Xenia Hotels & Resorts, Inc. (XHR) FY 2023 MD&A

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

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included herein this Annual 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 Regarding Forward-Looking Statements" and "Part I-Item 1A. Risk Factors" contained in this Annual Report and in our other reports that we file from time to time with the SEC.

Overview

Xenia is a self-advised and self-administered REIT that invests primarily in uniquely positioned luxury and upper upscale hotels and resorts with a focus on the top 25 lodging markets as well as key leisure destinations in the United States ("U.S."). As of December 31, 2023, we owned 32 hotels and resorts, comprising 9,514 rooms across 14 states. Our hotels are primarily operated and/or licensed by industry leaders such as Marriott, Hyatt, Fairmont, Kimpton, Loews, Hilton, The Kessler Collection and Davidson.

We plan to grow our business through a differentiated acquisition strategy, aggressive asset management and capital investment in our properties. 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. We believe our focus on a broader range of markets allows us to evaluate a greater number of acquisition opportunities and thereby be highly selective in our pursuit of only those opportunities that best fit our investment criteria. 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. Within these segments, we focus on hotels and resorts that will provide guests with a distinctive lodging experience and that are tailored to reflect local market environments.

We also seek properties that exhibit an opportunity for us to enhance operating performance through aggressive asset management and targeted capital investment. While we do not operate our hotel properties, our asset management team and our executive management team monitor and work with our hotel managers by conducting regular revenue, sales, and financial performance reviews and also perform in-depth on-site reviews focused on ongoing operating margin improvement initiatives. We interact frequently with our management companies and on-site management personnel, including conducting regular meetings with key executives of our management companies and brands. 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.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company, the Operating Partnership and XHR Holding. The Company's subsidiaries generally consist of limited liability companies, limited partnerships and the TRS. The effects of all inter-company transactions have been eliminated. Corporate costs directly associated with our executive offices, personnel and other administrative costs are reflected as general and administrative expenses on the consolidated statements of operations and comprehensive income (loss).

Market Outlook

The U.S. lodging industry has historically exhibited a strong correlation to U.S. GDP, which increased at an annual rate of approximately 2.5% during 2023, according to the U.S. Department of Commerce, in comparison to an increase of approximately 1.9% during 2022. The increase in GDP during the year ended December 31, 2023 reflected increases in consumer spending, nonresidential fixed investment, state and local government spending, exports, and federal government spending as well a decrease in imports that were partially offset by decreases in residential fixed investment and inventory investment. During the fourth quarter of 2023, GDP increased at an annual rate of 3.3%, representing a decrease from the annual rate of 4.9% in the third quarter of 2023. The increase during the fourth quarter of 2023 reflected increases in consumer spending, exports, state and local government spending, federal government spending, private inventory investment, and residential and nonresidential fixed investment that were partially offset by an increase in imports. In addition, the unemployment rate decreased slightly to 3.7% in December 2023 compared to 3.8% in September 2023 and increased from 3.6% in June 2023.

As operating results continued to gain strength following the COVID-19 pandemic, overall industry lodging demand increased 1.1% and new hotel supply increased by 0.5% during the year ended December 31, 2023 compared to 2022. The increase in demand led to an increase in industry RevPAR of 4.9% for the year ended December 31, 2023 compared to 2022, which was driven by an increase in occupancy of 0.6% coupled with a 4.3% increase in ADR. All U.S. data for the year ended December 31, 2023 are per industry reports.

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Significant Events

The following significant events occurred during the year ended December 31, 2023:

•In January 2023, the Company entered into a new $675 million senior unsecured credit facility comprised of a $450 million revolving line of credit, a $125 million term loan and a $100 million delayed draw term loan and used the proceeds to pay off the $125 million corporate credit facility term loan as well as the $99.5 million outstanding mortgage loan collateralized by Renaissance Atlanta Waverly Hotel & Convention Center.

•In January 2023, the Company amended the mortgage loan collateralized by Andaz Napa to update the variable index from one-month LIBOR to Term SOFR, increase the credit spread, increase the principal amount to $55 million and extend the maturity date through January 2028.

•During the year ended December 31, 2023, the Company repurchased in the open market and retired $35.3 million aggregate principal of its 6.375% 2020 Senior Notes due August 2025.

•During the year ended December 31, 2023, 10,414,262 shares were repurchased at a weighted-average price of $12.74 per share for an aggregate purchase price of $132.7 million.

•We invested approximately $120.9 million in portfolio improvements, which we believe will drive positive performance at these properties in the future. In June 2023, we commenced the transformative renovation and upbranding of the 491-room Hyatt Regency Scottsdale Resort & Spa at Gainey Ranch to a Grand Hyatt with completion of all phases expected by the end of 2024. Upon completion, the property will have five additional keys, or 496 rooms.

Our Customers

We generate a significant portion of our revenue from the following broad customer groups: transient business, group business and contract business. Transient business broadly represents individual business or leisure travelers. Historically, business travelers have made up the majority of transient demand at our hotels. Therefore, we will be more affected by trends in business travel than trends in leisure demand. Group business represents clusters of guestrooms booked together, usually with a minimum of 10 rooms. Contract business refers to blocks of rooms sold to a specific company for an extended period of time at significantly discounted rates. Airline crews have historically been typical generators of contract demand at some of our hotels. Additionally, contract rates may be utilized by hotels that are located in markets that are experiencing consistently lower levels of demand.

Our Revenues and Expenses

Revenues

Our revenues are derived from hotel operations and are composed of the following sources:

•Rooms revenues - Represents the sale of rooms at our hotel properties and accounts for a substantial majority of our total revenue. Occupancy and ADR are the major drivers of rooms revenues. The business mix and distribution channel mix of the hotels are significant determinants of ADR.

•Food and beverage revenues - Occupancy and the type of customer staying at the hotel are the major drivers of food and beverage revenue (i.e., group business typically generates more food and beverage business through catering functions when compared to transient business, which may or may not utilize the hotel’s food and beverage outlets).

•Other revenues - Represents ancillary revenue such as parking, resort or destination amenity fees, golf, spa services and other guest services and tenant leases. Occupancy and the nature of amenities at the property are the main drivers of other revenue.

Expenses

Our operating expenses consist of costs to provide hotel services and corporate-level expenses. The following are components of our expenses:

•Rooms expenses - These costs include housekeeping wages, payroll taxes, room supplies, laundry services and front desk costs. Similar to rooms revenues, occupancy is the major driver of rooms expense and as a result, rooms expense has a significant correlation to rooms revenues. These costs as a percentage of revenue can increase based on increases in salaries, wages and benefits, as well as on the level of service and amenities that are provided.

•Food and beverage expenses - These expenses primarily include food, beverage and associated labor costs. Occupancy and the type of customer staying at the hotel are major drivers of food and beverage expense (i.e.,

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catered functions generally are more profitable than on-property food and beverage outlet sales), which correlates closely with food and beverage revenue.

•Other direct expenses - These expenses primarily include labor and other costs associated with other revenues, such as parking and other guest services.

•Other indirect expenses - These expenses primarily include hotel costs associated with general and administrative, state sales and excise taxes, sales and marketing, information technology and telecommunications, repairs and maintenance and utility costs.

•Management and franchise fees - Base management fees are computed as a percentage of gross revenue. Management fees also include incentive management fees, which are typically a percentage of net operating income (or similar measurements of hotel profitability) above an annual threshold. Franchise fees are computed as a percentage of rooms revenues. See "Part I-Item 2. Properties - Our Principal Agreements" for a summary of key terms related to our management and franchise agreements.

•Depreciation and amortization expense - These are non-cash expenses that primarily consist of depreciation of fixed assets such as buildings, furniture, fixtures and equipment at our hotels, as well as certain corporate assets. Amortization expense primarily consists of amortization of acquired advance bookings and acquired leases, which are amortized over the life of the related term or lease.

•Real estate taxes, personal property taxes and insurance - These expenses primarily include real estate tax and personal property tax payments due in the respective jurisdictions where our hotels are located, partially offset by refunds from prior year real estate tax appeals, and payments due under insurance policies for our hotel portfolio.

•Ground lease expense - This expense represents the rent associated with land underlying our hotels and/or meeting facilities that we lease from third-parties. It also includes the non-cash ground rent determined as part of the initial purchase price allocation at acquisition.

•General and administrative expenses - These expenses primarily consist of compensation expense for our corporate staff and personnel supporting our business (including non-cash stock compensation expense), office administrative and related expenses, legal and professional fees, and other corporate costs.

•Gain on business interruption insurance - These gains consist of insurance settlements for lost income that was covered per the terms of our respective insurance policies, which was in excess of insurance deductibles.

•Other operating expenses - These expenses typically consist of legal fees, other professional fees, franchise taxes, pre-opening costs, other direct costs associated with our pursuit and acquisitions of hotel investments which are not ultimately consummated and hotel management transition efforts. As a result, these costs will vary depending on the timing, volume and nature of acquisition activity.

•Impairment and other losses - Our real estate, intangible assets, goodwill and other long-lived assets are generally held for the long-term. We evaluate these assets for impairment as discussed in "Critical Accounting Policies and Estimates." 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. 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. Additionally, from time to time we may record other losses related to property damage resulting from natural disasters and/or other disaster remediation costs.

Most categories of variable operating expenses, including labor costs such as housekeeping, fluctuate with changes in occupancy. Increases in occupancy are accompanied by increases in most categories of variable operating expenses, while increases in ADR typically only result in increases in limited categories of operating costs and expenses, such as management fees and franchise fees, which are based on hotel revenues. Thus, changes in ADR have a more significant impact on operating margins than changes in occupancy.

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Factors that May Affect Results of Operations

The principal factors affecting our operating results include overall demand for hotel rooms compared to the supply of available hotel rooms, economic conditions, and the ability of our third-party management companies to increase or maintain revenues while controlling expenses.

•Demand and economic conditions - Consumer demand for lodging, especially business travel, is closely linked to the performance of the overall economy and is sensitive to business and personal discretionary spending levels. 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. Additionally, consumers may seek lower-cost alternatives when economic conditions are challenging. As a result, changes in consumer demand and general business cycles can subject and have subjected our revenues to significant volatility. See "Part I-Item 1A. Risk Factors - Risks Related To The Hotel Industry."

•Supply - New hotel room supply is an important factor that can affect the lodging industry’s performance. Room rates and occupancy, and thus RevPAR, tend to increase when demand growth exceeds supply growth. The addition of new competitive hotels affects the ability of existing hotels to drive growth in RevPAR, and thus profits. New development is driven largely by construction costs, the availability of financing and expected performance of existing hotels.

•Third-party hotel managers - We depend on the performance of third-party hotel management companies that manage the operations of each of our hotels under long-term agreements. 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. We believe we have good relationships with our third-party managers and are committed to the continued growth and development of these relationships.

•Fixed nature of expenses - Many of the expenses associated with operating our hotels are relatively fixed. These expenses include certain personnel costs, rent, property taxes, insurance and utilities, as well as sales and marketing expenses. 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. This effect can be especially pronounced during periods of economic contraction or slow economic growth.

•Seasonality - The lodging industry is seasonal in nature, which can be expected to cause fluctuations in our hotel rooms revenues, occupancy levels, room rates, operating expenses and cash flows. The periods during which our hotels experience higher or lower levels of demand vary from property to property and depend upon location, type of property and competitive mix within the specific location.

•Competition - The lodging industry is highly competitive. Our hotels compete with other hotels and alternative accommodations for guests in each of their markets based on a number of factors, including, among others, room rates, quality of accommodations, service levels and amenities, location, brand affiliation, reputation, and reservation systems. Competition is often specific to the individual markets in which our hotels are located and includes competition from existing and new hotels. We believe that hotels, such as those in our portfolio, will enjoy the competitive advantages associated with operating under nationally recognized brands.

Key Indicators of Operating Performance

We measure hotel results of operations and the operating performance of our business by evaluating financial and non-financial metrics such as RevPAR; ADR; occupancy; EBITDA, EBITDAre and Adjusted EBITDAre; FFO and Adjusted FFO. We evaluate individual hotel and company-wide performance with comparisons to budgets, prior periods and competing properties. ADR, occupancy and RevPAR may be impacted by macroeconomic factors as well as regional and local economies and events. See "Non-GAAP Financial Measures" for further discussion of the Company's use, definitions and limitations of EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO.

Critical Accounting Policies and Estimates

General

The preparation of consolidated 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. We consider the following policies critical because they require the most difficult, subjective and complex judgments and include estimates about matters that are inherently uncertain, involve various assumptions, require management judgment, and because they are important for understanding and evaluating our

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reported financial results. As a result, these accounting policies could materially affect our financial position, results of operations and related disclosures. We evaluate our estimates, assumptions and judgments on an ongoing basis, based on information that is then available to us, our historical experiences and various matters that we believe are reasonable and appropriate for consideration under the circumstances. Actual results may differ significantly from these estimates due to changes in judgments, assumptions and conditions as a result of unforeseen events or otherwise, which could have a material impact on financial position or results of operations. All of our significant accounting policies are disclosed in the notes to our consolidated financial statements in "Part IV. Exhibits and Financial Statements Schedules." The following represent certain critical accounting policies that require us to exercise our business judgment or make significant estimates.

Investment in Hotel Properties

Investments in hotel properties, including land and land improvements, buildings and building improvements, furniture, fixtures and equipment, and identifiable intangible assets and liabilities, will generally be accounted for as asset acquisitions. The determination of whether or not an acquisition qualifies as an asset acquisition or business combination is an area that requires management's use of judgment in evaluating the criteria of the screen test.

Acquired assets are recorded at their relative fair value based on total accumulated costs of the acquisition, which includes direct acquisition-related costs. Identifiable assets include land, land improvements, building and building improvements, furniture, fixtures and equipment, inventory and identifiable intangible assets or liabilities. Identifiable intangible assets or liabilities typically arise from contractual arrangements assumed in connection with the transaction, including terms that are above or below market compared to an estimated market agreement at the acquisition date. The allocation of the purchase price to elements of our acquired hotel properties is an area that requires judgment and significant estimates. Therefore, the amounts allocated to acquired assets and liabilities could be materially different than if that transaction had occurred on a different date or in a different location. At times estimates are determined based on limited data for comparable market transactions, such as discount rates used in the market or income valuation approach, or the purchase involves land or a ground lease in a niche market. This could materially impact the allocation to identifiable assets and the related amortization and depreciation over future periods if the value was assigned to another identifiable asset acquired.

Impairment

Long-lived assets and intangibles

The Company assesses the carrying values of the respective long-lived assets, which includes hotel properties and the related intangible assets, whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. Events or circumstances that may cause a review include, but are not limited to, when (1) a hotel property experiences a significant decrease in the market price of the long-lived asset, (2) a hotel property experiences a current or projected loss from operations combined with a history of operating or cash flow losses, (3) it becomes more likely than not that a hotel property will be sold before the end of its useful life, (4) an accumulation of costs is significantly in excess of the amount originally expected for the acquisition, construction or renovation of a long-lived asset, (5) adverse changes in the demand occur for lodging at a specific property due to declining national or local economic conditions and/or new hotel construction in markets where the hotel is located, (6) there is a significant adverse change in legal factors or in the business climate that could affect the value of the long-lived asset and/or (7) there is a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition. When such conditions exist, we perform an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the eventual disposition of a hotel exceed its carrying value. If it is determined that the estimated undiscounted future cash flow do not exceed the carrying value of the asset, an adjustment to reduce the carrying amount of the hotel to its estimated fair market value is recorded and an impairment loss is recognized.

Impairment Estimates

In the evaluation of impairment of our hotel properties, including the related intangible assets and goodwill, we make many assumptions and estimates including valuation approach, projected cash flows, growth rates, eventual disposition, expected useful life and holding period, future capital expenditures, and fair values, which includes consideration of capitalization rates, discount rates, and comparable selling prices. The valuation and possible subsequent impairment of a hotel or goodwill is a significant estimate that can and does change based on our continuous process of analyzing each hotel property and goodwill and reviewing assumptions about uncertain inherent factors, as well as the economic condition of the property at a particular point in time.

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.

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Results of Operations

Operating Results Overview

Our total portfolio RevPAR, which includes the results of hotels sold or acquired for the period of ownership by the Company, increased 4.1% to $169.46 for the year ended December 31, 2023, compared to $162.75 for the year ended December 31, 2022. The increase in our total portfolio RevPAR for the year ended December 31, 2023 compared to the same period in 2022 was driven by increases in both occupancy and ADR.

Net income decreased 65.5% for the year ended December 31, 2023 compared to 2022, which was primarily attributed to:

•no gain or loss on the sale of investment properties in 2023 compared to a $27.3 million gain on the sale of investment properties in 2022;

•a $7.0 million reduction in operating income;

•a $5.5 million reduction in hotel operating income attributed to the three hotels sold in 2022;

•a $3.0 million increase in corporate general and administrative expenses;

•a $2.3 million increase in interest expense;

•a $2.3 million reduction in business interruption proceeds;

•a $0.9 million increase in loss on extinguishment of debt; and

•a $0.5 million increase in other operating expenses.

These decreases were offset by:

•a $5.7 million increase in other income primarily due to an increase in interest income;

•a $2.6 million increase in hotel operating income attributed to the acquisition of W Nashville;

•a $1.3 million reduction in impairment and other losses;

•a $0.8 million reduction in income tax expense; and

•a $0.6 million reduction in depreciation and amortization expense.

Adjusted EBITDAre and Adjusted FFO attributable to common stock and unit holders decreased 2.0% and 4.0%, respectively, for the year ended December 31, 2023 compared to 2022. The decreases during the year ended December 31, 2023 were primarily attributable to a reduction in operating income primarily attributable to normalizing leisure demand and renovation disruption. Refer to "Non-GAAP Financial Measures" for the definition of these financial measures, a description of how they are useful to investors as key supplemental measures of our operating performance and the reconciliation of these non-GAAP financial measures to net income (loss) attributable to common stock and unit holders.

Portfolio Composition

As of December 31, 2023 and 2022, the Company owned 32 lodging properties with a total of 9,514 and 9,508 rooms, respectively. As of December 31, 2021, the Company owned 34 lodging properties with a total of 9,659 rooms.

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The following represents the disposition details for the properties sold in the years ended December 31, 2022 and 2021 (in thousands, except number of rooms):

No hotels were sold during the year ended December 31, 2023.

The following represents our acquisitions activity for the year ended December 31, 2022 (in thousands, except number of rooms):

No hotels were acquired during the years ended December 31, 2023 and 2021.

Comparison of the year ended December 31, 2023 to the year ended December 31, 2022

Operating Information

The following table sets forth certain operating information for the years ended December 31, 2023 and 2022:

(1)     During the year ended December 31, 2023, we added three newly created rooms at both The Ritz-Carlton, Denver and Marriott Woodlands Waterway Hotel & Convention Center. During the year ended December 31, 2022, we acquired the 346-room W Nashville.

(2)     During the year ended December 31, 2022, we disposed of three hotels with 495 rooms and reduced the room count by two at Hyatt Regency Scottsdale Resort & Spa at Gainey Ranch.

(3)    For hotels disposed of during the period, operating results and statistics are only included through the date of the respective disposition.

(4)    Hotel operating income represents the difference between total revenues and total hotel operating expenses.

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Revenues

Revenues consists of room, food and beverage, and other revenues from our hotels, as follows (in thousands):

Rooms revenues

Rooms revenues increased by $12.0 million, or 2.1%, to $588.3 million for the year ended December 31, 2023 from $576.3 million for the year ended December 31, 2022 driven by strong RevPAR growth in both business transient and group demand and robust leisure transient demand in the first quarter, along with transaction activity including:

•$14.4 million decrease attributed to sale of Kimpton Hotel Monaco Chicago in January 2022, Bohemian Hotel Celebration, Autograph Collection in October 2022 and Kimpton Hotel Monaco Denver in December 2022 (collectively, "the three hotels sold in 2022"), and

•$7.0 million increase attributed to the acquisition of W Nashville in March 2022.

Leisure transient demand declined somewhat as it began to normalize following higher than normal leisure demand during the recovery from COVID-19.

Rooms revenues increased $19.3 million, or 3.6%, for our comparable hotels, which was attributed to a 3.6% increase in RevPAR in 2023 compared to 2022, driven by an increase in occupancy of 230 basis points aided by easier comparable performance to 2022, particularly in January and February which were impacted by the Omicron variant. For our comparable hotels, ADR was flat in 2023 compared to 2022.

Food and beverage revenues

Food and beverage revenues increased by $16.3 million, or 4.8%, to $354.1 million for the year ended December 31, 2023 from $337.8 million for the year ended December 31, 2022 primarily due to significant growth in business transient and group demand, along with transaction activity including:

•$6.7 million decrease attributed to the three hotels sold in 2022, and

•$4.0 million increase attributed to the acquisition of W Nashville in March 2022.

Food and beverage revenues increased $19.1 million, or 6.1%, for our comparable hotels.

Other revenues

Other revenues decreased by $0.5 million, or 0.6%, to $83.1 million for the year ended December 31, 2023 from $83.5 million for the year ended December 31, 2022. This decrease was attributed to a $4.4 million reduction in other revenues from cancellations and attrition for comparable hotels as well as a reduction of $1.3 million attributed to the three hotels sold in 2022. This decrease was partially offset by a $4.5 million increase in other revenues, excluding revenues from cancellations and attrition, for our comparable properties as well as a $0.6 million increase attributed to the acquisition of W Nashville in March 2022.

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Hotel Operating Expenses

Hotel operating expenses consist of the following (in thousands):

Total hotel operating expenses

Generally, hotel operating costs fluctuate based on various factors, including occupancy, labor costs, utilities and insurance costs which have increased during the last year. Luxury and upper upscale hotels generally have higher fixed costs than other types of hotels due to the services and amenities provided to guests.

Total hotel operating expenses increased $31.5 million, or 4.7%, to $703.8 million for the year ended December 31, 2023 from $672.3 million for the year ended December 31, 2022, primarily due to the increase in total revenues along with increased staffing and higher costs of labor in 2023 compared to 2022, along with transaction activity including:

•$16.0 million decrease attributed to the three hotels sold in 2022, and

•$8.7 million increase attributed to the acquisition of W Nashville in March 2022.

Hotel operating expenses increased $38.8 million, or 6.2%, on a 4.1% increase in total revenues for our comparable hotels.

Corporate and Other Expenses

Corporate and other expenses consist of the following (in thousands):

Depreciation and amortization

Depreciation and amortization expense decreased $0.6 million, or 0.5%, to $132.0 million for the year ended December 31, 2023 from $132.6 million for the year ended December 31, 2022. This decrease was primarily attributed a reduction of $2.7 million in depreciation and amortization expense related to the three hotels sold in 2022 as well as the timing of new assets being placed in service and fully depreciated assets during the comparable periods. These decreases were partially offset by an increase attributed to the acquisition of W Nashville in March 2022.

Real estate taxes, personal property taxes and insurance

Real estate taxes, personal property taxes and insurance expenses increased $6.1 million, or 13.7%, to $50.5 million for the year ended December 31, 2023 from $44.4 million for the year ended December 31, 2022. This increase was primarily attributed to a

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$3.4 million increase in insurance premiums, a $3.2 million increase in real estate taxes and an increase of $0.4 million attributed to the acquisition of W Nashville in March 2022. These increases were partially offset by a $0.9 million reduction in real estate taxes, personal property taxes and insurance related to the three hotels sold in 2022.

Ground lease expense

Ground lease expense increased $0.2 million, or 8.0%, to $3.0 million for the year ended December 31, 2023 from $2.8 million for the year ended December 31, 2022, which was primarily attributable to an increase in percentage rent in 2023, which is based on revenues at certain hotels with ground leases, compared to 2022.

General and administrative expenses

General and administrative expenses increased $3.0 million, or 8.7%, to $37.2 million for the year ended December 31, 2023 from $34.3 million for the year ended December 31, 2022. This increase is primarily due to the write off of $1.2 million of accumulated offering costs associated with the prior ATM program offering which expired in August 2023 as well as increased employee related costs.

Gain on business interruption insurance

Gain on business interruption insurance was $0.2 million for the year ended December 31, 2023, which was attributed to insurance proceeds for a portion of lost income associated with cancellations at Fairmont Pittsburgh due to power outages during certain portions of December 2022 and January 2023. Gain on business interruption insurance was $2.5 million for the year ended December 31, 2022, which was attributed to $1.5 million in insurance proceeds for a portion of lost income associated with cancellations at Loews New Orleans Hotel due to the impact of Hurricane Ida in August 2021 as well as $1.0 million in proceeds for lost income associated with cancellations for properties in Texas due to the impact of the Texas winter storms in February 2021.

Other operating expenses

Other operating expenses increased $0.5 million, or 43.0%, to $1.5 million for the year ended December 31, 2023 from $1.1 million for the year ended December 31, 2022. This increase was primarily attributable to state franchise taxes.

Impairment and other losses

In August 2021, Hurricane Ida impacted Loews New Orleans Hotel located in New Orleans, Louisiana. During the year ended December 31, 2022, the Company expensed hurricane-related repair and cleanup costs of $1.3 million.

Refer to the accompanying Notes to the consolidated financial statements included herein for further discussion.

Results of Non-Operating Income and Expenses

Non-operating income and expenses consist of the following (in thousands):

Gain (loss) on sale of investment properties

The gain on sale of investment properties for the year ended December 31, 2022 was attributed to the disposition of Bohemian Hotel Celebration, Autograph Collection in October 2022 and Kimpton Hotel Monaco Denver in December 2022. The sale of Kimpton Hotel Monaco Chicago in January 2022 did not result in a gain or loss after previously recording an impairment during the year ended December 31, 2021.

Other income (loss)

Other income increased $5.7 million, or 136.8%, to $9.9 million for the year ended December 31, 2023 from $4.2 million for

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the year ended December 31, 2022. Interest income increased $6.8 million to $9.0 million for the year ended December 31, 2023 from $2.2 million for the year ended December 31, 2022 primarily attributed to higher interest rates. In addition, during the year ended December 31, 2023, we recognized a $1.1 million lease termination fee, a gain on insurance recovery of $0.5 million associated with hurricane-related damage sustained at Loews New Orleans Hotel and $0.5 million of interest related to federal tax refunds which was partially offset by loan issuance costs. Other income for the year ended December 31, 2022 was primarily attributable a $3.6 million gain on insurance recovery associated with hurricane-related damage at Loews New Orleans Hotel which was partially offset by costs associated with the termination of two interest rate swaps.

Interest expense

Interest expense increased $2.3 million, or 2.7%, to $85.0 million for the year ended December 31, 2023 from $82.7 million for the year ended December 31, 2022. The increase was primarily due to higher average outstanding corporate credit facility term loan debt coupled with rising interest rates on variable rate debt. This increase was partially offset by the impact of interest rate swaps entered into during the second quarter of 2023, reduced interest resulting from the repurchase and retirement of $35.3 million aggregate principal of 6.375% 2020 Senior Notes due 2025 and capitalized interest of $0.9 million in the second half of 2023. Refer to Note 6 in the consolidated financial statements included herein for further discussion.

Loss on extinguishment of debt

The loss on extinguishment of debt of $1.2 million for year ended December 31, 2023 was primarily attributable to the write-off of certain unamortized debt issuance costs associated with the prior revolving credit facility, which was refinanced with the revolving line of credit in January 2023, as well as the early repayments of the corporate credit facility term loan that was due to mature in September 2024 and one mortgage loan. The loss on extinguishment of debt of $0.3 million for the year ended December 31, 2022 was attributable to the write-off of unamortized debt issuance costs upon the early repayment of one mortgage loan.

Income tax expense

Income tax expense decreased $0.8 million, or 34.4%, to $1.4 million for the year ended December 31, 2023 from $2.2 million for the year ended December 31, 2022. The decrease from the prior year was primarily attributed to a reduction in federal and state income tax expense related to a net operating loss generated by the TRS partially offset by an increase in state margins taxes levied on gross receipts.

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

This information is contained in "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 2, 2023, and is incorporated herein by reference.

Non-GAAP Financial Measures

We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our operating performance: EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss, operating profit, cash from operations, or any other operating performance measure as prescribed per GAAP.

EBITDA, EBITDAre and Adjusted EBITDAre

EBITDA is a commonly used measure of performance in many industries and is defined as net income or loss (calculated in accordance with GAAP) excluding interest expense, provision for income taxes (including income taxes applicable to sale of assets) and depreciation and amortization. We consider EBITDA useful to an investor regarding our results of operations, in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results, even though EBITDA does not represent an amount that accrues directly to common stockholders. In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and dispositions and along with FFO and Adjusted FFO is used by management in the annual budget process for compensation programs.

We then calculate EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts ("Nareit"). Nareit defines EBITDAre as EBITDA plus or minus losses and gains on the disposition of depreciated property, including gains or losses on change of control, plus 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 adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.

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We further adjust EBITDAre to exclude the impact of non-controlling interests in consolidated entities other than our Operating Partnership Units because our Operating Partnership Units may be redeemed for common stock. We believe it is meaningful for the investor to understand Adjusted EBITDAre attributable to all common stock and Operating Partnership unit holders. We also adjust EBITDAre for certain additional items such as depreciation and amortization related to corporate assets, terminated transaction and pre-opening expenses, amortization of share-based compensation, non-cash ground rent and straight-line rent expense, the cumulative effect of changes in accounting principles, and other costs we believe do not represent recurring operations and are not indicative of the performance of our underlying hotel property entities. We believe Adjusted EBITDAre attributable to common stock and unit holders provides investors with another financial measure in evaluating and facilitating comparison of operating performance between periods and between REITs that report similar measures.

FFO and Adjusted FFO

We calculate FFO in accordance with standards established by Nareit, as amended in the 2018 Restatement White Paper, which defines FFO as net income or loss (calculated in accordance with GAAP), excluding real estate-related depreciation, amortization and impairments, gains or losses from sales of real estate, the cumulative effect of changes in accounting principles, similar adjustments for unconsolidated partnerships and consolidated variable interest entities, and items classified by GAAP as extraordinary. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. We believe that the presentation of FFO provides useful supplemental information to investors regarding our operating performance by excluding the effect of real estate depreciation and amortization, gains or losses from sales for real estate, impairments of real estate assets, extraordinary items and the portion of these items related to unconsolidated entities, all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance. We believe that the presentation of FFO can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common stockholders. Our calculation of FFO may not be comparable to measures calculated by other companies who do not use the Nareit definition of FFO or do not calculate FFO per diluted share in accordance with Nareit guidance. Additionally, FFO may not be helpful when comparing us to non-REITs. We present FFO attributable to common stock and unit holders, which includes our Operating Partnership Units because our Operating Partnership Units may be redeemed for common stock. We believe it is meaningful for the investor to understand FFO attributable to all common stock and unit holders.

We further adjust FFO for certain additional items that are not in Nareit’s definition of FFO such as terminated transaction and pre-opening expenses, amortization of debt origination costs and share-based compensation, non-cash ground rent and straight-line rent expense, operating results from properties that are sold and other items we believe do not represent recurring operations. We believe that Adjusted FFO provides investors with useful supplemental information that may facilitate comparisons of ongoing operating performance between periods and between REITs that make similar adjustments to FFO and is beneficial to investors’ complete understanding of our operating performance.

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The following is a reconciliation of net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre attributable to common stock and unit holders for the years ended December 31, 2023, 2022, and 2021 (in thousands):

(1)    During the year ended December 31, 2021, we recognized impairment charges of $12.6 million and $15.7 million related to Marriott Charleston Town Center and Kimpton Hotel Monaco Chicago, respectively, which were attributed to their respective net book value exceeding the undiscounted cash flows over a shortened hold period. Additionally, during the year ended December 31, 2021, we wrote off $0.6 million related to previously capitalized design costs for a renovation project that will no longer be completed due to a change of scope.

(2)    During the years ended December 31, 2023 and 2022, we recorded $0.5 million and $3.6 million, respectively, of insurance proceeds in excess of recognized losses related to damage sustained at Loews New Orleans Hotel during Hurricane Ida in August 2021. These gains on insurance recovery are included in other income (loss) on the consolidated statements of operations and comprehensive income (loss) for the periods then ended.

(3)    During the year ended December 31, 2022, we recorded hurricane-related repair and cleanup costs of $1.3 million. 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. Additionally, during the year ended December 31, 2021, we recorded Texas winter storm-related repair and cleanup costs of $0.4 million at two hotels.

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The following is a reconciliation of net income (loss) to FFO and Adjusted FFO for the years ended December 31, 2023, 2022, and 2021 (in thousands):

(1)    During the year ended December 31, 2021, we recognized impairment charges of $12.6 million and $15.7 million related to Marriott Charleston Town Center and Kimpton Hotel Monaco Chicago, respectively, which were attributed to their respective net book value exceeding the undiscounted cash flows over a shortened hold period. Additionally, during the year ended December 31, 2021, we wrote off $0.6 million related to previously capitalized design costs for a renovation project that will no longer be completed due to a change of scope.

(2)    During the years ended December 31, 2023 and 2022, we recorded $0.5 million and $3.6 million, respectively, of insurance proceeds in excess of recognized losses related to damage sustained at Loews New Orleans Hotel during Hurricane Ida in August 2021. These gains on insurance recovery are included in other income (loss) on the consolidated statements of operations and comprehensive income (loss) for the periods then ended.

(3)    Loan related costs included amortization of debt premiums, discounts and deferred loan origination costs.

(4)    During the year ended December 31, 2022, we recorded hurricane-related repair and cleanup costs of $1.3 million. 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. Additionally, during the year ended December 31, 2021, we recorded Texas winter storm-related repair and cleanup costs of $0.4 million at two hotels.

Use and Limitations of Non-GAAP Financial Measures

EBITDA, EBITDAre, Adjusted EBITDAre, FFO, and Adjusted FFO do not represent cash generated from operating activities under GAAP and should not be considered as alternatives to net income or loss, operating profit, cash flows from operations or any other operating performance measure prescribed by GAAP. Although we present and use EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO because we believe they are useful to investors in evaluating and facilitating comparisons of our operating performance between periods and between REITs that report similar measures, the use of these non-GAAP measures has certain limitations as analytical tools. These non-GAAP financial measures are not measures of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to fund capital expenditures, contractual commitments, working capital, service debt or make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that we have incurred and will incur. These non-GAAP financial measures may include funds that may not be available for management’s discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. These non-GAAP financial measures as presented may not be comparable to non-GAAP financial measures as calculated by other real estate companies.

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 GAAP financial measures, and our consolidated statements of operations and comprehensive income (loss), include interest expense, 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 reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding 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.

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Liquidity and Capital Resources

We expect to meet our short-term liquidity requirements from cash on hand, cash flow from hotel operations, use of our unencumbered asset base, asset dispositions, borrowings under our revolving line of credit, and proceeds from various capital market transactions, including issuances of debt and equity securities. The objectives of our cash management policy are to maintain the availability of liquidity and minimize operational costs.

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. To the extent we are able to successfully improve the performance of our portfolio, we believe this will result in increased operating cash flows. Additionally, we may meet our long-term liquidity requirements through additional borrowings, the issuance of equity and debt securities, which may not be available on advantageous terms or at all, and/or proceeds from the sales of hotels.

Liquidity

As of December 31, 2023, we had $164.7 million of consolidated cash and cash equivalents and $58.4 million of restricted cash and escrows. The restricted cash as of December 31, 2023 primarily consisted of $49.7 million related to FF&E reserves as required per the terms of our management and franchise agreements, $7.1 million in deposits made for capital projects and cash held in restricted escrows of $1.5 million primarily for real estate taxes and mortgage escrows.

In January 2023, XHR LP (the "Borrower") entered into a new $675 million senior unsecured credit facility comprised of a $450 million revolving line of credit (the “revolving line of credit”), a $125 million initial term loan (the "2023 Initial Term Loan") and a $100 million delayed draw term loan (the “2023 Delayed Draw Term Loan” and, together with the 2023 Initial Term Loan, the "2023 Term Loans") pursuant to a Revolving Credit and Term Loan Agreement, dated as of January 10, 2023, by and among the Borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other parties party thereto (the “2023 Credit Agreement”). The revolving line of credit and the 2023 Initial Term Loan refinanced in full the then existing corporate credit facilities outstanding under the prior agreement, and as a result of such refinancing, the then existing pledges of equity of certain subsidiaries securing obligations under the Company's prior credit facilities were released. The 2023 Delayed Draw Term Loan was funded on January 17, 2023 and was used to repay in full the mortgage loan collateralized by Renaissance Atlanta Waverly Hotel & Convention Center that was due August 2024. Proceeds from future revolving line of credit borrowings may be used for working capital, general corporate or other purposes permitted by the 2023 Credit Agreement. The revolving line of credit matures in January 2027 and can be extended up to an additional year. The interest rate on the revolving line of credit is based on a pricing grid with a range of 145 to 275 basis points over the applicable Term SOFR rate as determined by the Company’s leverage ratio, subject to a 10-basis point credit spread adjustment and a zero basis point floor. The 2023 Term Loans mature in March 2026, can be extended up to an additional year and bear interest rates consistent with the pricing grid on the revolving line of credit.

As of December 31, 2023, there was no outstanding balance on our revolving line of credit and the full $450 million was available to be borrowed.

In August 2023, the then existing registration statement registering shares to be sold pursuant to our ATM program expired and as a result, the Company filed a new registration statement. No shares were sold under the ATM Agreement during the year ended December 31, 2023. As of December 31, 2023, $200 million of common stock remained available for sale under the ATM Agreement.

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. Future determinations regarding the declaration and payment of dividends will be at the discretion of our Board of Directors and will depend on then-existing conditions, including our results of operations, payout ratio, capital requirements, financial condition, prospects, contractual arrangements, any limitations on payment of dividends present in our current and future debt agreements, maintaining our REIT status and other factors that our Board of Directors may deem relevant.

We believe that our cash position, short-term investments, cash from operations, borrowing capacity under our revolving credit facility, and access to the capital markets, including pursuant to our ATM program, will be adequate to meet all of our funding requirements and capital deployment objectives both in the short-term and long-term.

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Debt and Loan Covenants

As of December 31, 2023, our outstanding total debt was $1.4 billion and had a weighted-average interest rate of 5.47%. Our weighted-average debt maturity as of December 31, 2023 was 3.2 years for our mortgage loans, 3.3 years for our corporate credit facility term loans, the Senior Notes, and revolving line of credit and 3.3 years for all debt.

Debt as of December 31, 2023 and December 31, 2022 consisted of the following (dollars in thousands):

(1)The rates shown represent the annual interest rates as of December 31, 2023. The variable index for the corporate credit facilities is Term SOFR, subject to a 10 basis point credit spread adjustment and a zero basis point floor, as further described below.

(2)This mortgage loan was repaid in full in January 2023.

(3)In January 2023, the Company amended this mortgage loan to update the variable index from one-month LIBOR to Term SOFR, increase the credit spread, increase the principal amount to $55 million and extend the maturity date through January 2028. Term SOFR has been fixed with interest rate swaps through January 1, 2027.

(4)Represents the weighted-average interest rate as of December 31, 2023.

(5)In January 2023, the then existing corporate credit facility term loan was refinanced with a new $125 million initial term loan and, effective as of January 10, 2023, the spread to Term SOFR for such term loan varies based on the Company's leverage ratio as further described below. On January 17, 2023, an additional $100 million delayed draw term loan was borrowed and, effective as of such date, the spread to Term SOFR for such term loan varies based on the Company's leverage ratio as further described below. Term SOFR has been fixed with interest rate swaps on both the 2023 Initial Term Loan and the 2023 Delayed Draw Term Loan through mid-February 2025.

(6)The prior revolving credit facility was refinanced with a new $450 million revolving line of credit in January 2023 and, effective as of January 10, 2023, the spread to Term SOFR varies based on the Company’s leverage ratio, as further described below.

(7)During the year ended December 31, 2023, the Company repurchased in the open market and retired $35.3 million aggregate principal of its 6.375% 2020 Senior Notes due August 2025.

(8)Includes loan premiums, discounts and deferred financing costs, net of accumulated amortization.

Mortgage Loans

In January 2023, the Company repaid in full the $99.5 million outstanding balance on the mortgage loan collateralized by Renaissance Atlanta Waverly Hotel & Convention Center using proceeds from the 2023 Delayed Draw Term Loan. Also in January 2023, the Company amended the mortgage loan collateralized by Andaz Napa to update the variable index from one-month LIBOR to Term SOFR, increase the credit spread, increase the principal amount to $55 million and extend the maturity date through January 2028.

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Corporate Credit Facilities

As of December 31, 2023, there was no outstanding balance on the revolving line of credit. During the years ended December 31, 2023, 2022 and 2021, the Company incurred unused commitment fees of approximately $1.4 million each year. During the years ended December 31, 2023 and 2022, the Company did not incur interest expense on the revolving line of credit. During the year ended December 31, 2021, the Company incurred interest expense of $1.9 million.

In January 2023, XHR LP (the "Borrower") entered into a new $675 million senior unsecured credit facility comprised of a $450 million revolving line of credit (the “revolving line of credit”), a $125 million initial term loan (the "2023 Initial Term Loan) and a $100 million delayed draw term loan (the “2023 Delayed Draw Term Loan” and, together with the 2023 Initial Term Loan, the "2023 Term Loans") pursuant to a Revolving Credit and Term Loan Agreement, dated as of January 10, 2023, by and among the Borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other parties party thereto (the “2023 Credit Agreement”). The revolving line of credit and the 2023 Initial Term Loan refinanced in full the then existing corporate credit facilities, and as a result of such refinancing, the then existing pledges of equity of certain subsidiaries securing obligations under the Company's prior corporate credit facilities were released. The 2023 Delayed Draw Term Loan was funded on January 17, 2023 and was used to repay in full the mortgage loan collateralized by Renaissance Atlanta Waverly Hotel & Convention Center that was due August 2024. Proceeds from future revolving line of credit borrowings may be used for working capital, general corporate or other purposes permitted by the 2023 Credit Agreement. The revolving line of credit matures in January 2027 and can be extended up to an additional year. The interest rate on the revolving line of credit is based on a pricing grid with a range of 145 to 275 basis points over the applicable Term SOFR rate as determined by the Company’s leverage ratio, subject to a 10 basis point credit spread adjustment and a zero basis point floor. The 2023 Term Loans mature in March 2026, can be extended up to an additional year and bear interest rates consistent with the pricing grid on the revolving line of credit.

Senior Notes

We issued $500 million of 6.375% Senior Notes (the "2020 Senior Notes") during the year ended December 31, 2020. In May 2021, we issued $500 million of 4.875% Senior Notes due in 2029 (the "2021 Senior Notes" and together with the 2020 Senior Notes, the "Senior Notes").

The indentures governing the Senior Notes contain customary covenants that limit our ability and, in certain circumstances, the ability of our subsidiaries, to borrow money, create liens on assets, make distributions and pay dividends on or redeem or repurchase stock, make certain types of investments, sell stock in certain subsidiaries, enter into agreements that restrict dividends or other payments from subsidiaries, enter into transactions with affiliates, issue guarantees of indebtedness, and sell assets or merge with other companies. These limitations are subject to a number of important exceptions and qualifications set forth in the indentures. In connection with entry into the 2023 Credit Agreement and the refinancing of the obligations under the prior corporate credit facilities, the collateral securing the Senior Notes was released in full. On and after January 10, 2023, the Senior Notes constituted unsecured obligations.

We may redeem the 2021 Senior Notes prior to June 1, 2024 at a make-whole price. After June 1, 2024, we may also redeem the Senior Notes at certain redemption prices that decline ratably to par. We may also redeem a portion of the Senior Notes with proceeds from certain equity offerings or certain support received from government authorities in connection with the COVID-19 global pandemic, subject to certain conditions.

We may, from time to time, seek to retire or purchase any of the outstanding Senior Notes through cash purchases and/or exchanges for the other securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

During the year ended December 31, 2023, the Company repurchased in the open market and retired $35.3 million aggregate principal of its 6.375% 2020 Senior Notes due August 2025.

Debt Covenants

As of December 31, 2023, we were not in compliance with a debt covenant on one mortgage loan due to disruption from a significant renovation taking place during the prior trailing 12 months. This did not result in an event of default but allows the lender the option to institute a cash sweep until covenant compliance is achieved for a period of time specified in the loan agreement. The cash sweep permits the lender to withdraw excess cash generated by the collateralized property into a separate bank account that the lender controls and that may be used to reduce the amount of the outstanding loan balance. The lender has agreed to waive this covenant until March 31, 2024. As of December 31, 2023, we were in compliance with all debt covenants, current on all loan payments and not otherwise in default under the revolving line of credit, corporate credit facility term loans, remaining mortgage loans or Senior Notes.

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Derivatives

We continuously monitor and evaluate the level of floating rate debt exposure that we have and will continue to use interest rate hedges to limit it as we determine appropriate. See "Part II-Item. 7 Management's Discussion of Financial Condition and Results of Operations - Derivative Instruments" for more information related to our hedging policy and transaction activity.

Capital Markets

We maintain an ATM program pursuant to the ATM Agreement. In accordance with the terms of the ATM Agreement, the Company may from time to time offer and sell shares of its common stock having an aggregate gross offering price of up to $200 million. In August 2023, the existing registration statement expired and as a result, the Company wrote off accumulated offering costs of $1.2 million and filed a new registration statement. No shares were sold under the ATM Agreement during the years ended December 31, 2023, 2022 and 2021. As of December 31, 2023, we had $200 million available for sale under the ATM Agreement.

The Board of Directors has authorized a stock repurchase program pursuant to which we are authorized to repurchase our common stock, par value $0.01 per share, in the open market, in privately negotiated transactions or otherwise, including pursuant to Rule 10b5-1 plans (the "Repurchase Program"). Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The Repurchase Program does not have an expiration date. This Repurchase Program may be suspended or discontinued at any time and does not obligate us to acquire any particular amount of shares.

During the year ended December 31, 2023, 10,414,262 shares were repurchased under the Repurchase Program, at a weighted-average price of $12.74 per share for an aggregate purchase price of $132.7 million. During the year ended December 31, 2022, 1,912,794 shares were repurchased under the Repurchase Program, at a weighted-average price of $14.74 per share for an aggregate purchase price of $28.2 million. No shares were purchased as part of the Repurchase Program during the year ended December 31, 2021. As of December 31, 2023, the Company had approximately $133.7 million remaining under its share repurchase authorization.

Off-Balance Sheet Arrangements

As of December 31, 2023, we had various contracts outstanding with third-parties in connection with the renovation of certain of our hotel properties. The remaining commitments under these contracts at December 31, 2023 totaled $67.8 million.

Capital Expenditures and Reserve Funds

We maintain each of our properties in good repair and condition and in conformity with applicable laws and regulations, franchise agreements and management agreements. Routine capital expenditures are administered by the property management companies. However, we have approval rights over the capital expenditures as part of the annual budget process for each of our properties. From time to time, certain of our hotels may be undergoing renovations as a result of our decision to upgrade portions of the hotels, such as guest rooms, public space, meeting space and/or restaurants, in order to better compete with other hotels in our markets. In addition, upon the acquisition of a hotel we often are required to complete a property improvement plan in order to bring the hotel into compliance with the respective brand standards. If permitted by the terms of the management agreement, funding for a renovation will first come from the FF&E reserves. We are obligated to maintain reserve funds with respect to certain agreements with our hotel management companies, franchisors and lenders to provide funds, generally 3% to 5% of hotel revenues, sufficient to cover the cost of certain capital improvements to the hotels and to periodically replace and update furniture, fixtures and equipment. Most of the agreements require that we reserve this cash in separate accounts. To the extent that the FF&E reserves are not available or adequate to cover the cost of the renovation, we may fund a portion of the renovation with cash on hand, borrowings from our revolving line of credit and/or other sources of available liquidity. We have been and will continue to be prudent with respect to our capital spending, taking into account our cash flows from operations.

As of December 31, 2023 and 2022, we had a total of $49.7 million and $46.3 million, respectively, of FF&E reserves. During the year ended December 31, 2023 and 2022, we made total capital expenditures of $120.9 million and $70.4 million, respectively.

Sources and Uses of Cash

Our principal sources of cash are cash flows from operations, borrowings under debt financings including draws on our revolving line of credit and from various types of equity offerings or the sale of our hotels. Our principal uses of cash are asset acquisitions, capital investments, routine debt service and debt repayments, operating costs, corporate expenses and dividends. We may also elect to use cash to buy back our common stock in the future under the Repurchase Program.

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Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022

The table below presents summary cash flow information for the consolidated statements of cash flows (in thousands):

Operating

•Cash provided by operating activities was $198.1 million and $187.1 million for the years ended December 31, 2023 and 2022, respectively. Cash flows from operating activities generally consist of the net cash generated by our hotel operations, partially offset by the cash paid for interest, corporate expenses and other working capital changes. Our cash flows from operating activities may also be affected by changes in our portfolio resulting from hotel acquisitions, dispositions or from disruption and subsequent improvements resulting from renovations. The net increase to cash provided by operating activities during the year ended December 31, 2023 was primarily due to the timing of working capital transactions including the receipt of $17.4 million in federal tax refunds related to prior year net operating loss carrybacks. Refer to the "Results of Operations" section for further discussion of our operating results for the years ended December 31, 2023 and 2022.

Investing

•Cash used in investing activities was $118.8 million and $265.4 million for the years ended December 31, 2023 and 2022, respectively. Cash used in investing activities for the year ended December 31, 2023 was attributed to $120.9 million in capital improvements at our hotel properties, which was partially offset by $1.6 million of performance guaranty payments received that were recorded as a reduction in the respective hotel's cost basis and $0.5 million of proceeds from property insurance. Cash used in investing activities for the year ended December 31, 2022 was attributed to $328.5 million for the acquisition of W Nashville and $70.4 million in capital improvements at our hotel properties, which was partially offset by net proceeds of $127.1 million from the dispositions of Kimpton Hotel Monaco Chicago, Bohemian Hotel Celebration, Autograph Collection and Kimpton Hotel Monaco Denver, $4.0 million of proceeds from property insurance and $2.3 million of performance guaranty payments received that were recorded as a reduction in the respective hotel's cost basis.

Financing

•Cash used in financing activities was $222.1 million and $110.1 million for the years ended December 31, 2023 and 2022, respectively. Cash used in financing activities for the year ended December 31, 2023 was attributed to (i) the repurchase of common stock totaling $132.7 million, (ii) the repayment of the prior corporate credit facility term loan maturing in 2024 totaling $125.0 million, (iii) the repayment of mortgage debt totaling $99.5 million, (iv) the payment of $44.6 million in dividends, (v) the expenditure of $34.9 million for the repurchase and retirement of $35.3 million aggregate principal of 6.375% 2020 Senior Notes, (vi) the payment of loan fees and issuance costs of $5.6 million, (vii) principal payments of mortgage debt totaling $3.3 million, (viii) the redemption of Operating Partnership Units for common stock and cash of $1.4 million and (ix) shares redeemed to satisfy tax withholding on vested share-based compensation of $0.6 million, which was partially offset (y) by proceeds from the 2023 Term Loans totaling $225.0 million and (z) proceeds from the amendment of one mortgage loan of $0.4 million. Cash used in financing activities for the year ended December 31, 2022 was attributed to the repayment of mortgage debt totaling $65.0 million, the repurchase of common stock totaling $28.2 million, the payment of $11.7 million in dividends, principal payments of mortgage debt totaling $4.6 million and shares redeemed to satisfy tax withholding on vested share-based compensation of $0.6 million.

Derivative Instruments

In the normal course of business, we are exposed to the effects of interest rate changes. We may enter into derivative instruments including interest rate swaps, caps and collars to manage or hedge interest rate risk in accordance with the criteria of the hedging policy approved by our Board of Directors. Derivative instruments are subject to fair value reporting at each

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reporting date and the increase or decrease in fair value is recorded in net income (loss) or accumulated other comprehensive income, based on the applicable hedge accounting guidance. We anticipate that our interest rate hedges will be highly effective because the terms of the derivative instruments closely match the terms of the related hedged debt agreements. As such, periodic changes in the fair value of these derivatives are expected to be reflected in other comprehensive income (loss) in our consolidated financial statements. Derivatives expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company believes it minimizes this credit risk by transacting with well-known creditworthy financial institutions.

Our ability to apply hedge accounting in the future could be impacted to the extent that the payment terms of our loans change. The discontinuation of hedge accounting could result in future changes in the fair market values of hedges and/or a portion or all of the $2.4 million balance of accumulated other comprehensive income as of December 31, 2023 to be recognized on the consolidated statements of operations and comprehensive income (loss) through net income (loss). Any future defaults by the Company under the terms of its hedges, including those which may arise from cross default provisions with loan agreements, could result in the Company being immediately liable for the fair market value liability of the defaulted hedges.

As of December 31, 2023, we had six interest rate swaps with an aggregate notional amount of $280.0 million. These swaps fix the variable interest rate on one mortgage loan to daily SOFR through the end of 2026 and fix the variable interest rate on the 2023 Term Loans to one-month SOFR through the middle of the first quarter of 2025. The 2023 Term Loans spread may vary, as it is determined by our leverage ratio.

Inflation

We rely on the performance of our hotels to increase revenues in order to keep pace with inflation. Generally, our third-party management companies possess the ability to adjust room rates daily, except for group or corporate rates contractually committed to in advance, although competitive pressures and prevailing economic conditions may limit the ability of our third-party management companies to raise rates faster than inflation or even at the same rate.

Inflation may affect our expenses, including, without limitation, by increasing costs such as wages, benefits, food, taxes, property and casualty insurance, borrowing costs, utilities, the cost of capital expenditures, etc. Inflation may also reduce the demand for travel, levels of spending in transient or group business and leisure segments, and levels of consumer confidence. In addition, our hotel expenses may increase at higher rates than hotel revenue.

Seasonality

Demand in the lodging industry is affected by recurring seasonal patterns, which are greatly influenced by overall economic cycles, the geographic locations of the hotels and the customer mix at the hotels.

Subsequent Events

In January 2024, we repurchased a total of 463,707 shares of common stock in open market purchases in accordance with Rule 10b-18 of the Exchange Act at a weighted-average price of $13.51 per share for total consideration of approximately $6.3 million pursuant to a trading plan intended to comply with Rule 10b5-1 of the Exchange Act.

New Accounting Pronouncements Not Yet Implemented

See Note 2 to the accompanying consolidated financial statements included herein this Annual Report for additional information related to recently issued accounting pronouncements.