

(2.7)

Total hotel operating expenses

$

809,304 

$

818,245 

$

(8,941)

(1.1)

%

Our hotel operating expenses decreased $8.9 million from $818.2 million for the year ended December 31, 2024 to $809.3 million for the year ended December 31, 2025, with $20.6 million of such decrease attributable to our 2025 Disposition, partially offset by an increase of $7.3 million due to our 2024 Acquisition. The remaining increase of $13.3 million was due to higher property tax assessments, primarily related to our Chicago hotels, as well as increases in utilities and repairs and maintenance costs.

Depreciation and amortization. Our depreciation and amortization expense decreased $0.5 million from $113.6 million for the year ended December 31, 2024 to $113.1 million for the year ended December 31, 2025, primarily due to our 2025 Disposition.

Impairment losses. During the year ended December 31, 2025, we recorded an impairment loss of $1.1 million related to the write-off of construction in progress that was determined not to be recoverable. During the year ended December 31, 2024, we recorded impairment losses of $32.6 million related to the Westin Washington D.C. City Center and $1.6 million related to the write-off of construction in progress that was determined not to be recoverable. The impairment of the Westin Washington D.C. City Center was a result of our evaluation of the recoverability of the carrying amount of the hotel due to our determination in the fourth quarter of 2024 that it was more likely than not that the hotel would be sold before the end of its previously estimated useful life. The impairment adjusted the hotel's carrying amount to its estimated fair value less costs to sell.

Corporate expenses. Corporate expenses principally consist of employee-related costs, including payroll, bonus, share-based compensation and benefits. Corporate expenses also include corporate operating costs, professional fees and directors' fees. Our corporate expenses decreased $18.5 million, from $52.9 million for the year ended December 31, 2024 to $34.4 million for the year ended December 31, 2025, primarily due to severance expense recognized during the year ended December 31, 2024, in connection with executive leadership changes made in April 2024.

Interest expense. Our interest expense was comprised of the following (in thousands):

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Year Ended December 31,

Change

2025

2024

$

%

Unsecured term loan interest

$

50,394 

$

47,232 

$

3,162 

6.7 

%

Mortgage debt interest

7,211 

14,753 

(7,542)

(51.1)

Credit facility interest and unused fees

1,337 

1,253 

84 

6.7 

Amortization of debt issuance costs

1,972 

1,967 

5 

0.3 

Finance lease expense (1)

1,884 

311 

1,573 

505.8 

$

62,798 

$

65,516 

$

(2,718)

(4.1)

%

(1)In October 2024, we extended the term on one of our ground leases, and, as a result, the lease classification changed from an operating lease to a finance lease.

The decrease in interest expense is primarily due to our mortgage debt repayments in 2025.

Income taxes. During the year ended December 31, 2025, we recognized an income tax benefit of $1.2 million, which was primarily related to the release of $2.4 million of the valuation allowance on our deferred tax assets. The release was driven by improved evidence of realizability at our TRSs, including cumulative taxable income over the most recent three-year period, the expected reversal of certain taxable temporary differences, and forecasted future taxable income. This benefit was slightly offset by state and local income tax expense. During the year ended December 31, 2024, we recognized income tax expense of $1.5 million, which was primarily related to state and local income tax expense. The income tax expense was slightly offset by a release of $0.2 million of the valuation allowance on our deferred tax assets.

Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023

Discussion of the comparison of the results of operations for the year ended December 31, 2024 to the year ended December 31, 2023 was included in our Annual Report on Form 10-K for the year ended December 31, 2024 on page 47 under Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which was filed with the SEC on February 28, 2025.

Liquidity and Capital Resources

Our short-term liquidity requirements consist primarily of funds necessary to pay our scheduled debt service, operating

expenses, ground lease payments, capital expenditures directly associated with our hotels, any share repurchases, and distributions to our common stockholders.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotels, renovations and other capital expenditures that need to be made periodically to our hotels, scheduled debt payments, debt maturities, certain redemptions of common OP units, ground lease payments, share repurchases, and making distributions to our common stockholders. We expect to meet our long-term liquidity requirements through various sources of capital, including cash provided by operations, borrowings, issuances of additional equity, including common OP units, and/or debt securities and proceeds from property dispositions. Our ability to incur additional debt is dependent upon a number of factors, including the state of the credit markets, our degree of leverage, the value of our unencumbered assets and borrowing restrictions imposed by existing lenders. Our ability to raise capital through the issuance of additional equity and/or debt securities is also dependent on a number of factors including the current state of the capital markets, investor sentiment and our intended use of proceeds. We may need to raise additional capital if we identify acquisition opportunities that meet our investment objectives and require liquidity in excess of existing cash balances. Our ability to raise funds through the issuance of equity securities depends on, among other things, general market conditions for hotel companies and REITs and market perceptions about us.

Our Financing Strategy

Since our formation in 2004, we have been committed to a conservative capital structure with prudent leverage. Our outstanding debt consists of unsecured term loans and periodic borrowings on our senior unsecured credit facility. We have a preference to maintain a significant portion of our portfolio as unencumbered in order to provide balance sheet flexibility. As of December 31, 2025, our portfolio is fully unencumbered by secured debt. We expect that our strategy will enable us to maintain a balance sheet with an appropriate amount of debt throughout all phases of the lodging cycle. We believe that it is prudent to reduce the inherent risk of highly cyclical lodging fundamentals through a low leverage capital structure.

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We prefer a relatively simple yet efficient capital structure. We generally structure our hotel acquisitions to be straightforward and to fit within our capital structure; however, we will consider a more complex transaction, such as the issuance of common OP units in connection with the acquisition of Cavallo Point, The Lodge at the Golden Gate, if we believe that the projected returns to our stockholders will significantly exceed the returns that would otherwise be available.

We believe that we maintain a reasonable amount of debt. As of December 31, 2025, we had $1.1 billion of debt outstanding with a weighted average interest rate of 4.98%, which includes the effect of interest rate swaps, and a weighted average maturity date of approximately 3.6 years, assuming all extension options available in our debt agreements are exercised. We remain committed to our core strategy of prudent leverage.

The following table outlines the timing and extent of our debt principal maturities and estimated interest payments for our mortgage debt and unsecured term loans as of December 31, 2025, assuming all extension options available in our debt agreements are exercised (in thousands):

Principal

Interest (1)

Total Principal and Interest

2026

$

— 

$

54,799 

$

54,799 

2027

— 

54,630 

54,630 

2028

— 

55,148 

55,148 

2029

500,000 

30,684 

530,684 

2030

600,000 

1,837 

601,837 

$

1,100,000 

$

197,098 

$

1,297,098 

______________

(1)The interest expense for our variable rate unsecured term loans is calculated based on the weighted average rate as of December 31, 2025 of 4.98%, which includes the effect of interest rate swaps.

Information about our financing activities is available in Note 5 to the accompanying consolidated financial statements.

ATM Program

In August 2024, our board of directors approved an “at-the-market” equity offering program (the “ATM Program”), pursuant to which we may issue and sell shares of our common stock from time to time, having an aggregate offering price of up to $200.0 million. We did not sell any shares under the ATM Program during the years ended December 31, 2025 and 2024.

Share Repurchase Program

On May 1, 2024, our board of directors authorized the repurchase of up to $200.0 million of our common stock under a share repurchase program. The timing and actual number of shares repurchased will depend on a variety of factors, including price and general business and market conditions. The share repurchase program does not obligate us to acquire any particular amount of shares, and may be suspended or discontinued at any time at our discretion. The share repurchase program will expire on May 1, 2026. During the year ended December 31, 2025, we repurchased 4,798,642 shares of common stock at an average price of $7.72 per share for an aggregate purchase price of $37.1 million. As of February 27, 2026, we have $137.0 million of authorized capacity remaining under the share repurchase program.

Preferred Shares

We are authorized by our charter to issue up to 10 million shares of preferred stock, $0.01 par value per share. Our board of directors is required to set for each class or series of preferred stock the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, and terms or conditions of redemption.

As of December 31, 2024, there were 4,760,000 shares of 8.250% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) issued and outstanding with a liquidation preference of $25.00 per share. On August 31, 2025, the Series A Preferred Stock became redeemable at the Company's option, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, but not including, the redemption date. On December 31, 2025, the Company redeemed all 4,760,000 outstanding shares at $25.00 per share for a total redemption amount of $119.0 million, plus accrued and unpaid dividends.

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Short-Term Borrowings

Other than borrowings under our senior unsecured credit facility, discussed below, we do not utilize short-term borrowings to meet liquidity requirements.

Senior Unsecured Credit Facility and Unsecured Term Loans

Prior to July 22, 2025, we were party to a Sixth Amended and Restated Credit Agreement that provided us with a $400.0 million senior unsecured revolving credit facility and two term loan facilities in the aggregate amount of $800.0 million. The revolving credit facility was scheduled to mature on September 27, 2026, subject to customary extension options. The term loan facilities consisted of a $500.0 million term loan maturing on January 3, 2028 and a $300.0 million term loan maturing on January 3, 2026. We had the right to increase the aggregate amount of the facilities to $1.4 billion upon the satisfaction of certain standard conditions. On July 2, 2025, we drew $60.0 million on our senior unsecured revolving credit facility, which was subsequently repaid.

On July 22, 2025, we entered into the Seventh Amended and Restated Credit Agreement (the “Amended Credit Facility”), which provides us with a $400.0 million senior unsecured revolving credit facility and three term loan facilities in the aggregate amount of $1.1 billion. The senior unsecured revolving credit facility (the “Revolving Credit Facility”) matures on January 22, 2030. The term loan facilities consist of a $500.0 million term loan that matures on January 3, 2028 (the “Term 1 Loan”), a $300.0 million term loan that matures on January 22, 2030 (the “Term 2 Loan”) and a $300.0 million term loan that matures on January 22, 2029 (the “Term 3 Loan”). The maturity date of the Revolving Credit Facility, Term 1 Loan and Term 3 Loan may be extended for two additional six-month periods upon the payment of applicable fees and satisfaction of certain standard conditions. As of December 31, 2025, we had $400.0 million of borrowing capacity under the Revolving Credit Facility.

Additional information about the Amended Credit Facility, including a summary of significant covenants, can be found in Note 5 to the accompanying consolidated financial statements.

Sources and Uses of Cash

As of December 31, 2025, we had $68.1 million of unrestricted corporate cash and $35.1 million of restricted cash, and no outstanding borrowings on our Revolving Credit Facility.

Our net cash provided by operations was $243.7 million for the year ended December 31, 2025. Our cash from operations generally consists of the net cash flow from hotel operations, offset by cash paid for corporate expenses, interest payments, and other working capital changes.

Our net cash provided by investing activities was $7.5 million for the year ended December 31, 2025, which consisted of $89.0 million of proceeds from the sale of Westin Washington D.C. City Center offset by $81.6 million of capital expenditures.

Our net cash used in financing activities was $276.7 million for the year ended December 31, 2025, which consisted of $295.8 million of mortgage debt principal payments, $119.0 million paid for the redemption of our preferred stock, $98.3 million of distributions paid to holders of common stock and common units, $37.1 million of common shares repurchased under our share repurchase program, $11.6 million of financing costs, $9.8 million of distributions paid to holders of preferred stock, $5.1 million paid to repurchase shares upon the vesting of restricted stock for the payment of tax withholdings obligations, partially offset by $300.0 million of term loan proceeds.

We currently anticipate our significant sources of cash for the year ending December 31, 2026 will be net cash flow from hotel operations and potential dispositions. We expect our estimated uses of cash for the year ending December 31, 2026 will be debt service payments, potential acquisitions of hotel properties, capital expenditures, distributions to common stockholders, share repurchases, and corporate expenses.

Dividend Policy

We intend to distribute to our stockholders dividends at least equal to our REIT taxable income to avoid paying corporate income tax and excise tax on our earnings (other than the earnings of our taxable REIT subsidiaries, which are all subject to tax at regular corporate rates) and to qualify for the tax benefits afforded to REITs under the Code. In order to maintain our qualification as a REIT, we are required to distribute to our stockholders each year at least:

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•90% of our REIT taxable income, determined before the deduction for dividends paid and excluding any net capital gain (which does not necessarily equal net income as calculated in accordance with U.S. GAAP); plus

•90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Code; less

•any excess non-cash income (as determined under the Code).

The timing and frequency of distributions will be authorized by our board of directors and declared by us based upon a variety of factors, including our financial performance, restrictions under applicable law and our current and future loan agreements, our debt service requirements, our capital expenditure requirements, the requirements for qualification as a REIT under the Code and other factors that our board of directors may deem relevant from time to time. Information about our distributions declared and paid can be found in Note 9 to the accompanying consolidated financial statements.

Capital Expenditures

The management and franchise agreements for each of our hotels provide for the establishment of separate property improvement reserves to cover, among other things, the cost of replacing and repairing furniture, fixtures and equipment at our hotels and other routine capital expenditures. Contributions to the property improvement fund are calculated as a percentage of hotel revenues. In addition, we may be required to pay for the cost of certain additional improvements that are not permitted to be funded from the property improvement reserves under the applicable management or franchise agreement. As of December 31, 2025, we have set aside $35.1 million for capital projects in property improvement funds, which are included in restricted cash on our consolidated balance sheets.

We invested approximately $81.6 million in capital improvements at our hotels during the year ended December 31, 2025. Completed projects in 2025 included the following:

•Hilton Garden Inn New York/Times Square Central: We completed a renovation of the hotel's guestrooms during the first quarter of 2025.

•Sedona Repositioning: We completed the repositioning of Orchards Inn as the Cliffs at L'Auberge during the third quarter of 2025, which integrated the hotel with the adjacent L'Auberge de Sedona and included construction of a new hillside pool and path connecting the two properties, renovation of the guestrooms and creation of a new arrival experience and new outdoor event space. The renovation of the guestrooms, arrival experience and event space was completed in May 2025 and the pool and path connection were completed in September 2025.

•Kimpton Hotel Palomar Phoenix: We completed a renovation of the hotel's guestrooms during the third quarter of 2025.

We expect to spend approximately $80 to $90 million in capital improvements at our hotels in 2026. Significant projects in 2026 include the following:

•Courtyard New York Manhattan/Midtown East: We commenced a renovation of the hotel's guestrooms, which is expected to be completed by the end of the first quarter of 2026.

•Henderson Park Inn: We commenced a renovation of the hotel's guestrooms and bathrooms, which is expected to be completed during the first quarter of 2026.

•Westin San Diego Bayview: We expect to commence a renovation of the entrance and public spaces throughout the lobby, including the lobby bar in mid-2026.

•Atlanta Marriott Alpharetta: We expect to commence a renovation of the hotel's guestrooms during the fourth quarter of 2026.

•Kimpton Shorebreak Huntington Beach Resort: We expect to commence a renovation of the hotel's guestrooms during the fourth quarter of 2026.

Non-GAAP Financial Measures

We use the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: EBITDA, EBITDAre, Adjusted EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with U.S. GAAP. EBITDA, EBITDAre, Adjusted EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO, as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company.

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Use and Limitations of Non-GAAP Financial Measures

Our management and Board of Directors use EBITDA, EBITDAre, Adjusted EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies. The use of these non-GAAP financial measures has certain limitations. These non-GAAP financial measures as presented by us, may not be comparable to non-GAAP financial measures as calculated by other real estate companies. These measures do not reflect certain expenses or expenditures that we incurred and will incur, such as depreciation, interest and capital expenditures. We compensate for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable U.S. GAAP financial measures, and our consolidated statements of operations and comprehensive income and consolidated statements of cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with U.S. GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by U.S. GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our U.S. GAAP results and the reconciliations to the corresponding U.S. GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.

EBITDA and EBITDAre

EBITDA represents net income (calculated in accordance with U.S. GAAP) excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. The Company computes EBITDAre in accordance with the National Association of Real Estate Investment Trusts (“Nareit”) guidelines, as defined in its September 2017 white paper “Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate.” EBITDAre represents net income (calculated in accordance with U.S. GAAP) adjusted for: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; (3) depreciation and amortization; (4) gains or losses on the disposition of depreciated property including gains or losses on change of control; (5) 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 (6) adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.

We believe EBITDA and EBITDAre are useful to an investor in evaluating our operating performance because they help investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization, and in the case of EBITDAre, impairment and gains or losses on dispositions of depreciated property) from our operating results. In addition, covenants included in our debt agreements use EBITDA as a measure of financial compliance. We also use EBITDA and EBITDAre as measures in determining the value of hotel acquisitions and dispositions.

FFO

We compute FFO in accordance with standards established by Nareit, which defines FFO as net income (calculated in accordance with U.S. GAAP) excluding gains or losses from sales of properties and impairment losses, plus real estate related depreciation and amortization. We believe that the presentation of FFO provides useful information to investors regarding its operating performance because it is a measure of our operations without regard to specified non-cash items, such as real estate related depreciation and amortization and gains or losses on the sale of assets. We also use FFO as one measure in assessing our operating results.

Adjustments to EBITDAre and FFO

We adjust EBITDAre and FFO when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA and Adjusted FFO when combined with U.S. GAAP net income, EBITDAre and FFO, is beneficial to an investor's complete understanding of our consolidated and property-level operating performance. We adjust EBITDAre and FFO for the following items:

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•Non-Cash Lease Expense and Other Amortization: We exclude the non-cash expense incurred from the straight line recognition of expense from our ground leases and other contractual obligations and the non-cash amortization of our favorable and unfavorable contracts, originally recorded in conjunction with certain hotel acquisitions. We exclude these non-cash items because they do not reflect the actual cash amounts due to the respective lessors in the current period and they are of lesser significance in evaluating our actual performance for that period.

•Cumulative Effect of a Change in Accounting Principle: The Financial Accounting Standards Board promulgates new accounting standards that require or permit the consolidated statement of operations and comprehensive income to reflect the cumulative effect of a change in accounting principle. We exclude the effect of these adjustments, which include the accounting impact from prior periods, because they do not reflect the Company’s actual underlying performance for the current period.

•Gains or Losses from Debt Extinguishment: We exclude the effect of gains or losses recorded on the debt extinguishment because these gains or losses result from transaction activity related to the Company’s capital structure that we believe are not indicative of the ongoing operating performance of the Company or our hotels.

•Hotel Acquisition Costs: We exclude hotel acquisition costs expensed during the period because we believe these transaction costs are not reflective of the ongoing performance of the Company or our hotels.

•Severance Costs: We exclude corporate severance costs, or reversals thereof, incurred with the termination of corporate-level employees and severance costs incurred at our hotels related to lease terminations or structured severance programs because we believe these costs do not reflect the ongoing performance of the Company or our hotels.

•Hotel Manager Transition and Hotel Pre-Opening Costs: We exclude the transition costs associated with a change in hotel manager and the pre-opening costs associated with the redevelopment or rebranding of a hotel because we believe these items do not reflect the ongoing performance of the Company or our hotels.

•Share-Based Compensation Expense: We exclude share-based compensation expense as it is a non-cash item. This adjustment aligns with the calculation of Adjusted EBITDA for our financial covenant ratios under our credit facility, supporting consistency in our financial reporting and covenant compliance, as well as comparability with our peers.

•Other Items: From time to time we incur costs or realize gains that we consider outside the ordinary course of business and that we do not believe reflect the ongoing performance of the Company or our hotels. Such items may include, but are not limited to, the following: non-cash realized gains or losses on our deferred compensation plan assets; management or franchise contract termination fees; terminated transaction costs; gains or losses from legal settlements; costs incurred related to natural disasters; and gains on property insurance claim settlements, other than income related to business interruption insurance.

In addition, to derive Adjusted FFO, we exclude any unrealized fair value adjustments to interest rate swaps and the portion of our non-cash ground lease expense recognized as interest expense. We exclude these non-cash amounts because they do not reflect the underlying performance of the Company.

Hotel Adjusted EBITDA

We believe that Hotel Adjusted EBITDA provides our investors with a useful financial measure to evaluate our hotel operating performance, excluding the impact of our capital structure (primarily interest), our asset base (primarily depreciation and amortization), and our corporate-level expenses. With respect to Hotel Adjusted EBITDA, we believe that excluding the effect of corporate-level expenses provides a more complete understanding of the operating results over which individual hotels and third-party management companies have direct control. We believe property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and effectiveness of the third-party management companies operating our business on a property-level basis. Hotel Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by total hotel revenues.

The following table is a reconciliation of our U.S. GAAP net income to EBITDA, EBITDAre, Adjusted EBITDA and Hotel Adjusted EBITDA (in thousands):

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Year Ended December 31,

2025

2024

(As Adjusted)(1)

2023

(As Adjusted)(1)

Net income

$

101,942 

$

48,250 

$

86,635 

Interest expense

62,798 

65,516 

65,072 

Income tax (benefit) expense

(1,231)

1,541 

317 

Real estate related depreciation and amortization

113,107 

113,588 

111,302 

EBITDA

276,616 

228,895 

263,326 

Impairment losses

1,076 

34,169 

941 

EBITDAre

277,692 

263,064 

264,267 

Non-cash lease expense and other amortization

5,140 

5,970 

6,156 

Share-based compensation expense (2)

7,350 

7,458 

9,463 

Hotel pre-opening costs

501 

1,006 

1,246 

Terminated transaction costs

1,058 

— 

— 

Loss on debt extinguishment

5,850 

— 

— 

Severance costs (3)

— 

20,362 

— 

Adjusted EBITDA

$

297,591 

$

297,860 

$

281,132 

Corporate expenses

25,279 

25,001 

22,577 

Interest (income) and other (income) expense, net

(6,042)

(4,247)

(2,553)

Hotel Adjusted EBITDA

$

316,828 

$

318,614 

$

301,156 

_______________

(1)

Effective January 1, 2025, we exclude share-based compensation from our calculation of Adjusted EBITDA. Amounts reported for 2024 and 2023 have been adjusted to reflect the current year presentation.

(2)

Amounts include less than $0.1 million, $0.6 million, and $0.7 million of non-cash items related to our deferred compensation plan for the years ended December 31, 2025, 2024, and 2023, respectively.

(3)

During the year ended December 31, 2024, we incurred severance costs related to the executive team changes that occurred in April 2024.

The following table is a reconciliation of our U.S. GAAP net income to FFO and Adjusted FFO (in thousands):

Year Ended December 31,

2025

2024

(As Adjusted)(1)

2023

(As Adjusted)(1)

Net income

$

101,942 

$

48,250 

$

86,635 

Real estate related depreciation and amortization

113,107 

113,588 

111,302 

Impairment losses

1,076 

34,169 

941 

FFO

216,125 

196,007 

198,878 

Distributions to preferred stockholders

(9,817)

(9,817)

(9,817)

FFO available to common stock and unit holders

206,308 

186,190 

189,061 

Non-cash lease expense and other amortization

5,891 

6,092 

6,156 

Share-based compensation expense

7,350 

7,458 

9,463 

Terminated transaction costs

1,058 

— 

— 

Loss on debt extinguishment

5,850 

— 

— 

Severance costs (3)

— 

20,362 

— 

Hotel pre-opening costs

501 

1,006 

1,246 

Fair value adjustments to interest rate swaps

— 

— 

2,033 

Adjusted FFO available to common stock and unit holders

$

226,958 

$

221,108 

$

207,959 

_______________

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(1)

Effective January 1, 2025, we exclude share-based compensation from our calculation of Adjusted FFO. Amounts reported for 2024 and 2023 have been adjusted to reflect the current year presentation.

(2)

Amounts include less than $0.1 million, $0.6 million, and $0.7 million of non-cash items related to our deferred compensation plan for the years ended December 31, 2025, 2024, and 2023, respectively.

(3)

During the year ended December 31, 2024, we incurred severance costs related to the executive team changes that occurred in April 2024.

Critical Accounting Estimates and Policies

Our consolidated financial statements include the accounts of DiamondRock Hospitality Company and all consolidated subsidiaries. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. While we do not believe the reported amounts would be materially different, application of these policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ materially from these estimates. We evaluate our estimates and judgments, including those related to the impairment of long-lived assets, on an ongoing basis. We base our estimates on experience and on various assumptions that are believed to be reasonable under the circumstances. All of our significant accounting policies are disclosed in the notes to our consolidated financial statements. The following represent certain critical accounting policies that require us to exercise our business judgment or make significant estimates:

Investment in Hotels

Property and equipment are recorded at cost. Costs of improvements that extend the economic life or improve service potential, which generally includes significant improvements, renovations and replacements, are capitalized, while repairs and maintenance are expensed as incurred.

Acquisitions of hotel properties are generally accounted for as acquisitions of a group of assets and recorded at relative fair value based upon total accumulated cost of the acquisition. The acquisition cost is allocated to land, buildings, improvements, furniture, fixtures and equipment, as well as identifiable intangible and lease assets and liabilities. In making estimates of fair values for purposes of allocating purchase price we evaluate several factors, including but not limited to comparable sales, expected future cash flows discounted at risk adjusted rates as well as industry and Company data. Direct acquisition-related costs are capitalized as a component of the acquired assets.

Depreciation is recorded using the straight-line method over the assets' estimated useful lives, which are generally as follows: 15 to 40 years for buildings and improvements; 1 to 10 years for furniture, fixtures and equipment; and 3 to 5 years for computer equipment and acquired software.

We evaluate the carrying value of our property and equipment for indicators of impairment. Indicators of impairment that may cause a review include, but are not limited to, adverse changes in the demand for lodging at the properties, current or projected losses from operations, and an expectation that the property is more likely than not to be sold significantly before the end of its useful life. When such indicators exist, we perform an analysis to determine the recoverability of the asset group by comparing the estimated undiscounted future cash flows, including the proceeds from the ultimate disposition of a hotel, less costs to sell, to the net carrying value of the asset group. If the carrying value of the asset group is not recoverable and it exceeds the estimated fair value of the asset group, we recognize an impairment loss in our consolidated statement of operations and comprehensive income for the amount by which the carrying value exceeds the estimated fair value. We allocate the impairment loss related to the asset group among the various assets within the asset group pro rata based on the relative carrying values of the respective assets.

We will classify a hotel as held for sale in the period that we have made the decision to dispose of the hotel, a binding agreement to purchase the property has been signed under which the buyer has committed a significant amount of nonrefundable cash and no significant financing or other contingencies exist which could cause the transaction to not be completed in a timely manner. If these criteria are met, we will record an impairment loss if the fair value less costs to sell is lower than the carrying amount of the hotel and related assets and will cease recording depreciation expense. We will classify the assets and related liabilities as held for sale on the balance sheet.

Upon the sale or retirement of a fixed asset, the cost and related accumulated depreciation are removed from the Company’s accounts and any resulting gain or loss is included in the statements of operations and comprehensive income.

Inflation

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Operators of hotels generally possess the ability to adjust room rates on a daily basis to reflect the effects of inflation. Our management companies may adjust room rates daily, excluding previously contractually committed reservations. However, competitive pressures, demand elasticity, or other market factors may limit the ability of our management companies to increase room rates. Inflation may also affect our operating expenses and the cost of capital improvements, including, without limitation, increases in costs of labor, employee-related benefits, food, commodities and other materials, taxes, property and casualty insurance and utilities. Refer to “Outlook for 2026” above for more information regarding inflation.

Seasonality

The periods during which our hotels experience higher revenues vary from property to property, depending principally upon location and the customer base served. Accordingly, we expect some seasonality in our business. Volatility in our financial performance from the seasonality of the lodging industry could adversely affect our financial condition and results of operations.

New Accounting Pronouncements Not Yet Adopted

See Note 2 to the accompanying consolidated financial statements for additional information relating to recently issued accounting pronouncements.