Table of Contents

INDEX




			Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited):

~~Condensed~~ Consolidated Balance Sheets as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022			1

~~Condensed~~ Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~2022			2

~~Condensed~~ Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2023 and 2022			4

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~2022			37

Notes to the ~~Condensed~~ Consolidated Financial Statements			59

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			1724

Item 3. Quantitative and Qualitative Disclosures about Market Risk			3139

Item 4. Controls and Procedures			3139

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			3240

Item 1A. Risk Factors			3240

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3240

Item 3. Defaults Upon Senior Securities			3240

Item 4. Mine Safety Disclosures			3240

Item 5. Other Information			3240

Item 6. Exhibits			3441

PART I. FINANCIAL INFORMATION


~~Item I.~~	~~Financial Statements~~

Item I.Financial Statements

DIAMONDROCK HOSPITALITY COMPANY

~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

~~(unaudited)~~

September 30, 2017 December 31, 2016
ASSETS
Property and equipment, net $ 2,688,214
$ 2,646,676
Restricted cash 42,317
46,069
Due from hotel managers 98,292
77,928
Favorable lease assets, net 26,795
18,013
Prepaid and other assets 77,694
37,682
Cash and cash equivalents 166,619
243,095
Total assets $ 3,099,931
$ 3,069,463
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage debt, net of unamortized debt issuance costs $ 642,768
$ 821,167
Term loans, net of unamortized debt issuance costs 298,037
99,372
Total debt 940,805

920,539

Deferred income related to key money, net 17,028
20,067
Unfavorable contract liabilities, net 71,212
72,646
Deferred ground rent 85,047
80,509
Due to hotel managers 70,972
58,294
Dividends declared and unpaid 25,627
25,567
Accounts payable and accrued expenses 56,618
55,054
Total liabilities 1,267,309
1,232,676
Stockholders’ Equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued and outstanding —
—
Common stock, $0.01 par value; 400,000,000 shares authorized; 200,305,232 and 200,200,902 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 2,003
2,002
Additional paid-in capital 2,059,919
2,055,365
Accumulated deficit (229,300 ) (220,580 )
Total stockholders’ equity 1,832,622
1,836,787
Total liabilities and stockholders’ equity $ 3,099,931
$ 3,069,463


	September 30, 2023		December 31, 2022
ASSETS	(unaudited)
Property and equipment, net	$	2,765,646	$	2,748,476
Right-of-use assets	97,552		99,047

Restricted cash	42,503		39,614
Due from hotel managers	167,695		176,708
Prepaid and other assets	80,188		76,131
Cash and cash equivalents	102,737		67,564
Total assets	$	3,256,321	$	3,207,540
LIABILITIES AND EQUITY
Liabilities:
Mortgage and other debt, net of unamortized debt issuance costs	$	379,914	$	386,655
Unsecured term loans, net of unamortized debt issuance costs	799,337		799,138
Senior unsecured credit facility	—		—
Total debt	1,179,251		1,185,793

Lease liabilities	111,832		110,875
Due to hotel managers	122,746		123,682
Deferred rent	68,291		65,097
Unfavorable contract liabilities, net	59,825		61,069
Accounts payable and accrued expenses	48,940		43,120
Distributions declared and unpaid	6,380		12,946
Deferred income related to key money, net	8,457		8,780
Total liabilities	1,605,722		1,611,362
Equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized:
8.250% Series A Cumulative Redeemable Preferred Stock (liquidation preference $25.00 per share), 4,760,000 shares issued and outstanding at September 30, 2023 and December 31, 2022	48		48
Common stock, $0.01 par value; 400,000,000 shares authorized; 209,627,197 and 209,374,830 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	2,096		2,094
Additional paid-in capital	2,289,501		2,288,433
Accumulated other comprehensive income	3,802		—
Distributions in excess of earnings	(651,533)		(700,694)
Total stockholders’ equity	1,643,914		1,589,881
Noncontrolling interests	6,685		6,297
Total equity	1,650,599		1,596,178
Total liabilities and equity	$	3,256,321	$	3,207,540

The accompanying notes are an integral part of these ~~condensed~~ consolidated financial statements.

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DIAMONDROCK HOSPITALITY COMPANY

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,

	2023		2022		2023		2022
Revenues:
Rooms	$	186,334	$	184,994	$	544,325	$	510,189
Food and beverage	64,723		61,940		192,869		176,294
Other	25,463		21,274		74,126		59,965
Total revenues	276,520		268,208		811,320		746,448
Operating Expenses:
Rooms	45,773		43,899		131,092		120,374
Food and beverage	45,428		43,227		134,486		119,919
Other departmental and support expenses	65,952		62,271		193,365		170,328
Management fees	7,323		6,697		19,196		17,029
Franchise fees	8,913		8,709		26,393		23,212
Other property-level expenses	25,704		21,047		76,755		63,997
Depreciation and amortization	27,683		27,053		82,995		81,097
Impairment losses	—		—		941		2,843

Corporate expenses	7,526		7,516		23,677		22,275
Business interruption insurance income	(537)		—		(647)		(499)

Total operating expenses, net	233,765		220,419		688,253		620,575
Interest expense	15,973		9,072		48,712		22,866
Interest (income) and other (income) expense, net	(772)		152		(1,717)		1,044
Loss on early extinguishment of debt	—		9,698		—		9,698

Total other expenses, net	15,201		18,922		46,995		33,608
Income before income taxes	27,554		28,867		76,072		92,265
Income tax expense	(224)		(312)		(420)		(949)
Net income	27,330		28,555		75,652		91,316
Less: Net income attributable to noncontrolling interests	(58)		(99)		(259)		(315)
Net income attributable to the Company	27,272		28,456		75,393		91,001
Distributions to preferred stockholders	(2,454)		(2,454)		(7,362)		(7,362)
Net income attributable to common stockholders	$	24,818	$	26,002	$	68,031	$	83,639
Earnings per share:
Earnings per share available to common stockholders—basic	$	0.12	$	0.12	$	0.32	$	0.39
Earnings per share available to common stockholders—diluted	$	0.12	$	0.12	$	0.32	$	0.39

Three Months Ended September 30, Nine Months Ended September 30,

2017 2016 2017 2016
Revenues:
Rooms $ 167,990
$ 163,158
$ 483,305
$ 498,714
Food and beverage 42,651
44,069
140,191
151,850
Other 12,845
13,012
39,472
39,373
Total revenues 223,486
220,239
662,968
689,937
Operating Expenses:
Rooms 41,945
39,766
120,411
121,737
Food and beverage 30,794
29,103
93,324
97,718
Management fees 5,356
7,655
18,317
23,036
Other hotel expenses 77,769
74,123
228,036
232,576
Depreciation and amortization 25,083
23,605
75,031
73,731
Impairment losses 2,357
—
2,357
—
Hotel acquisition costs (245 ) —
2,028
—
Corporate expenses 6,109
4,684
19,199
17,420
Total operating expenses, net 189,168
178,936
558,703
566,218
Operating profit 34,318
41,303
104,265
123,719
Interest and other income, net (372 ) (333 ) (923 ) (451 )
Interest expense 9,692
9,504
28,790
32,242
Loss on early extinguishment of debt —
—
274
—
Gain on sale of hotel properties —
(2,198 ) —
(10,319 )
Total other expenses, net 9,320
6,973
28,141
21,472
Income before income taxes 24,998
34,330
76,124
102,247
Income tax expense (3,375 ) (4,393 ) (9,019 ) (11,357 )
Net income $ 21,623
$ 29,937
$ 67,105
$ 90,890
Earnings per share:
Basic earnings per share $ 0.11
$ 0.15
$ 0.33
$ 0.45
Diluted earnings per share $ 0.11
$ 0.15
$ 0.33
$ 0.45

The accompanying notes are an integral part of these ~~condensed~~ consolidated financial statements.

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DIAMONDROCK HOSPITALITY COMPANY

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - (CONTINUED)

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,

	2023		2022		2023		2022
Comprehensive Income:
Net income	$	27,330	$	28,555	$	75,652	$	91,316
Other comprehensive income:
Unrealized gain on interest rate derivative instruments	150		—		3,533		—
Unrealized (loss) gain on Rabbi Trust assets	(178)		—		269		—
Comprehensive income	27,302		28,555		79,454		91,316
Comprehensive income attributable to noncontrolling interests	(89)		(99)		(272)		(315)
Comprehensive income attributable to the Company	$	27,213	$	28,456	$	79,182	$	91,001

The accompanying notes are an integral part of these consolidated financial statements.

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DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except share and per share amounts)

(unaudited)

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	Preferred Stock			Common Stock
	Shares	Par Value		Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Distributions in Excess of Earnings		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2022	4,760,000	$	48	209,374,830	$	2,094	$	2,288,433	—		$	(700,694)	$	1,589,881	$	6,297	$	1,596,178
Distributions on common stock/units ($0.03 per common share/unit)	—	—		—	—		—		—		(6,295)		(6,295)		(32)		(6,327)
Distributions on preferred stock ($0.5156 per preferred share)	—	—		—	—		—		—		(2,454)		(2,454)		—		(2,454)
Share-based compensation	—	—		804,541	—		1,827		—		—		1,827		140		1,967
Shares redeemed to satisfy withholdings on vested share based compensation	—	—		(333,779)	6		(3,029)		—		—		(3,023)		—		(3,023)

Common stock repurchased and retired	—	—		(56,400)	(2)		(407)		—		—		(409)		—		(409)
Other comprehensive income:
Unrealized loss on interest rate derivative instruments	—	—		—	—		—		(84)		—		(84)		—		(84)
Unrealized gain on Rabbi Trust assets	—	—		—	—		—		237		—		237		—		237
Net income	—	—		—	—		—		—		9,156		9,156		32		9,188
Balance at March 31, 2023	4,760,000	$	48	209,789,192	$	2,098	$	2,286,824	$	153	$	(700,287)	$	1,588,836	$	6,437	$	1,595,273
Distributions on common stock/units ($0.03 per common share/unit)	—	—		—	—		—		—		(6,287)		(6,287)		(32)		(6,319)
Distributions on preferred stock ($0.5156 per preferred share)	—	—		—	—		—		—		(2,454)		(2,454)		—		(2,454)
Share-based compensation	—	—		62,500	—		2,535		—		—		2,535		225		2,760

Common stock repurchased and retired	—	—		(262,054)	(3)		(2,011)		—		—		(2,014)		—		(2,014)

Other comprehensive income:
Unrealized gain on interest rate derivative instruments	—	—		—	—		—		3,467		—		3,467		—		3,467
Unrealized gain on Rabbi Trust assets	—	—		—	—		—		210		—		210		—		210
Net income	—	—		—	—		—		—		38,965		38,965		169		39,134
Balance at June 30, 2023	4,760,000	$	48	209,589,638	$	2,095	$	2,287,348	$	3,830	$	(670,063)	$	1,623,258	$	6,799	$	1,630,057

Distributions on common stock/units ($0.03 per common share/unit)	—	—		—	—		—		—		(6,288)		(6,288)		(31)		(6,319)
Distributions on preferred stock ($0.5156 per preferred share)	—	—		—	—		—		—		(2,454)		(2,454)		—		(2,454)
Share-based compensation	—	—		—	—		1,788		—		—		1,788		225		2,013
Redemption of Operating Partnership units	—	—		37,559	1		365		—		—		366		(366)		—



Other comprehensive income:
Unrealized gain on interest rate derivative instruments	—	—		—	—		—		150		—		150		—		150
Unrealized loss on Rabbi Trust assets	—	—		—	—		—		(178)		—		(178)		—		(178)
Net income	—	—		—	—		—				27,272		27,272		58		27,330
Balance at September 30, 2023	4,760,000	$	48	209,627,197	$	2,096	$	2,289,501	$	3,802	$	(651,533)	$	1,643,914	$	6,685	$	1,650,599

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DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED

(in thousands, except share and per share amounts)

(unaudited)


	Preferred Stock			Common Stock
	Shares	Par Value		Shares	Par Value		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Distributions in Excess of Earnings		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2021	4,760,000	$	48	210,746,895	$	2,107	$	2,293,990	—		$	(780,931)	$	1,515,214	$	5,750	$	1,520,964

Distributions on preferred stock ($0.5156 per preferred share)	—	—		—	—		—		—		(2,454)		(2,454)		—		(2,454)
Share-based compensation	—	—		114,210	—		951		—		—		951		209		1,160
Shares redeemed to satisfy withholdings on vested share based compensation	—	—		—	2		(812)		—		—		(810)		—		(810)


Net income	—	—		—	—		—		—		10,028		10,028		32		10,060
Balance at March 31, 2022	4,760,000	$	48	210,861,105	$	2,109	$	2,294,129	$	—	$	(773,357)	$	1,522,929	$	5,991	$	1,528,920

Distributions on preferred stock ($0.5156 per preferred share)	—	—		—	—		—		—		(2,454)		(2,454)		—		(2,454)
Share-based compensation	—	—		54,910	—		2,684		—		—		2,684		65		2,749

Redemption of Operating Partnership Units	—	—		7,000	—		51		—		—		51		(51)		—

Net income	—	—		—	—		—		—		52,517		52,517		184		52,701
Balance at June 30, 2022	4,760,000	$	48	210,923,015	$	2,109	$	2,296,864	$	—	$	(723,294)	$	1,575,727	$	6,189	$	1,581,916
Distributions on common stock/units $0.03 per common share/unit)	—	—		—	—		—		—		(6,455)		(6,455)		(25)		(6,480)
Distributions on preferred stock ($0.5156 per preferred share)	—	—		—	—		—		—		(2,454)		(2,454)		—		(2,454)
Share-based compensation	—	—		—	—		1,839		—		—		1,839		86		1,925


Redemption of Operating Partnership units	—	—		21,502	—		163		—		—		163		(163)		—

Net income	—	—		—	—		—		—		28,456		28,456		99		28,555
Balance at September 30, 2022	4,760,000	$	48	210,944,517	$	2,109	$	2,298,866	$	—	$	(703,747)	$	1,597,276	$	6,186	$	1,603,462

The accompanying notes are an integral part of these consolidated financial statements.

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DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2023		2022

Cash flows from operating activities:
Net income	$	75,652	$	91,316
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	82,995		81,097
Corporate asset depreciation as corporate expenses	150		167

Loss on early extinguishment of debt	—		9,698
Non-cash lease expense and other amortization	4,620		4,675


Non-cash interest rate swap fair value adjustment	2,033		(14,002)
Amortization of debt issuance costs	1,540		1,963
Impairment losses	941		2,843



Amortization of deferred income related to key money	(323)		(315)
Share-based compensation	6,740		5,852
Changes in assets and liabilities:
Prepaid expenses and other assets	(2,022)		(7,505)
Due to/from hotel managers	7,377		(24,585)
Accounts payable and accrued expenses	4,983		6,821
Net cash provided by operating activities	184,686		158,025
Cash flows from investing activities:
Capital expenditures	(67,449)		(44,588)

Acquisition of interest in land	(1,833)		—

Property acquisitions	(31,894)		(106,184)



Receipt of deferred key money	—		1,000
Net cash used in investing activities	(101,176)		(149,772)
Cash flows from financing activities:
Scheduled mortgage debt principal payments	(7,109)		(11,854)




Proceeds from senior unsecured term loan	—		800,000
Repayments of senior unsecured term loans	—		(400,000)
Draws on senior unsecured credit facility	—		110,000
Repayments of senior unsecured credit facility	—		(200,000)

Payment of financing costs	—		(13,846)

Distributions on common stock and units	(25,531)		(10)
Distributions on preferred stock	(7,362)		(7,362)
Repurchase of common stock	(2,423)		—

Shares redeemed to satisfy tax withholdings on vested share-based compensation	(3,023)		(828)
Net cash (used in) provided by financing activities	(45,448)		276,100
Net increase in cash, cash equivalents, and restricted cash	38,062		284,353
Cash, cash equivalents, and restricted cash at beginning of period	107,178		75,507
Cash, cash equivalents, and restricted cash at end of period	$	145,240	$	359,860

Nine Months Ended September 30,
2017 2016

Cash flows from operating activities:
Net income $ 67,105
$ 90,890
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 75,031
73,731
Corporate asset depreciation as corporate expenses 56
49
Gain on sale of hotel properties —
(10,319 )
Loss on early extinguishment of debt 274
—
Non-cash ground rent 4,756
4,230
Amortization of debt issuance costs 1,489
1,760
Impairment losses 42,264
—
Estimated recovery of impairment losses from insurance (39,907 ) —
Amortization of favorable and unfavorable contracts, net (1,434 ) (1,434 )
Amortization of deferred income related to key money (3,040 ) (2,143 )
Stock-based compensation 4,769
4,015
Changes in assets and liabilities:
Prepaid expenses and other assets (560 ) (735 )
Restricted cash 2,039
21
Due to/from hotel managers (11,369 ) (13,092 )
Accounts payable and accrued expenses 7,975
5,572
Net cash provided by operating activities 149,448
152,545
Cash flows from investing activities:
Hotel capital expenditures (77,479 ) (78,652 )
Hotel acquisitions (93,795 ) —
Net proceeds from sale of hotel properties —
183,494
Change in restricted cash 2,371
3,083
Net cash (used in) provided by investing activities (168,903 ) 107,925
Cash flows from financing activities:
Scheduled mortgage debt principal payments (9,094 ) (8,384 )
Repayments of mortgage debt (170,368 ) (249,793 )
Proceeds from senior unsecured term loan 200,000
100,000
Draws on senior unsecured credit facility —
75,000
Repayments of senior unsecured credit facility —
(75,000 )
Payment of financing costs (1,579 ) (2,765 )
Payment of cash dividends (75,451 ) (75,635 )
Repurchase of common stock (529 ) (1,512 )
Net cash used in financing activities (57,021 ) (238,089 )
Net (decrease) increase in cash and cash equivalents (76,476 ) 22,381
Cash and cash equivalents, beginning of period 243,095
213,584
Cash and cash equivalents, end of period $ 166,619
$ 235,965

The accompanying notes are an integral part of these ~~condensed~~ consolidated financial statements.

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DIAMONDROCK HOSPITALITY COMPANY

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)

(in thousands)

(unaudited)

Supplemental Disclosure of Cash Flow Information:

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 27,183
$ 31,856
Cash paid for income taxes $ 2,688
$ 1,621
Non-cash Investing and Financing Activities:
Unpaid dividends $ 25,627
$ 23,586
Buyer assumption of mortgage debt on sale of hotel included in sale proceeds $ —
$ 89,486


	Nine Months Ended September 30,
	2023		2022
Cash paid for interest	$	44,706	$	34,214
Cash paid for income taxes, net	$	2,645	$	4,599



Non-cash investing and financing activities:
Unpaid dividends and distributions declared	$	6,380	$	6,489
Accrued capital expenditures	$	6,712	$	4,294



Redemption of Operating Partnership units for common stock	$	365	$	214

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets to the amount shown within the consolidated statements of cash flows:


	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	102,737	$	67,564
Restricted cash	42,503		39,614
Total cash, cash equivalents and restricted cash	$	145,240	$	107,178

The accompanying notes are an integral part of these ~~condensed~~ consolidated financial statements.

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DIAMONDROCK HOSPITALITY COMPANY

Notes to the ~~Condensed~~ Consolidated Financial Statements

(Unaudited)


1.	~~Organization~~

1. Organization

DiamondRock Hospitality Company (the “Company” or “we”) is a lodging-focused real estate company that owns a portfolio of premium hotels and resorts. Our hotels are concentrated in ~~key gateway cities~~major urban markets and in destination resort locations, and the majority of our hotels are operated under a brand owned by one of the leading global lodging brand companies (Marriott International, Inc., Hilton Worldwide, or ~~Hilton Worldwide)~~IHG Hotels & Resorts). We are an owner, as opposed to an operator, of the hotels in our portfolio. As an owner, we receive all of the operating profits or losses generated by our hotels after we pay fees to the hotel managers and hotel brands, which are based on the revenues and profitability of the hotels.

As of September 30, ~~2017~~,2023, we owned 2836 hotels with ~~9,630~~9,745 guest rooms, located in the following markets: Atlanta, Georgia; Boston, Massachusetts (2); Burlington, Vermont; Charleston, South Carolina; Chicago, Illinois (2); Denver, Colorado (2); Fort Lauderdale, Florida; Fort Worth, Texas; Huntington Beach, California; Key West, Florida (2); New York, New York (4); Salt Lake City, Utah; San Diego, California; San Francisco, California; Sedona, Arizona (2); Sonoma, California; Washington D.C. (2); St. Thomas, U.S. Virgin Islands; and Vail, Colorado.rooms.

We conduct our business through a traditional umbrella partnership real estate investment trust, 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 ~~currently owns, either directly or indirectly, all~~owned 99.7% of the limited partnership units (“common OP units”) of our operating ~~partnership.~~partnership as of September 30, 2023. The remaining 0.3% of the common OP units are held by third parties and executive officers of the Company. See Note 9 for additional disclosures related to common OP units.


2.	~~Summary of Significant Accounting Policies~~

2.Summary of Significant Accounting Policies

Basis of Presentation

We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made are adequate to prevent the information presented from being misleading. However, the unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended ~~December 31, 2016, included in our Annual Report on Form 10-K filed on~~ ~~February 27, 2017~~.

~~In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of~~ ~~September 30, 2017, and the results of our operations for the three and nine months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~, and cash flows for the nine months ended September 30, 2017 and 2016. Interim results are not necessarily indicative of full-year performance because of the impact of seasonal and short-term variations.

Our financial statements include all of the accounts of the Company and its subsidiaries in accordance with United States Generally Accepted Accounting Principles (“U.S. ~~GAAP.~~GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. If the Company determines that it has an interest in a variable interest entity within the meaning of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation, the Company will consolidate the entity when it is determined to be the primary beneficiary of the entity. Our operating partnership meets the criteria of a variable interest entity. The Company is the primary beneficiary and, accordingly, we consolidate our operating partnership.

In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments necessary to present fairly our financial position, the results of our operations, the statements of equity, and cash flows. Interim results are not necessarily indicative of full-year performance because of the impact of seasonal and short-term variations. We believe the disclosures made are adequate to prevent the information presented from being misleading. However, the unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2022, included in our Annual Report on Form 10-K filed on February 24, 2023.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications did not affect the Company's financial position, results of operations, or cash flows. An adjustment was made to the consolidated statements of operations and comprehensive income for the year ended December 31, 2022 to present other departmental and support expenses and other property-level expenses, which were previously reported in total as other hotel expenses.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Risks and Uncertainties

The state of the overall economy can significantly impact hotel operational performance and thus, impact our financial position. Currently, some of the most significant risks and uncertainties relate to the impact of rising inflation and increasing interest rates on the overall economy. Should any of our hotels experience a significant decline in operational performance, it may affect our ability to make distributions to our stockholders and service debt or meet other financial obligations.

Fair Value Measurements

In evaluating fair value, U.S. GAAP outlines a valuation framework and creates a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and a reporting entity’s own assumptions (unobservable inputs). The hierarchy ranks the quality and reliability of inputs used to determine fair value, which are then classified and disclosed in one of the three categories. The three levels are as follows:

•Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities

•Level 2 - Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets in markets that are not active and model-derived valuations whose inputs are observable

•Level 3 - Model-derived valuations with unobservable inputs

Property and Equipment

~~Investments in~~Investment purchases of hotel properties ~~land,~~(land, land improvements, building and furniture, fixtures and equipment and identifiable intangible ~~assets~~assets) that are not businesses are accounted for as asset acquisitions and recorded at relative fair value based upon total accumulated cost of the acquisition. Direct acquisition-related costs are capitalized as a component of the acquired assets. Property and equipment purchased after the hotel acquisition date is recorded at cost. Replacements and improvements are capitalized, while repairs and maintenance are expensed as incurred. 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.~~operations and comprehensive income.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 155 to 40 years for buildings, land improvements, and building improvements and 1 to 10 years for furniture, fixtures and equipment. Leasehold improvements are amortized over the shorter of the lease term or the useful lives of the related assets.

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We review our investments in hotel properties for impairment whenever events or changes in circumstances indicate that the carrying ~~value~~amount of the hotel properties may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, adverse changes in the demand for lodging at the properties, ~~due~~current or projected losses from operations, and an expectation that the property is more likely than not to ~~declining national or local economic conditions and/or new hotel construction in markets where~~be sold significantly before the ~~hotels are located. When such conditions exist,~~end of its useful life. If present, management performs an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel, less costs to sell, exceed its carrying ~~value.~~amount. If the estimated undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related hotel’s estimated fair market value is recorded and an impairment loss is recognized.

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.

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We maintain cash and cash equivalents balances in excess of insured limits with various financial institutions. This may subject us to significant concentrations of credit risk. We perform periodic evaluations of the credit quality of these financial institutions.

Revenue Recognition

Revenues from hotel operations ~~of the hotels~~ are recognized when the goods or services are provided. Revenues consist of room sales,

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food and beverage sales, and other hotel department revenues, such as telephone, parking, ~~gift shop sales~~spa and resort fees.

~~Earnings Per Share~~

Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period plus other potentially dilutive securities such as equity awards or shares issuable in the event of conversion of operating partnership units. No adjustment is made for shares that are anti-dilutive during a period.

~~Stock-based Compensation~~

We account for stock-based employee compensation using the fair value based method of accounting. We record the cost of stock-based awards based on the grant-date fair value of the award. The vesting of the awards issued to officers and employees is based on either continued employment (time-based) or based on continued employment and the relative total shareholder returns of the Company or improvement in market share of the Company's hotels (performance-based). The cost of time-based awards and performance-based awards Rooms revenue is recognized over the length of stay that the hotel room is occupied by the customer. Food and beverage revenue is recognized at the point in time in which the goods and/or services are rendered to the customer, such as for restaurant dining services or banquet services. Other revenues are recognized at the point in time or over the time period ~~during which~~that goods or services are provided to the customer. Certain ancillary services are provided by third parties and we assess whether we are the principal or agent in these arrangements. If we are the agent, revenue is recognized based upon the commission earned from the third party. If we are the principal, we recognize revenue based upon the gross sales price.

Advance deposits are recorded as liabilities when a customer or group of customers provides a deposit for a future stay or

banquet event at our hotels. Advance deposits are converted to revenue when the services are provided to the customer or when a customer with a noncancelable reservation fails to arrive for part or all of the reservation. Conversely, advance deposits are generally refundable upon guest cancellation of the related reservation within an ~~employee is required~~established period of time prior to ~~provide service in exchange for~~ the ~~award, adjusted for forfeitures.~~reservation.

Income Taxes

We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in earnings during the period in which the new rate is enacted. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of September 30, 2023 and December 31, 2022, we had a valuation allowance of $8.4 million and $11.0 million, respectively, on our deferred tax assets.

We have elected to be treated as a real estate investment trust, ~~(“REIT”)~~or REIT, under the provisions of the Internal Revenue Code of 1986, as amended, ~~(the "Code"),~~ which requires that we distribute at least 90% of our taxable income annually to our stockholders and comply with certain other requirements. In addition to paying federal and state taxes on any retained income, we may be subject to taxes on “built-in gains” on sales of certain assets. Our taxable REIT subsidiaries will generally be subject to federal, state, local and/or foreign income taxes.

In order for the income from our hotel property investments to constitute “rents from real properties” for purposes of the gross income tests required for REIT qualification, the income we earn cannot be derived from the operation of any of our hotels. Therefore, we lease each of our hotel properties to a wholly owned ~~subsidiary of Bloodstone TRS, Inc., our primary~~ taxable REIT ~~subsidiary,~~subsidiaries.

We may recognize a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or ~~TRS, except for~~litigation processes, based on the ~~Frenchman’s Reef & Morning Star Marriott Beach Resort, which~~technical merits. If a tax position does not meet the more-likely-than-not recognition threshold, despite our belief that our filing position is ~~owned by a Virgin Islands corporation, which we have elected~~supportable, the benefit of that tax position is not recognized in the consolidated statements of operations and comprehensive income. We recognize interest and penalties, as applicable, related to ~~be treated~~unrecognized tax benefits as a ~~TRS, and~~component of income tax expense. We recognize unrecognized tax benefits in the ~~L'Auberge de Sedona and Orchards Inn Sedona, which are each leased to a wholly owned subsidiary~~period that the uncertainty is eliminated by either affirmative agreement of the ~~Company, which we have elected to be treated as a TRS.~~uncertain tax position by the applicable taxing authority, or by expiration of the applicable statute of limitation.

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We had no accruals for tax uncertainties as of September 30, ~~2017~~ ~~and~~ 2023 or December 31, ~~2016~~.2022.

~~Fair Value Measurements~~

In evaluating fair value, U.S. GAAP outlines a valuation framework and creates a fair value hierarchy that distinguishes between market assumptions based on market data (observable inputs) and a reporting entity’s own assumptions about market data (unobservable inputs). The hierarchy ranks the quality and reliability of inputs used to determine fair value, which are then classified and disclosed in one of the three categories. The three levels are as follows:

•~~Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities~~

•~~Level 2 - Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical~~

~~or similar assets in markets that are not active and model-derived valuations whose inputs are observable~~

•~~Level 3 - Model-derived valuations with unobservable inputs~~

Intangible Assets and Liabilities

Intangible assets and liabilities ~~are~~ recorded ~~on non-market contracts~~may include trade name, management or franchise agreement intangibles, right-to-manage and in-place lease intangibles assumed as part of the acquisition of certain hotels. We review the terms of agreements assumed in conjunction with the purchase of a hotel to determine if ~~the terms are favorable~~an intangible asset or ~~unfavorable compared to an estimated market agreement at the acquisition date. Favorable lease~~liability exists. Intangible assets or ~~unfavorable contract~~ liabilities are recorded at the acquisition date and amortized using the straight-line method over the ~~term of the agreement.~~expected useful life. We do not amortize intangible assets with indefinite useful lives, but we review these assets for impairment annually or at interim periods if events or circumstances indicate that the asset may be impaired.

~~Accounting~~Earnings Per Share

Basic earnings per share (“EPS”) is calculated by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is calculated by dividing net income

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available to common stockholders by the weighted-average number of common shares outstanding during the period plus other potentially dilutive securities such as stock grants. No adjustment is made for ~~Impacts~~shares that are anti-dilutive during a period.

Share-based Compensation

We account for share-based employee compensation using the fair value based method of ~~Natural Disasters~~accounting. We record the cost of awards with service or market conditions based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render the requisite service.

~~Assets destroyed~~Comprehensive Income

The purpose of reporting comprehensive income is to report a measure of all changes in equity of an entity that result from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners. Comprehensive income consists of net income and other comprehensive income.

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 and caps, to manage or ~~damaged~~hedge interest rate risk. Derivative instruments are recorded at fair value on the balance sheet date. For derivative instruments for which we have not elected hedge accounting, changes in the fair value of derivatives are recorded each period and are included in interest expense in the consolidated statements of operations and comprehensive income. For derivative instruments for which we have elected hedge accounting treatment, unrealized gains and losses of hedging instruments are reported in other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

Noncontrolling Interests

The noncontrolling interest is the portion of equity in our consolidated operating partnership not attributable, directly or indirectly, to the Company. Such noncontrolling interests are reported on the consolidated balance sheets within equity, separately from the Company’s equity. The noncontrolling interests are classified as permanent equity as we have the right to choose to settle each holder's redemption of the interest in either cash or delivery of shares of our common stock. See Note 9 for additional details. On the consolidated statements of operations and comprehensive income, revenues, expenses and net income or loss from our less-than-wholly-owned operating partnership are reported within the consolidated amounts, including both the amounts attributable to the Company and noncontrolling interests. Income or loss is allocated to noncontrolling interests based on their weighted average ownership percentage for the applicable period. Consolidated statements of equity include beginning balances, activity for the period and ending balances for stockholders’ equity, noncontrolling interests and total equity.

Restricted Cash

Restricted cash primarily consists of cash held in reserve for replacement of furniture and fixtures generally held by our hotel managers and cash held in escrow pursuant to lender requirements.

Debt Issuance Costs

Financing costs are recorded at cost as a ~~result~~component of ~~natural disasters~~the debt carrying amount and consist of loan fees and other costs incurred in connection with the issuance of debt. Amortization of debt issuance costs is computed using a method that approximates the effective interest method over the remaining life of the debt and is included in interest expense in the accompanying consolidated statements of operations and comprehensive income.

Debt issuance costs related to our senior unsecured credit facility are included within prepaid and other assets on the accompanying consolidated balance sheets. These debt issuance costs are amortized ratably over the term of the credit facility, regardless of whether there are any outstanding borrowings, and the amortization is included in interest expense in the accompanying consolidated statements of operations and comprehensive income.

If a refinancing of our debt is considered an extinguishment, unamortized debt issuance costs are included in the gain or loss on extinguishment. All fees paid to or received from creditors are included in the gain or loss on extinguishment. Fees paid to third parties are capitalized as debt issuance costs. If a refinancing of our debt is considered a modification, the net debt issuance costs at the time of modification are amortized over the remaining life of the modified debt.

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Due to/from Hotel Managers

The due from hotel managers consists of hotel level accounts receivable, periodic hotel operating distributions receivable from managers and prepaid and other assets held by the hotel managers on our behalf. The due to hotel managers represents liabilities incurred by the hotel on behalf of us in conjunction with the operation of our hotels which are legal obligations of the Company.

Key Money

Key money received in conjunction with entering into hotel management or franchise agreements or completing specific capital projects is deferred and amortized over the term of the hotel management agreement, the term of the franchise agreement, or other ~~involuntary events are written off~~systematic and rational period, if appropriate. Key money is classified as deferred income in the accompanying consolidated balance sheets and amortized as an offset to management fees or ~~reduced in carrying value to their salvage value. When recovery of all~~franchise fees.

Leases

We determine if an arrangement is a lease or ~~a portion of the amount of property damage loss or other covered expenses through insurance proceeds is demonstrated to be probable, a receivable is recorded~~contains an embedded lease at inception. For agreements with both lease and offsets the loss or expense up to the amount of the total loss or expense. No gain is recorded until all contingencies related to the insurance claim have been resolved. Income resulting from business interruption insurance is not recognized until all contingencies related to the insurance recoveries are resolved.

~~Use of Estimates~~

~~Recently Issued Accounting Pronouncements~~

~~In January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~nonlease components (e.g., which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions of assets or business combinations. As a result of the standard, we anticipate that the majority of our hotel acquisitions will be considered asset purchases as opposed to business combinations. However, the determination will be made on a transaction-by-transaction basis andcommon-area maintenance costs), we do not ~~expect~~separate the ~~determination~~nonlease components from the lease components, but account for these components as one. We determine the lease classification (operating or finance) at lease inception.

Right-of-use assets and lease liabilities are recognized based on the present value of the future lease payments over the lease term at the commencement date. The discount rate used to ~~materially change~~determine the present value of the lease payments is our incremental borrowing rate as of the lease commencement date, as the implicit rate is not readily determinable. The right-of-use assets also include any initial direct costs and any lease payments made at or before the commencement date, and is reduced for any unrestricted incentives received at or before the commencement date.

Options to extend or terminate the lease are included in the recognition of ~~the assets and liabilities acquired. This standard will be applied on a prospective basis and, therefore, it does not affect the accounting for any of~~ our ~~previous transactions. This standard will be effective for annual periods beginning after December 15, 2017, although early adoption is permitted.~~

~~In November 2016, the FASB issued ASU No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~, which requires that the statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This standard will be effective for annual periods beginning after December 15, 2017, although early adoption is permitted. We do not anticipate that this guidance will have a material impact on our consolidated financial statements.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~, which clarifies and provides specific guidance on eight cash flow classification issues with an objective to reduce the current diversity in practice. This standard will be effective for annual periods beginning after December

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~~15, 2017, although early adoption is permitted. We do not anticipate that this guidance will have a material impact on our consolidated financial statements.~~

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~, which simplifies various aspects of how share-based payments are accounted for and presented in the financial statements. This standard requires companies to record all of the tax effects related to share-based payments through the income statement, allows companies to elect an accounting policy to either estimate the share based award forfeitures (and expense) or account for forfeitures (and expense) as they occur, and allows companies to withhold up to the maximum individual statutory tax rate the shares upon settlement of an award without causing the award to be classified as a liability. This guidance is effective for annual periods beginning after December 15, 2016. We adopted ASU No. 2016-09 effective January 1, 2017 and it did not have a material impact on our financial position, results of operations or cash flows.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842), which primarily changes the lessee's accounting for operating leases by requiring recognition of lease~~ right-of-use assets and lease ~~liabilities. This standard~~liabilities when it is ~~effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. The primary impact of~~reasonably certain that we will exercise the ~~new standard will be to the treatment of our ground leases, which represent~~option. Variable payments that are based on an index or a ~~majority of all of our operating lease payments. We~~rate are ~~evaluating the effect of ASU 2016-02 on our consolidated financial statements and related disclosures.~~

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, which affects virtually all aspects of an entity’s revenue recognition. The new standard sets forth five prescribed steps to determine the timing and amount of revenue to be recognized to appropriately depict the transfer of promised goods or services to customersincluded in ~~an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14,~~ ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date~~, which deferred the effectiveness of ASU No. 2014-09 to reporting periods beginning after December 15, 2017 and permitted early application for annual reporting periods beginning after December 15, 2016. By working in conjunction with our hotel operators, we have substantially completed our evaluation of the effect that ASU No. 2014-09 will have on our consolidated financial statements. Because of the short-term, day-to-day nature of our hotel revenues, we have determined that the pattern of revenue recognition will not change significantly. Furthermore, we do not expect the standard to significantly impact the recognition of our right-of-use assets and lease liabilities using the index or ~~accounting~~rate at lease commencement; however, changes to these lease payments due to rate or index updates are recorded as rent expense in the period incurred. Contingent rentals based on a percentage of sales in excess of stipulated amounts are not included in the measurement of the lease liability and right-of-use asset but will be recognized as variable lease expense when they are incurred. Leases that contain provisions that increase the fixed minimum lease payments based on previously incurred variable lease payments related to performance will be remeasured, as these payments now represent an increase in the fixed minimum payments for ~~real estate sales~~the remainder of the lease term. However, leases with provisions that increase minimum lease payments based on changes in a reference index or rate (e.g. Consumer Price Index) will not be remeasured as such changes do not constitute a resolution of a contingency. If we purchase an underlying asset prior to ~~third parties, since we primarily dispose~~the termination of ~~real estate~~the lease term, the right-of-use asset and related lease liability is reversed and the net gain or loss is recorded as part of the acquisition basis.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of our cash and cash equivalents. We maintain cash and cash equivalents with various financial institutions. We perform periodic evaluations of the relative credit standing of these financial institutions and limit the amount of credit exposure with any one institution.

Segment Reporting

Each one of our hotels is an operating segment. We evaluate each of our properties on an individual basis to assess performance, the level of capital expenditures, and acquisition or disposition transactions. Our evaluation of individual properties is not focused on property type (e.g. urban, suburban, or resort), brand, geographic location, or industry classification.

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We aggregate our operating segments using the criteria established by U.S. GAAP, including the similarities of our product offering, types of customers and method of providing service. All of our properties react similarly to economic stimulus, such as business investment, changes in ~~exchange for cash with few contingencies.We will adopt the new standard on its effective date of January 1, 2018 under the cumulative effect transition method.~~Gross Domestic Product, and changes in travel patterns.


3.	~~Property and Equipment~~

3. Property and Equipment

Property and equipment as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 consists of the following (in thousands):


	September 30, 2023		December 31, 2022
Land	$	590,661	$	577,861
Land improvements	7,994		7,994
Buildings and site improvements	2,865,198		2,798,654
Furniture, fixtures and equipment	557,145		525,901
Construction in progress	21,354		32,422
	4,042,352		3,942,832
Less: accumulated depreciation	(1,276,706)		(1,194,356)
	$	2,765,646	$	2,748,476

September 30, 2017 December 31, 2016
Land $ 602,879
$ 553,769
Land improvements 7,994
7,994
Buildings and site improvements 2,404,426
2,355,871
Furniture, fixtures and equipment 424,669
428,991
Construction in progress 13,459
35,253
3,453,427
3,381,878
Less: accumulated depreciation (765,213 ) (735,202 )
$ 2,688,214
$ 2,646,676

As of September 30, ~~2017,~~2023 and December 31, 2022, we ~~determined~~had accrued capital expenditures of $6.7 million and $8.0 million, respectively. During the ~~carrying value~~nine months ended September 30, 2023, we recorded an impairment loss of ~~$1.8~~$0.9 million related to the write-off of construction in progress that was determined not ~~recoverable~~to be recoverable.

4. Acquisitions

2023 Acquisition

On August 1, 2023, we acquired the 117-room Chico Hot Springs Resort and an adjacent ranch located in Pray, Montana for $31.9 million, including prorations and transaction costs. The acquisition was funded with corporate cash.

2022 Acquisitions

On January 6, 2022, we acquired the 103-room Tranquility Bay Beachfront Resort located in Marathon, Florida, for $62.4 million, including prorations and transaction costs. The acquisition was funded with corporate cash. The acquisition includes income from 84 units owned by third parties that currently participate in the hotel's rental management program and the majority of the intervals in three units that are structured as vacation ownership. In March 2022, we entered into agreements to purchase four of the third-party owned units for $4.1 million in aggregate. In connection with the purchase agreements, we evaluated the recoverability of the right-to-manage intangible asset related to the long-term rental agreements ("RMAs"), and as a result, we recorded an impairment loss of $2.8 million. On March 23, 2022, we closed on the purchase of two of the four third-party owned units and on April 7, 2022, we closed on the purchase of the remaining two third-party owned units.

We recognized a ~~corresponding $1.8~~$45.2 million ~~charge~~right-to-manage intangible asset related to the RMAs that were purchased as part of the acquisition. We estimated the fair value of the right-to-manage intangible using a discounted cash flow model, which calculated

a present value of expected future cash flows over the remaining term of agreements, including expected renewal periods, with

a discount rate of 12% and reversion rate of 9.25%. The intangible asset will be amortized over a period of 40 years, which is our estimate of its useful life, inclusive of expected renewal periods. The remaining useful life of this intangible asset as of September 30, 2023 is approximately 38.3 years. As of September 30, 2023 and December 31, 2022, the intangible asset was $40.5 million and $41.3 million, net of accumulated amortization of $1.9 million and $1.1 million, respectively, and is recorded within ~~impairment losses~~prepaid and other assets on the accompanying consolidated balance sheet. Amortization expense for the three and nine months ended September 30, ~~2017.~~

~~As of~~2023 was $0.3 million and $0.8 million, respectively. Amortization expense for the three and nine months ended September 30, ~~2017 and December 31, 2016, we had accrued capital expenditures of $4.4~~2022 was $0.2 million and ~~$10.8~~$0.8 million, respectively. Amortization expense is expected to be $1.1 million annually for the remaining useful life of the asset.

~~Natural Disaster Impact~~

~~During September 2017, several of our hotels were impacted by~~On April 1, 2022, we acquired the ~~effects of Hurricanes Irma and Maria. Frenchman's Reef & Morning Star Marriott Beach Resort (“Frenchman's Reef”) located in St. Thomas, U.S. Virgin Islands sustained significant~~

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~~damage and is currently closed. We expect that Frenchman's Reef will remain closed through the end of 2018. The Inn at Key West and Sheraton Suites Key West located in Key West, Florida and the Westin~~96-room Kimpton Fort Lauderdale Beach Resort located in Fort Lauderdale, Florida for $35.6 million, including prorations and transaction costs.The acquisition was funded with corporate cash.

On November 21, 2022, we acquired the 40-room Lake Austin Spa Resort located in Austin, Texas for $75.8 million,

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including prorations and transaction costs. The acquisition was funded with corporate cash.

5. Debt

The following table sets forth information regarding the Company’s debt as of September 30, 2023 and December 31, 2022 (dollars in thousands):


			Principal Balance as of
Loan	Interest Rate as of September 30, 2023	Maturity Date	September 30, 2023		December 31, 2022




Courtyard New York Manhattan/Midtown East mortgage loan	4.40%	August 2024	$	74,808	$	76,153
Worthington Renaissance Fort Worth Hotel mortgage loan	3.66%	May 2025	74,210		75,625
Hotel Clio mortgage loan	4.33%	July 2025	56,443		57,469
Westin Boston Seaport District mortgage loan	4.36%	November 2025	175,164		178,487
Unamortized debt issuance costs			(711)		(1,079)
Total mortgage debt, net of unamortized debt issuance costs			379,914		386,655





Unsecured term loan	SOFR + 1.35%	January 2028	500,000		500,000
Unsecured term loan	SOFR + 1.35%	January 2025 (1)	300,000		300,000
Unamortized debt issuance costs			(663)		(862)
Unsecured term loans, net of unamortized debt issuance costs			799,337		799,138

Senior unsecured credit facility	SOFR + 1.40%	September 2026 (1)	—		—

Total debt, net of unamortized debt issuance costs			$	1,179,251	$	1,185,793
Weighted-Average Interest Rate (2)	5.07%

_______________________

(1)Maturity date may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions.

(2)Weighted-average interest rate as of September 30, 2023 includes effect of interest rate swaps.

Mortgage Debt

We have incurred limited recourse, property specific mortgage debt secured by certain of our hotels. In the event of default, the lender may only foreclose on the secured assets; however, in the event of fraud, misapplication of funds or other customary recourse provisions, the lender may seek payment from us. As of September 30, 2023, four of our 36 hotels were ~~impacted~~secured by mortgage debt. We have one mortgage loan that matures within one year, which has a principal balance of $74.8 million as of September 30, 2023. We intend to repay this mortgage loan using cash flow from operations or available capacity on our senior unsecured credit facility, which is sufficient to meet the principal due within the next twelve months.

Our mortgage debt contains certain property specific covenants and restrictions, including minimum debt service coverage

ratios or debt yields that trigger “cash trap” provisions, as well as restrictions on incurring additional debt without lender consent. Such cash trap provisions are triggered when the hotel’s operating results fall below a certain debt service coverage ratio or debt yield. When these provisions are triggered, all of the excess cash flow generated by the ~~effects of Hurricane Irma. Each~~hotel is deposited directly into cash management accounts for the benefit of our ~~Florida hotels closed in advance~~ lenders until a specified debt service coverage ratio or debt yield is reached and maintained for a certain period of time. Such provisions do not provide the lender the right to accelerate repayment

of the ~~storm~~underlying debt. As of December 31, 2022, we had $2.9 million held in ~~order~~cash traps, which is included within the restricted cash on the accompanying consolidated balance sheet. As of September 30, 2023, all cash traps had been released.

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Table of Contents

Senior Unsecured Credit Facility and Unsecured Term Loans

We are party to ~~comply~~a Sixth Amended and Restated Credit Agreement (the “Credit Agreement”) that provides us with ~~mandatory evacuation orders.~~a $400 million senior unsecured revolving credit facility and two term loan facilities in the aggregate amount of $800 million. The ~~Westin Fort Lauderdale Beach Resort~~revolving credit facility matures on September 27, 2026, which we may extend for an additional year upon the payment of applicable fees and ~~Sheraton Suites Key West sustained minimal damage~~satisfaction of certain standard conditions. The term loan facilities consist of a $500 million term loan that matures on January 3, 2028 and ~~reopened shortly after the storm, while the Inn at Key West sustained more substantial damage and remains closed. We expect the Inn at Key West to remain closed through the end~~a $300 million term loan that matures January 3, 2025. The maturity date of the ~~first quarter~~$300 million term loan may be extended for an additional year upon the payment of ~~2018.~~applicable fees and satisfaction of certain standard conditions. We have the right to increase the aggregate amount of the facilities to $1.4 billion upon the satisfaction of certain standard conditions.

~~We maintain property, casualty, flood,~~Interest is paid on the periodic advances on the revolving credit facility and ~~business interruption insurance for each~~amounts outstanding on the term loans at varying rates, based upon the adjusted Secured Overnight Financing Rate (“SOFR”), as defined in the Credit Agreement, plus an applicable margin. The applicable margin is based upon our leverage ratio, as follows:


Leverage Ratio	Applicable Margin for Revolving Loans	Applicable Margin for Term Loans
Less than 30%	1.40%	1.35%
Greater than or equal to 30% but less than 35%	1.45%	1.40%
Greater than or equal to 35% but less than 40%	1.50%	1.45%
Greater than or equal to 40% but less than 45%	1.60%	1.55%
Greater than or equal to 45% but less than 50%	1.80%	1.75%
Greater than or equal to 50% but less than 55%	1.95%	1.85%
Greater than or equal to 55%	2.25%	2.20%

The Credit Agreement contains various financial covenants. A summary of the most significant covenants is as follows:

Actual at

Covenant

September 30, 2023

Maximum leverage ratio (1)

60%

28.3%

Minimum fixed charge coverage ratio (2)

1.50x

3.08x

Secured recourse indebtedness

Less than 45% of Total Asset Value

11.0%

Unencumbered leverage ratio

60%

28.4%

Unencumbered implied debt service coverage ratio

1.20x

2.65x

_____________________________

(1)Leverage ratio is net indebtedness, as defined in the Credit Agreement, divided by total asset value, defined in the Credit Agreements as the value of our owned hotels ~~with~~based on hotel net operating income divided by a defined capitalization rate.

(2)Fixed charge coverage upratio is Adjusted EBITDA, generally defined in the Credit Agreements as EBITDA less FF&E reserves, for the most recently ending 12 months, to ~~$361 million~~fixed charges, which is defined in the Credit Agreement as interest expense, all regularly scheduled principal payments and payments on capitalized lease obligations, for ~~each covered event, subject to certain deductibles and sublimits. While it is expected that insurance proceeds will be sufficient to cover all or a substantial portion~~the same most recently ending 12-month period.

The components of the ~~remediation costs and business interruption at these hotels, no determination has been made as to~~Company's interest expense consisted of the ~~total amount or timing~~following (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Mortgage debt interest	$	4,130	$	6,233	$	12,331	$	18,322
Unsecured term loan interest	11,019		4,104		31,867		11,568
Credit facility interest and unused fees	311		1,863		941		5,015
Amortization of debt issuance costs and debt premium	513		652		1,540		1,963
Interest rate swap mark-to-market	—		(3,780)		2,033		(14,002)
	$	15,973	$	9,072	$	48,712	$	22,866

-16-

Table of ~~those payments.~~Contents

6. Derivatives

As of September 30, ~~2017,~~2023 and December 31, 2022 the Company had the following derivatives that were designated as cash flow hedges of interest rate risk (in thousands):


									Fair Value of Assets (Liabilities)
Hedged Debt	Type	Fixed Rate		Index	Effective Date	Maturity Date	Notional Amount		September 30, 2023		December 31, 2022
Senior unsecured term loans	Swap (1)	2.21	%	SOFR	December 28, 2022	October 18, 2023	$	25,000	$	37	$	517
Senior unsecured term loans	Swap (1)	2.21	%	SOFR	December 28, 2022	October 18, 2023	$	25,000	37		515
Senior unsecured term loans	Swap (1)	1.63	%	SOFR	November 28, 2022	July 25, 2024	$	87,500	2,624		3,979
Senior unsecured term loans	Swap (1)	1.63	%	SOFR	November 28, 2022	July 25, 2024	$	87,500	2,621		3,976
Senior unsecured term loans	Swap	3.36	%	SOFR	March 1, 2023	January 1, 2028	$	75,000	2,892		—
Senior unsecured term loans	Swap	3.50	%	SOFR	March 1, 2023	January 1, 2027	$	75,000	2,277		—
									$	10,488	$	8,987

______________________

(1)Swap was designated as cash flow hedge as of April 1, 2023.

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we ~~recognized~~primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a $40.5 million impairment loss for property damage, which consists of $85.6 million of property and equipment and $45.1 million of corresponding accumulated depreciation. We recorded a reduction to the impairment loss and a corresponding receivable of $39.9 millioncounterparty in exchange for the ~~insurance proceeds that we believe~~Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

Derivative assets are probable of receipt. The remaining impairment loss of $0.6 million relates to property damage at the Sheraton Suites Key West that does not exceed the insurance deductible. The receivable for insurance proceeds is included in prepaid expenses and other assets and derivative liabilities are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. The changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in accumulated other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2023, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the accompanying condensed consolidated balance sheet. We believe these amounts to be recoverable by considering various factors, including discussions with our insurance providers, consideration of their financial strength, and reviewvariable-rate debt.

The fair value of our ~~insurance provisions and limits. All~~interest rate swaps is a Level 2 measurement under the fair value hierarchy. We estimate the fair value of ~~these amounts have been recorded~~the interest rate swap based on ~~preliminary estimates~~the interest rate yield curve and implied market volatility as inputs and adjusted for the counterparty's credit risk. We concluded the inputs for the credit risk valuation adjustment are Level 3 inputs; however these inputs are not significant to the fair value measurement in its entirety.

The table below details the location in the consolidated financial statements of the ~~damage~~gains and ~~corresponding insurance recovery. We will finalize the recorded amounts upon completion of our assessment in the fourth quarter of 2017.~~

~~4. Favorable Lease Assets~~

~~In connection with the acquisition of certain hotels, we have~~losses recognized ~~intangible assets~~on derivative financial statements for ~~favorable leases. Our favorable lease assets, net of accumulated amortization of $2.6 million and $2.3 million as of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, respectively, consist of the following (in thousands):~~

September 30, 2017 December 31, 2016
Westin Boston Waterfront Hotel Ground Lease $ 17,698
$ 17,859
Orchards Inn Sedona Annex Sublease 8,967
—
Lexington Hotel New York Tenant Leases 130
154
$ 26,795
$ 18,013

Favorable lease assets are recorded at the acquisition date and are generally amortized using the straight-line method over the remaining non-cancelable term of the lease agreement. We recorded $0.1 million of amortization expense for each of the three ~~months ended September 30, 2017~~ and ~~2016. We recorded $0.3 million and $0.2 million, respectively, of amortization expense for each of the~~ nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022 (in thousands):

~~In connection with~~


		Three Months Ended September 30,				Nine Months Ended September 30,
Effect of derivative instruments	Location in Statements of Operations and Comprehensive Income	2023		2022		2023		2022
Gain recognized in other comprehensive income	Unrealized loss on interest rate derivative instruments	$	150	$	—	$	3,533	$	—
Interest income for derivatives that were designated as cash flow hedges	Interest expense	$	(2,694)	$	—	$	(5,235)	$	—
Interest (income) expense for derivatives that were not designated as cash flow hedges	Interest expense	$	—	$	(3,972)	$	469	$	(12,615)

During the next twelve months, the Company estimates that $4.1 million will be reclassified from other comprehensive income as a decrease to interest expense.

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Table of Contents

7. Fair Value Measurements

The fair value of certain financial assets and liabilities and other financial instruments as of September 30, 2023 and December 31, 2022, in thousands, is as follows:


	September 30, 2023				December 31, 2022
	Carrying Amount (1)		Fair Value		Carrying Amount (1)		Fair Value
Debt	$	1,179,251	$	1,157,432	$	1,185,793	$	1,148,533

_______________

(1)The carrying amount of debt is net of unamortized debt issuance costs.

The fair value of our ~~acquisition~~debt is a Level 2 measurement under the fair value hierarchy (see Note 2). We estimate the fair value of our debt by discounting the ~~Orchards Inn Sedona on February 28, 2017, we recorded a $9.1 million favorable lease asset. We determined the value using a discounted~~future cash ~~flow~~flows of ~~the favorable difference between the contractual lease payments and~~each instrument at estimated market ~~rents.~~ rates.

The ~~market rents were estimated by~~carrying amount of our other financial instruments approximate fair value due to the short-term nature of these financial instruments.

8. Leases

We are subject to operating leases, the most significant of which are ground leases. We are the lessee to ground leases under eight of our hotels and one parking area as of September 30, 2023. The lease liabilities for our operating leases assume the exercise of all available extension options, as we believe they are reasonably certain to be exercised. As of September 30, 2023, our operating leases have a ~~third-party valuation firm~~weighted-average remaining lease term of 64 years and ~~the~~a weighted-average discount rate ~~was estimated using~~of 5.78%.

The components of operating lease expense, which is included in other hotel expenses in our consolidated statements of operations and comprehensive income, and cash paid for amounts included in the measurement of lease liabilities, are as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease cost	$	2,754	$	2,797	$	8,278	$	8,370
Variable lease payments	$	399	$	447	$	1,156	$	1,210
Cash paid for amounts included in the measurement of operating lease liabilities	$	981	$	1,011	$	2,942	$	2,990

Maturities of lease liabilities as of September 30, 2023 are as follows (in thousands):


Year Ending December 31,
2023 (excluding the nine months ended September 30, 2023)	$	982
2024	3,966
2025	4,026
2026	4,594
2027	4,737
Thereafter	752,819
Total lease payments	771,124
Less imputed interest	(659,292)
Total lease liabilities	$	111,832

On April 20, 2023, we acquired the fee simple interest in a ~~risk adjusted rate~~land parcel underlying the parking structure at the Worthington Renaissance Fort Worth Hotel, which had been subject to a ground lease, for $1.8 million.

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Table of ~~return. See Note 9 for further discussion of this favorable lease asset.~~Contents

~~5. Capital Stock~~9. Equity

Common Shares

We are authorized by our charter to issue up to 400 million shares of common stock, ~~$0.01~~$0.01 par value per share. Each outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of stockholders. Holders of our common stock are entitled to receive dividends out of assets legally available for the payment of dividends when authorized by our board of directors.

We ~~have~~maintain an “at-the-market” equity offering program (the “ATM ~~program”~~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~~$200.0 million. We have not sold any shares ~~of our common stock during 2017 and there is $128.3 million remaining~~ under the ATM ~~program.~~Program.

Our board of directors has ~~approved~~authorized a share repurchase program ~~authorizing us~~pursuant to which we are authorized to repurchase up to ~~$150~~$200.0 million ~~in shares~~ of our common stock. Repurchases under this program are made in open market or privately negotiated transactions as permitted by federal securities laws and other legal requirements. This authority may be exercised from time to time and in such amounts as market conditions warrant, and subject to regulatory considerations.stock through February 28, 2025. The timing ~~manner, price~~ and actual number of shares repurchased ~~depends~~will depend on a variety of factors, including ~~stock~~ price ~~corporate~~ and ~~regulatory requirements,~~general business and market ~~conditions, and other corporate liquidity requirements and priorities.~~conditions. The share repurchase program does not obligate us to acquire any particular amount of shares, and may be suspended or ~~terminated~~discontinued at any time ~~without prior notice. We have not~~at our discretion. During the nine months ended September 30, 2023, we repurchased ~~any~~318,454 shares of ~~our~~ common stock ~~during 2017 and~~at an average price of $7.60 per share for a total purchase price of $2.4 million. During the year ended December 31, 2022, we repurchased 1.6 million shares of common stock at an average price of $7.81 per share for a total purchase price of $12.3 million. As of November 3, 2023, we have ~~$143.5~~$185.3 million of authorized capacity remaining under ~~our~~the share repurchase program.

~~Dividends~~

~~We have paid the following dividends to holders of our common stock during 2017 as follows:~~

Payment Date Record Date
Dividend
per Share
January 12, 2017
December 30, 2016
$ 0.125
April 12, 2017
March 31, 2017
$ 0.125
July 12, 2017 June 30, 2017 $ 0.125
October 12, 2017 September 30, 2017 $ 0.125

Preferred Shares

We are authorized by our charter to issue up to 10 million shares of preferred stock, ~~$0.01~~$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 September 30, ~~2017~~2023 and December 31, ~~2016~~,2022, there were no4,760,000 shares of ~~preferred stock outstanding.~~8.250% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) issued and outstanding with a liquidation preference each of $25.00 per share. On or after August 31, 2025, the Series A Preferred Stock will be 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.

Operating Partnership Units

In connection with our acquisition of Cavallo Point in December 2018, we issued 796,684 common OP units to third parties, otherwise unaffiliated with the Company, then valued at $11.76 per unit. Each common OP unit is redeemable at the option of the holder. Holders of ~~operating partnership~~common OP units have certain redemption rights, which ~~would~~ enable them to cause our operating partnership to redeem their units in exchange for cash per unit equal to the market price of our common stock, at the time of redemption, or, at our option, for shares of our common stock on a one-for-one ~~basis. The number of shares issuable upon exercise of the redemption rights will be adjusted~~basis, subject to adjustment upon the occurrence of stock splits, mergers, consolidations or similar pro-rata share ~~transactions,~~transactions.

Long-Term Incentive Partnership units (“LTIP units”), which ~~otherwise would~~are also referred to as profits interest units, may be issued to eligible participants under the 2016 Plan (as defined in Note 10 below) for the performance of services to or for the benefit of our operating partnership. LTIP units are a class of partnership unit in our operating partnership and will receive, whether vested or not, the same per-unit distributions as the outstanding common OP units, which equal per-share dividends on shares of our common stock. Initially, LTIP units have a capital account balance of zero, do not receive an allocation of operating income (loss), and do not have full parity with common OP units with respect to liquidating distributions. If such parity is reached, vested LTIP units are converted into an equal number of common OP units, and thereafter will possess all of the ~~effect of diluting the ownership~~rights and interests of common OP units, including the ~~limited partners~~right to exchange the common OP units for cash per unit equal to the market price of our common stock, at the time of redemption, or, at our ~~stockholders. As~~option, for shares of ~~September 30, 2017~~our common stock on a one-for-one basis, subject to adjustment upon the occurrence of stock splits, mergers, consolidations or similar pro-rata share transactions. See Note 10 for additional disclosures related to LTIP units.

There were 723,166 and ~~December 31, 2016, there were~~ no ~~operating partnership~~719,542 common OP units held by unaffiliated third ~~parties.~~parties and executive officers of the Company as of September 30, 2023 and December 31, 2022, respectively. There were 314,137 and 98,050 unvested LTIP units outstanding as of September 30, 2023 and December 31, 2022, respectively.

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Table of Contents

Dividends and Distributions

We have paid the following dividends to holders of our common stock and distributions to holders of common OP units and LTIP units during 2023 and through the date of this report:


Payment Date	Record Date	Dividend per Share




January 12, 2023	December 30, 2022	$	0.06
April 12, 2023	March 31, 2023	$	0.03
July 12, 2023	June 30, 2023	$	0.03
October 12, 2023	September 29, 2023	$	0.03

We have paid the following dividends to holders of our Series A Preferred Stock during 2023 and through the date of this report:


Payment Date	Record Date	Dividend per Share
March 31, 2023	March 17, 2023	$	0.515625
June 30, 2023	June 20, 2023	$	0.515625
September 29, 2023	September 18, 2023	$	0.515625

10. Stock Incentive Plans

We are authorized to issue up to 6,082,664 shares of our common stock under our 2016 Equity Incentive Plan (the ~~"2016 Plan"~~“2016 Plan”), of which we have ~~issued or~~fully committed ~~to issue 447,089 shares~~ as of September 30, ~~2017. In addition to these shares, additional shares of common stock could be issued in connection with the performance stock unit awards as further described~~2023.

~~Table of Contents~~

below. The 2016 Plan replaced the 2004 Stock Option and Incentive Plan, as amended (the "2004 Plan"). We no longer make share grants and issuances under the 2004 Plan, although awards previously made under the 2004 Plan that are outstanding will remain in effect in accordance with the terms of that plan and the applicable award agreements.

Restricted Stock Awards

Restricted stock awards issued to our officers and employees generally vest over a three~~-year~~ to five year period from the date of ~~the~~ grant based on continued employment. We measure compensation expense for the restricted stock awards based upon the fair market value of our common stock at the date of grant. Compensation expense is recognized on a straight-line basis over the vesting period and is included in corporate expenses in the accompanying ~~condensed~~ consolidated statements of ~~operations.~~operations and comprehensive income. A summary of our restricted stock awards from January 1, ~~2017~~2023 to September 30, ~~2017~~2023 is as follows:


	Number of Shares	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2023	1,356,937	$	9.47
Granted	247,762	8.94
Vested	(382,822)	9.60
Forfeited	(21,184)	9.13
Unvested balance at September 30, 2023	1,200,693	$	9.33

Number of
Shares

Weighted-
Average Grant
Date Fair
Value
Unvested balance at January 1, 2017 567,540
$ 10.62
Granted 324,502
11.19
Vested (244,411 ) 11.29
Forfeited (16,669 ) 10.80
Unvested balance at September 30, 2017 630,962
$ 10.66

The ~~remaining share~~total unvested restricted stock awards as of September 30, 2023 are expected to vest as follows: ~~287,148~~513,251 shares during ~~2018, 227,699~~2024, 329,103 shares during ~~2019,~~2025, 344,918 shares during 2026, 6,712 shares during 2027, and ~~116,115~~6,709 shares during ~~2020.~~2028. As of September 30, ~~2017,~~2023, the unrecognized compensation cost related to restricted stock awards was ~~$4.9~~$6.4 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 2425 months. We recorded ~~$0.8~~$1.0 million and ~~$0.5~~$1.1 million ~~respectively,~~ of compensation expense related to restricted stock awards for each of the three months ended September 30, ~~2017~~2023 and ~~2016.~~2022, respectively. We recorded ~~$2.3~~$3.1 million and ~~$2.1~~$3.2 million ~~respectively,~~ of compensation expense related to restricted stock awards for each of the nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022, respectively.

Performance Stock Units

Performance stock units (“PSUs”) are restricted stock units that vest three or five years from the date of grant. Each executive officer is granted a target number of PSUs (the “PSU Target Award”). ~~For the PSUs issued in 2014 and 2015 and vesting in 2017 and 2018, respectively, the~~The actual number of shares of common stock

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Table of Contents

issued to each executive officer is ~~subject to~~based on the Company's achievement of certain performance targets. Under this framework, 50% of the PSUs are based on relative total stockholder return and 50% on hotel market share improvement. The achievement of certain levels of total stockholder return relative to the total stockholder return of a peer group of ~~publicly traded~~publicly-traded lodging REITs is measured over a three-year performance period. There ~~will be~~is no payout of shares of our common stock if our total stockholder return falls below the 30th percentile of the total stockholder returns of the peer group. The maximum number of shares of common stock issued to an executive officer is equal to 150% of the PSU Target Award and is earned if our total stockholder return is equal to or greater than the 75th percentile of the total stockholder returns of the peer group. ~~For~~The number of PSUs earned is limited to 100% of the ~~PSUs issued in 2016 and vesting in 2019,~~PSU Target Award if the ~~calculation of~~Company's total stockholder return ~~relative to the total stockholder return of a peer group over a three-year performance period remained in effect~~is negative for ~~75% of the number of PSUs to be earned in~~ the performance period. The ~~remaining 25% is determined based on achieving~~ improvement in market share for each of our hotels ~~over the three-year performance period. For the PSUs issued in 2017 and vesting in 2020, the calculation of total stockholder return relative to the total stockholder return of a peer group~~is generally measured over a three-year performance period ~~applies to 50% of the number of PSUs to be earned in the performance period. The remaining 50% is determined~~ based on ~~achieving improvement in market share~~a report prepared for each hotel by STR Global, a well-recognized benchmarking service for the hospitality industry. There is no payout of shares of our common stock if the percentage of our hotels ~~over~~with market share improvements is less than 30%. The maximum number of shares of common stock issued to an executive officer is equal to 150% of the ~~three-year performance period.~~PSU Target Award and is earned if the percentage of our hotels with market share improvements is greater than or equal to 75%.

We measure compensation expense for the PSUs based upon the fair market value of the award at the grant date. Compensation expense is recognized on a straight-line basis over the ~~three-year performance~~vesting period and is included in corporate expenses in the accompanying ~~condensed~~ consolidated statements of ~~operations.~~operations and comprehensive income. The grant date fair value of the portion of the PSUs based on our relative total stockholder return is determined using a Monte Carlo simulation performed by a third-party valuation firm. The grant date fair value of the portion of the PSUs based on ~~improvement in~~hotel market share ~~for each of our hotels~~improvement is the closing price of our common stock on the grant date.

~~On February 27, 2017, our board of directors granted 266,009 PSUs to our executive officers.~~ The ~~grant date fair value~~determination of the ~~portion~~grant-date fair values of ~~the PSUs~~outstanding awards based on our relative ~~total~~ stockholder return ~~was $10.89 using~~included the assumptions of volatility of 26.7% and a risk-free rate of 1.46%. The grant date fair value of the portion of the PSUs based on hotel market share was $11.20, the closing stock price of our common stock on such date.following assumptions:


Award Grant Date	Volatility	Risk-Free Rate	Total Stockholder Return PSUs	Hotel Market Share PSUs
March 2, 2021	68.8%	0.26%	$9.28	$9.40
February 22, 2022	71.4%	1.74%	$9.84	$9.56
August 9, 2022	73.3%	3.20%	$9.65	$9.32
February 23, 2023	74.5%	4.40%	$9.22	$8.94

~~Table of Contents~~

A summary of our PSUs from January 1, ~~2017~~2023 to September 30, ~~2017~~2023 is as follows:


						Number of Target Units	Weighted- Average Grant Date Fair Value
	Number of Target Units		Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2017	686,684		$	10.65
Unvested balance at January 1, 2023					Unvested balance at January 1, 2023	950,653	$	9.35
Granted	266,009		11.04		Granted	363,523	9.08
Additional units from dividends	24,703		11.21		Additional units from dividends	14,068	8.42
Vested (1)	(200,374	)	12.15		Vested (1)	(299,766)	9.01
Unvested balance at September 30, 2017	777,022		$	10.41

Unvested balance at September 30, 2023					Unvested balance at September 30, 2023	1,028,478	$	9.34

______________________


~~(1)~~	There was no payout of shares of our common stock for PSUs that vested on February 27, 2017, as our total stockholder return fell below the 30th percentile of the total stockholder returns of the peer group over the three-year performance period.

(1)The number of shares of common stock earned for the PSUs vested in 2023 was equal to 103.4% of the PSU Target Award.

The ~~remaining target units~~total unvested PSUs as of September 30, 2023 are expected to vest as follows: ~~213,772~~299,791 units during ~~2018, 291,257~~2024, 326,909 units during ~~2019 and 271,993~~2025, 366,210 units during ~~2020.~~2026, and 35,568 units during 2027. The number of shares earned upon vesting is subject to the attainment of the performance goals described above. As of September 30, ~~2017~~,2023, the unrecognized compensation cost related to the PSUs was ~~$3.8~~$4.9 million and is expected to be recognized on a straight-line basis over a weighted average period of 2426 months. We recorded ~~$0.6~~$0.8 million and ~~$0.1~~$0.7 million ~~respectively,~~ of compensation expense related to the PSUs for the three months ended September 30, ~~2017~~2023 and ~~2016.~~2022, respectively. We recorded ~~$1.8~~$2.3 million and ~~$1.4~~$1.6 million ~~respectively,~~ of compensation expense related to the PSUs for the nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022, respectively

LTIP Units

LTIP units are designed to offer executives a long-term incentive comparable to restricted stock, while potentially allowing them a more favorable income tax treatment. Each LTIP unit awarded is deemed equivalent to an award of one share of common stock reserved under the 2016 Plan. At the time of award, LTIP units do not have full economic parity with

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common OP units, but can achieve such parity over time upon the occurrence of specified events in accordance with partnership tax rules.

A summary of our LTIP units from January 1, 2023 to September 30, 2023 is as follows:


	Number of Units	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2023	98,050	$	9.39
Granted	257,270	8.94
Vested (1)	(41,183)	9.49

Unvested balance at September 30, 2023	314,137	$	9.01

______________________

(1)As of September 30, 2023, all vested LTIP units have achieved economic parity with common OP units and have been converted to common OP units.

The total unvested LTIP units as of September 30, 2023 are expected to vest as follows: 99,974 during 2024 and 2025, respectively, 99,973 during 2026, and 14,216 during 2027. As of September 30, 2023, the unrecognized compensation cost related to LTIP unit awards was $2.4 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 33 months. We recorded $0.2 million and $0.1 million of compensation expense related to LTIP unit awards for the three months ended September 30, 2023 and 2022, respectively. We recorded $0.6 million and $0.4 million of compensation expense related to LTIP unit awards for the nine months ended September 30, 2023 and 2022, respectively.

11. Earnings Per Share

Basic ~~earnings per share~~EPS is calculated by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted ~~earnings per share~~EPS is calculated by dividing net income available to common stockholders that has been adjusted for dilutive securities, by the weighted-average number of common shares outstanding including dilutive securities.

Unvested share-based awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of EPS pursuant to the two-class method. Accordingly, distributed and undistributed earnings attributable to unvested share-based compensation (participating securities) have been excluded, as applicable, from net income or loss available to common stockholders used in the basic and diluted EPS calculations.

The following is a reconciliation of the calculation of basic and diluted ~~earnings per share~~EPS (in thousands, except share and per share data):

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Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Numerator:
Net income $ 21,623
$ 29,937
$ 67,105
$ 90,890
Denominator:
Weighted-average number of common shares outstanding—basic 200,834,910
201,297,846
200,767,104
201,188,563
Effect of dilutive securities:
Unvested restricted common stock 173,557
58,115
170,612
—
Shares related to unvested PSUs 415,933
383,643
415,933
383,643
Weighted-average number of common shares outstanding—diluted 201,424,400
201,739,604
201,353,649
201,572,206
Earnings per share:

Basic earnings per share $ 0.11
$ 0.15
$ 0.33
$ 0.45
Diluted earnings per share $ 0.11
$ 0.15
$ 0.33
$ 0.45

~~We did not include unexercised stock appreciation rights of 20,770 for the three and nine months ended September 30, 2017 and 2016 as they would be anti-dilutive.~~

~~8. Debt~~

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		6	2022
Numerator:
Net income attributable to common stockholders	$	24,818	$	26,002	$	68,031		$	83,639
Dividends declared on unvested share-based compensation	—		—		—			—
Net income available to common stockholders	$	24,818	$	26,002	$	68,031		$	83,639
Denominator:
Weighted-average number of common shares outstanding—basic	211,490,571		212,878,364		211,525,596			212,736,133
Effect of dilutive securities:
Unvested restricted common stock	359,711		350,528		278,217			286,651

Shares related to unvested PSUs	354,707		428,481		325,899			436,570
Weighted-average number of common shares outstanding—diluted	212,204,989		213,657,373		212,129,712			213,459,354
Earnings per share:
Earnings per share available to common stockholders—basic	$	0.12	$	0.12	$	0.32		$	0.39
Earnings per share available to common stockholders—diluted	$	0.12	$	0.12	$	0.32		$	0.39

The ~~following table sets forth information regarding~~common OP units held by the ~~Company’s debt~~noncontrolling interest holders have been excluded from the denominator of the diluted EPS calculation as of ~~September 30, 2017~~ ~~and December 31, 2016 (dollars in thousands):~~

Principal Balance as of
Property Interest Rate Maturity Date September 30, 2017 December 31, 2016
Lexington Hotel New York LIBOR + 2.25% October 2017 (1) $ —
$ 170,368
Salt Lake City Marriott Downtown 4.25% November 2020 57,122
58,331
Westin Washington D.C. City Center 3.99% January 2023 65,346
66,848
The Lodge at Sonoma, a Renaissance Resort & Spa 3.96% April 2023 28,432
28,896
Westin San Diego 3.94% April 2023 65,220
66,276
Courtyard Manhattan / Midtown East 4.40% August 2024 84,421
85,451
Renaissance Worthington 3.66% May 2025 84,504
85,000
JW Marriott Denver at Cherry Creek 4.33% July 2025 63,790
64,579
Boston Westin 4.36% November 2025 198,922
201,470
Unamortized debt issuance costs (4,989 ) (6,052 )
Total mortgage debt, net of unamortized debt issuance costs 642,768
821,167

Unsecured term loan LIBOR + 1.45% (2) May 2021 100,000
100,000
Unsecured term loan LIBOR + 1.45% (3) April 2022 200,000
—
Unamortized debt issuance costs (1,963 ) (628 )
Unsecured term loan, net of unamortized debt issuance costs 298,037
99,372

Senior unsecured credit facility LIBOR + 1.50% May 2020 (4) —
—

Total debt, net of unamortized debt issuance costs $ 940,805
$ 920,539
Weighted-Average Interest Rate 3.75%

~~_______________________~~


~~(1)~~	~~The mortgage loan was repaid on April 26, 2017.~~


~~(2)~~	~~The interest rate as of September 30, 2017 was 2.68%.~~


~~(3)~~	~~The interest rate as of September 30, 2017 was 2.69%.~~


~~(4)~~	~~The credit facility may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions.~~

~~Mortgage Debt~~

~~We have incurred limited recourse, property specific mortgage debt secured by certain of our hotels. In the event of default, the lender may only foreclose~~there would be no effect on the ~~secured assets; however, in~~amounts since the ~~event~~common OP units' share of ~~fraud, misapplication of funds~~income or ~~other customary recourse provisions, the lender may seek payment from us. As of~~ ~~September 30, 2017, eight of our~~ 28 hotels were secured by mortgage debt. Our mortgage debt contains certain property specific covenants and restrictions, including minimum debt service coverage ratios that trigger “cash trap” provisions as well as restrictions on incurring additional debt without lender consent. As of September 30, 2017, we were in compliance with the financial covenants of our mortgage debt.

On April 26, 2017, we repaid the mortgage loan secured by the Lexington Hotel New York with proceeds from a new unsecured term loan, which is discussed further below. The mortgage loan had an outstanding principal balance of $170.4 million at repayment.

~~Senior Unsecured Credit Facility~~

~~Table of Contents~~

~~We are party~~loss would also be added or subtracted to a senior unsecured credit facility with a capacity up to $300 million. The maturity date is May 2020 and may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions. The facility also includes an accordion feature to expand up to $600 million, subject to lender consent. The interest rate on the facility is based upon LIBOR, plus an applicable margin based upon the Company’s leverage ratio, as follows:



~~Leverage Ratio~~	~~Applicable Margin~~
~~Less than or equal to 35%~~	~~1.50~~	%
~~Greater than 35% but less than or equal to 45%~~	~~1.65~~	%
~~Greater than 45% but less than or equal to 50%~~	~~1.80~~	%
~~Greater than 50% but less than or equal to 55%~~	~~2.00~~	%
~~Greater than 55%~~	~~2.25~~	%

In addition to the interest payable on amounts outstanding under the facility, we were required to pay an amount equal to 0.20% of the unused portion of the facility if the average usage of the facility was greater than 50% or 0.30% of the unused portion of the facility if the average usage of the facility was less than or equal to 50%.

~~The facility also contains various corporate financial covenants. A summary of the most restrictive covenants is as follows:~~

Actual at
Covenant September 30, 2017
Maximum leverage ratio (1) 60% 24.4%
Minimum fixed charge coverage ratio (2) 1.50x 4.46x
Minimum tangible net worth (3) $1.91 billion $2.57 billion
Secured recourse indebtedness Less than 45% of Total Asset Value 21.2%

~~_____________________________~~


~~(1)~~	Leverage ratio is net indebtedness, as defined in the credit agreement, divided by total asset value, defined in the credit agreement as the value of our owned hotels based on hotel net operating income divided by a defined capitalization rate.


~~(2)~~	Fixed charge coverage ratio is Adjusted EBITDA, generally defined in the credit agreement as EBITDA less FF&E reserves, for the most recently ending 12 months, to fixed charges, which is defined in the credit agreement as interest expense, all regularly scheduled principal payments and payments on capitalized lease obligations, for the same most recently ending 12-month period.


~~(3)~~	Tangible net worth, as defined in the credit agreement, is (i) total gross book value of all assets, exclusive of depreciation and amortization, less intangible assets, total indebtedness, and all other liabilities, plus (ii) 75% of net proceeds from future equity issuances.

As of September 30, 2017, we had no borrowings outstanding under the facility and the Company's leverage ratio was 24.4%. Accordingly, interest on our borrowings under the facility, if any, will be based on LIBOR plus 150 basis points for the following quarter. We incurred interest and unused credit facility fees on the facility of $0.2 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively. We incurred interest and unused credit facility fees on the facility of $0.7 million and $1.1 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Unsecured Term Loans~~

We are party to a five-year $100 million unsecured term loan. On April 26, 2017, we closed on a new five-year $200 million unsecured term loan. A portion of the proceeds from the new term loan was used to repay the $170.4 million mortgage loan secured by the Lexington Hotel New York.

The financial covenants of the term loans are consistent with the covenants on our senior unsecured credit facility, which are described above. The interest rate on each of the term loans is based on a pricing grid ranging from 145 to 220 basis points over LIBOR, as follows:



~~Leverage Ratio~~	~~Applicable Margin~~
~~Less than or equal to 35%~~	~~1.45~~	%
~~Greater than 35% but less than or equal to 45%~~	~~1.60~~	%
~~Greater than 45% but less than or equal to 50%~~	~~1.75~~	%
~~Greater than 50% but less than or equal to 55%~~	~~1.95~~	%
~~Greater than 55%~~	~~2.20~~	%

~~Table of Contents~~

As of September 30, 2017, the Company's leverage ratio was 24.4%. Accordingly, interest on our borrowings under the term loans will be based on LIBOR plus 145 basis points for the following quarter. We incurred interest on the term loans of $2.1 million and $0.5 million for the three months ended September 30, 2017 and 2016, respectively. We incurred interest on the term loans of $4.2 million and $0.8 million or the nine months ended September 30, 2017 and 2016, respectively.

~~9. Acquisitions~~

On February 28, 2017, we acquired the 88-room L'Auberge de Sedona and the 70-room Orchards Inn Sedona, each located in Sedona, Arizona, for a total contractual purchase price of $97 million. The acquisition was funded with corporate cash. The hotels are managed by IMH Financial Corporation pursuant to a new management agreement with an initial term of five years, which is terminable at our discretion beginning December 31, 2017. The management agreement provides for a base management fee of 2.45% of gross revenues in 2017, 2.70% of gross revenues in 2018, and 3.0% of gross revenues in 2019 and through the end of the term. The management agreement also provides for an incentive management fee of 12% of hotel operating profit above an owner's priority determined in accordance with the terms of the management agreement in 2017, increasing to 15% by 2020.

We lease the buildings and sublease the underlying land containing 28 of the 70 rooms at the Orchards Inn Sedona, which expires in 2070, including all extension options. We reviewed the terms of the annex sublease in conjunction with the hotel acquisition accounting and concluded that the terms are favorable to us compared with a typical current market lease. As a result, we recorded a $9.1 million favorable lease asset that will be amortized through 2070.

~~The following table summarizes the fair value of the assets acquired and liabilities assumed in our acquisitions (in thousands):~~

L'Auberge de Sedona Orchards Inn Sedona
Land $ 39,384
$ 9,726
Building and improvements 22,204
10,180
Furnitures, fixtures and equipment 4,376
1,982
Total fixed assets 65,964
21,888
Favorable lease asset —
9,065
Other assets and liabilities, net (2,710 ) (412 )
Total $ 63,254
$ 30,541

Acquired properties are included in our results of operations from the date of acquisition. The following unaudited pro forma financial information presents our results of operations (in thousands, except per share data) as if the hotels were acquired on January 1, 2016. The comparable information is not necessarily indicative of the results that actually would have occurred nor does it indicate future operating results.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Revenues $ 223,486
$ 227,110
$ 666,389
$ 710,039
Net income $ 21,623
$ 30,455
$ 66,830
$ 92,800
Earnings per share:
Basic earnings per share $ 0.11
$ 0.15
$ 0.33
$ 0.46
Diluted earnings per share $ 0.11
$ 0.15
$ 0.33
$ 0.46

For the three and nine months ended September 30, 2017, our condensed consolidated statements of operations include $7.2 million and $20.0 million of revenues, respectively, and $0.6 million and $3.8 million ofderive net income ~~respectively, related~~available to ~~the operations of the L'Auberge de Sedona and Orchards Inn Sedona.~~common stockholders.

~~10. Fair Value of Financial Instruments~~

~~The fair value of certain financial assets and liabilities and other financial instruments as of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, in thousands, is as follows:~~

~~Table of Contents~~

September 30, 2017 December 31, 2016

Carrying
Amount (1)
Fair Value
Carrying
Amount (1)
Fair Value
Debt $ 940,805
$ 951,552
$ 920,539
$ 906,156

~~_______________~~


~~(1)~~	~~The carrying amount of debt is net of unamortized debt issuance costs.~~

The fair value of our mortgage debt is a Level 2 measurement under the fair value hierarchy (see Note 2). We estimate the fair value of our mortgage debt by discounting the future cash flows of each instrument at estimated market rates. The carrying value of our other financial instruments approximate fair value due to the short-term nature of these financial instruments.

~~11. Relationships with Managers~~

In August 2017, we terminated the management agreement with Marriott International, Inc. ("Marriott") for the Courtyard Manhattan/Midtown East. In connection with the termination of Marriott, we recognized $1.9 million of accelerated amortization of key money, which is included in management fees on the accompanying consolidated statements of operations for the three and nine months ended September 30, 2017. We entered into a new 10-year management agreement with HEI Hotels & Resorts to operate the hotel and a 25-year franchise agreement with Marriott to continue the hotel's Courtyard brand affiliation. The management agreement provides for a base management fee of 1.5% of gross revenues in 2017 and 1.75% of gross revenues thereafter. The management agreement also provides for an incentive management fee of 15% of hotel operating profit above an owner's priority determined in accordance with the terms of the management agreement. Total incentive management fees are capped at 1% of gross revenues. The employees of the hotel are now represented by a labor union and subject to a collective bargaining agreement. The franchise agreement provides for a franchise fee of 6% of gross room sales.

In October 2017, we terminated the management agreement with Joie de Vivre Hotels for the Hotel Rex, located in San Francisco, California. We entered into a ten-year management agreement with Viceroy Hotels & Resorts to operate the hotel. The management agreement provides for a base management fee of 2.75% of gross revenues. The management agreement also provides for an incentive management fee of 15% of hotel operating profit above an owner's priority determined in accordance with the terms of the management agreement. Total incentive management fees are capped at 1.0% of gross revenues. The management agreement provides for one five-year extension of the term at the manager's discretion.

Frenchman's Reef sustained significant hurricane damage during September 2017. Under the terms of the management agreement, either party may terminate the management agreement in the event that the catastrophic damage is 30% or more of the replacement cost. We estimate the catastrophic damage exceeds 30% of replacement cost. We are currently evaluating our options with respect to the resort and have not made a decision on whether to terminate the management agreement.

12. Commitments and Contingencies

Litigation

We are subject to various claims, lawsuits and legal proceedings, including routine litigation arising in the ordinary course of business regarding the operation of our hotels and ~~company~~other Company matters. While it is not possible to ascertain the ultimate outcome of such matters, management believes that the aggregate amount of such liabilities, if any, in excess of amounts covered by insurance will not have a material adverse impact on our financial condition or results of ~~operations.~~operations and comprehensive income. The outcome of claims, lawsuits and legal proceedings brought against the Company, however, is subject to significant uncertainties.

~~Other Matters~~

As previously reported, in February 2016, the Company was notified by the franchisor of one of its hotels that as a result of low guest satisfaction scores, the Company was in default under the franchise agreement for that hotel. The Company continues to proactively work with the franchisor and the manager of the hotel and has developed and executed a plan aimed to improve guest satisfaction scores. To date, the guest satisfaction scores have improved so that the Company is no longer in default under the franchise agreement. However, if the guest satisfaction scores were to decrease again, the franchisor may again notify the Company that it is in default under the franchise agreement and that the franchisor is reserving all of its rights under the franchise agreement, including the right to terminate the franchise agreement in the future.

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While the Company continues to work diligently with the franchisor and manager to maintain the guest satisfaction scores at a level such that the Company does not fall back into default, no assurance can be given that the Company will be successful. If the Company is not successful, the franchisor may seek to terminate the franchise agreement and assert a claim it is owed a termination fee, including a payment for liquidated damages, which could result in a material adverse effect on the Company's business, financial condition or results of operation.

~~Table of Contents~~


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

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 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 “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, ~~2016~~2022 as updated by our subsequent Quarterly Reports on Form ~~10-Q.~~10-Q and Current Reports on Form 8-K. Accordingly, there is no assurance that the Company’s expectations will be ~~realized, including as it relates to the estimated cost and duration of renovation or restoration projects and estimated insurance recoveries.~~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 rising inflation and interest rates, job loss or growth trends, an increase in unemployment 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, rising 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 and franchise agreements;

•risks associated with the increase in labor costs and the availability of labor at our hotels;

•risks associated with natural disasters and other unforeseen catastrophic events, including the emergence of a pandemic or other widespread health emergency;

•the adverse impact of COVID-19 or any future pandemic, epidemic or outbreak of any other 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 lodging-focused ~~Maryland corporation~~real estate company operating as a real estate investment trust (“REIT”). for U.S. federal income tax purposes that owns a portfolio of premium hotels and resorts. As of September 30, ~~2017,~~2023, we owned a portfolio of 2836 premium hotels and resorts that contain ~~9,630~~9,745 guest rooms located in 1825 different markets in ~~North America and~~ the ~~U.S. Virgin Islands.~~ United States.

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As an owner, rather than an operator, of lodging properties, we receive all of the operating profits or losses generated by our hotels after the payment of fees due to hotel managers and hotel brands, which are calculated based on the revenues and profitability of each hotel.

Our ~~vision~~strategy is to ~~be a highly professional public~~apply aggressive asset management, prudent financial strategy, and disciplined capital allocation to high quality lodging ~~REIT that delivers long-term returns for our stockholders which exceed long-term returns generated by our peers.~~properties in North American urban and resort markets with superior growth prospects and high barriers-to-entry. Our goal is to deliver long-term stockholder returns that exceed those generated by our peers through a combination of dividends and enduring capital appreciation. Our strategy is to utilize disciplined capital allocation, focus on high quality lodging properties in North American markets with superior growth prospects and high barriers-to-entry, aggressively asset manage those hotels, and employ conservative amounts of leverage.

Our primary business is to acquire, own, asset manage and renovate ~~full-service~~premium hotel properties in the United States. Our portfolio is concentrated in ~~key gateway cities~~major urban markets and destination resort locations. Each of our hotels is managed by a third ~~party and a substantial number of our hotels are operated under~~party—either an independent operator or a brand ~~owned by~~operator, such as Marriott International, Inc. ~~or Hilton Worldwide.~~

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 in order 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 rooms revenue, food and beverage revenue and other revenue, which consists of parking, spa, resort fees, other guest services, and tenant leases, among other items.

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"~~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 ~~(or ADR)~~(“ADR”);

•Revenue per Available Room ~~(or RevPAR)~~(“RevPAR”);

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

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

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~~Funds From Operations (or FFO) and Adjusted FFO.~~

Occupancy, ADR and 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, is an important statistic for monitoring operating performance at the individual hotel level and across our business as a whole. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a company-wide and regional basis. ADR and RevPAR include only room revenue. Room revenue comprised approximately ~~73%~~67% of our total revenues for the nine months ended September 30, ~~2017~~2023 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 and RevPAR performance may be impacted by macroeconomic factors such as U.S. economic conditions generally, increasing inflation, increasing interest rates, 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 and RevPAR performance is dependent on the ~~continued~~ success of our hotels' ~~global brands.~~brands and managers.

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

Our Hotels

The following ~~table sets~~tables set forth certain operating information for the nine months ended September 30, ~~2017~~2023 for each of our ~~hotels.~~hotels owned during the period.

-26-

Table of Contents

Property Location
Number of
Rooms
Occupancy (%) ADR($) RevPAR($)
% Change
from 2016 RevPAR (1)
Chicago Marriott Downtown Chicago, Illinois 1,200
73.1 % $ 218.14
$ 159.44
4.5 %
Westin Boston Waterfront Hotel Boston, Massachusetts 793
79.1 % 254.66
201.37
1.5 %
Lexington Hotel New York New York, New York 725
92.1 % 231.36
213.14
2.3 %
Salt Lake City Marriott Downtown Salt Lake City, Utah 510
79.3 % 167.03
132.49
15.8 %
Renaissance Worthington Fort Worth, Texas 504
75.4 % 182.09
137.36
18.8 %
Frenchman’s Reef & Morning Star Marriott Beach Resort (2) St. Thomas, U.S. Virgin Islands 502
87.8 % 282.62
248.11
11.4 %
Westin San Diego San Diego, California 436
86.9 % 198.46
172.39
5.1 %
Westin Fort Lauderdale Beach Resort Fort Lauderdale, Florida 432
86.9 % 192.20
167.03
(7.7 )%
Westin Washington, D.C. City Center Washington, D.C. 410
86.6 % 223.17
193.29
1.0 %
Hilton Boston Downtown Boston, Massachusetts 403
86.3 % 290.62
250.76
1.1 %
Vail Marriott Mountain Resort & Spa Vail, Colorado 344
75.0 % 282.34
211.68
6.2 %
Marriott Atlanta Alpharetta Atlanta, Georgia 318
76.3 % 168.15
128.27
(0.3 )%
Courtyard Manhattan/Midtown East New York, New York 321
90.1 % 243.41
219.26
(5.0 )%
The Gwen Chicago Chicago, Illinois 311
73.0 % 219.29
160.17
(0.1 )%
Hilton Garden Inn Times Square Central New York, New York 282
97.0 % 227.06
220.20
(2.7 )%
Bethesda Marriott Suites Bethesda, Maryland 272
75.6 % 170.12
128.53
5.5 %
Hilton Burlington Burlington, Vermont 258
81.5 % 180.10
146.86
— %
JW Marriott Denver at Cherry Creek Denver, Colorado 196
81.1 % 262.32
212.70
(3.8 )%
Courtyard Manhattan/Fifth Avenue New York, New York 189
89.1 % 249.08
221.86
0.6 %
Sheraton Suites Key West Key West, Florida 184
89.5 % 256.78
229.77
0.1 %
The Lodge at Sonoma, a Renaissance Resort & Spa Sonoma, California 182
65.1 % 326.04
212.12
(11.6 )%
Courtyard Denver Downtown Denver, Colorado 177
81.0 % 207.87
168.46
(0.2 )%
Renaissance Charleston Charleston, South Carolina 166
79.1 % 245.39
194.10
(4.3 )%
Shorebreak Hotel Huntington Beach, California 157
76.3 % 244.28
186.38
(1.2 )%
Inn at Key West (2) Key West, Florida 106
82.1 % 197.20
161.91
(10.7 )%
Hotel Rex San Francisco, California 94
83.9 % 224.87
188.64
(5.8 )%
L'Auberge de Sedona (3) Sedona, Arizona 88
76.8 % 551.56
423.72
19.3 %
Orchards Inn Sedona (3) Sedona, Arizona 70
84.1 % 231.35
194.50
12.1 %
TOTAL/WEIGHTED AVERAGE 9,630
81.5 % $ 228.67
$ 186.46
1.9 %


Property	Location	Number of Rooms	Occupancy (%)		ADR ($)		RevPAR ($)		% Change from 2022 RevPAR(1)
Chicago Marriott Downtown Magnificent Mile	Chicago, Illinois	1,200	60.7	%	$	246.14	$	149.41	14.8	%
Westin Boston Seaport District	Boston, Massachusetts	793	85.3	%	243.78		207.90		15.5	%
Salt Lake City Marriott Downtown at City Creek	Salt Lake City, Utah	510	63.3	%	190.89		120.75		13.5	%
Worthington Renaissance Fort Worth Hotel	Fort Worth, Texas	504	74.5	%	194.08		144.59		14.2	%
Westin San Diego Bayview	San Diego, California	436	79.9	%	214.93		171.62		13.6	%
Westin Fort Lauderdale Beach Resort	Fort Lauderdale, Florida	433	73.3	%	274.94		201.56		(6.4)	%
Westin Washington, D.C. City Center	Washington, D.C.	410	75.9	%	216.66		164.39		32.7	%
The Dagny	Boston, Massachusetts	403	75.3	%	291.35		219.35		(4.6)	%
The Hythe Vail	Vail, Colorado	344	61.1	%	435.10		265.81		12.5	%
Courtyard New York Manhattan/Midtown East	New York, New York	321	90.5	%	314.26		284.44		16.7	%
Atlanta Marriott Alpharetta	Atlanta, Georgia	318	68.5	%	154.52		105.84		27.9	%
The Gwen Hotel	Chicago, Illinois	311	74.5	%	299.15		222.97		3.8	%
Hilton Garden Inn New York/Times Square Central	New York, New York	282	89.4	%	252.61		225.73		(0.4)	%
Embassy Suites by Hilton Bethesda	Bethesda, Maryland	272	71.9	%	163.58		117.54		66.7	%
Hilton Burlington Lake Champlain	Burlington, Vermont	258	76.2	%	252.40		192.25		4.4	%
Henderson Beach Resort	Destin, Florida	254	61.7	%	458.10		282.64		(18.1)	%
Hotel Palomar Phoenix	Phoenix, Arizona	242	76.0	%	221.99		168.72		15.4	%
Bourbon Orleans Hotel	New Orleans, Louisiana	220	76.9	%	236.68		182.12		29.3	%
Hotel Clio	Denver, Colorado	199	71.2	%	320.35		227.96		7.4	%
Courtyard New York Manhattan/Fifth Avenue	New York, New York	189	95.1	%	270.33		257.20		11.1	%
Margaritaville Beach House Key West	Key West, Florida	186	84.3	%	403.61		340.19		(12.9)	%
The Lodge at Sonoma Resort	Sonoma, California	182	62.7	%	455.78		285.78		(2.8)	%
Courtyard Denver Downtown	Denver, Colorado	177	78.4	%	220.51		172.83		10.6	%
The Lindy Renaissance Charleston Hotel	Charleston, South Carolina	167	89.2	%	352.01		313.99		1.3	%
Kimpton Shorebreak Resort	Huntington Beach, California	157	81.3	%	338.09		274.92		(5.9)	%
Cavallo Point, The Lodge at the Golden Gate	Sausalito, California	142	55.8	%	590.72		329.54		(10.7)	%
Chico Hot Springs Resort	Pray, Montana	117	79.6	%	183.71		146.31		10.8	%
Havana Cabana Key West	Key West, Florida	106	84.2	%	305.56		257.20		(13.3)	%
Tranquility Bay Beachfront Resort	Marathon, Florida	103	77.8	%	652.82		507.60		(15.2)	%
Hotel Emblem San Francisco	San Francisco, California	96	67.0	%	245.70		164.55		(1.7)	%
Kimpton Fort Lauderdale Beach Resort	Fort Lauderdale, Florida	96	66.3	%	217.03		143.81		(6.6)	%
L'Auberge de Sedona	Sedona, Arizona	88	60.0	%	907.24		544.22		(22.3)	%
The Landing Lake Tahoe Resort & Spa	South Lake Tahoe, California	82	53.0	%	472.57		250.32		(10.1)	%
Orchards Inn Sedona	Sedona, Arizona	70	59.6	%	281.82		167.87		(15.2)	%
Lake Austin Spa Resort	Austin, Texas	40	58.5	%	1,071.67		627.30		(16.1)	%
Henderson Park Inn	Destin, Florida	37	70.2	%	627.97		440.90		(15.1)	%
TOTAL/WEIGHTED AVERAGE		9,745	73.3	%	$	281.92	$	206.76	4.1	%

____________________

(1)The percentage change from ~~2016~~2022 RevPAR reflects the comparable period in ~~2016~~2022 to our ~~2017~~2023 ownership period for our ~~2017~~2023 and 2022 acquisitions.

(2) The hotel temporarily closed on September 6, 2017 due to Hurricane Irma. The percentage change from 2016 RevPAR reflects the comparable period in 2016 to the period in which the hotel was open from January 1, 2017 to September 5, 2017.

~~(3) The hotel was acquired on February 28, 2017. The operating statistics reflect the period from February 28, 2017 to September 30, 2017.~~

~~Update on on Impact from Natural Disasters~~

~~Frenchman's Reef & Morning Star Marriott Beach Resort.~~ ~~The hotel sustained significant hurricane damage during September 2017. The hotel closed on September 6, 2017 and is currently expected to remain closed through the end of 2018.~~

~~The Inn at Key West.~~ The hotel sustained substantial wind and water-related damage from Hurricane Irma. The hotel closed on September 6, 2017 to comply with a mandatory evacuation order and is currently expected to remain closed through the end of the first quarter of 2018.

~~Sheraton Suites Key West.~~ ~~The hotel sustained minimal wind and water-related damage from Hurricane Irma. The hotel closed on September 6, 2017 to comply with a mandatory evacuation order and re-opened on September 16, 2017.~~

~~Westin Fort Lauderdale Beach Resort.~~ ~~The hotel experienced minimal water intrusion from Hurricane Irma. The hotel closed on September 7, 2017 to comply with a mandatory evacuation order and re-opened on September 12, 2017.~~

~~Table of Contents~~

~~The Lodge at Sonoma Renaissance Resort & Spa.~~ The hotel was impacted by smoke infiltration during the recent wildfires and was closed from October 10, 2017 through October 19, 2017. The smoke infiltration has been remediated and the hotel re-opened on October 20, 2017.

Results of Operations

At September 30, 2023 and 2022, we owned 36 and 34 hotels, respectively. 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 three and nine months ended September 30, 2023 and 2022. The properties detailed in the table below are hereinafter referred to as “non-comparable properties” and all other properties are referred to as “comparable properties”:

-27-

Table of Contents

Property

Location

Acquisition Date

Tranquility Bay Beachfront Resort

Marathon, Florida

January 6, 2022

Kimpton Fort Lauderdale Beach Resort

Fort Lauderdale, Florida

April 1, 2022

Lake Austin Spa Resort

Austin, Texas

November 21, 2022

Chico Hot Springs Resort

Pray, Montana

August 1, 2023

Comparison of the Three Months Ended September 30, ~~2017~~2023 to the Three Months Ended September 30, ~~2016~~2022

Revenue. Revenue consists primarily of the room, food and beverage and other operating revenues from our hotels, as follows (dollars in millions):


	Three Months Ended September 30,				Change
	2023		2022		$		%
Rooms	$	186.3	$	185.0	$	1.3	0.7	%
Food and beverage	64.7		61.9		2.8		4.5	%
Other	25.5		21.3		4.2		19.7	%
Total revenues	$	276.5	$	268.2	$	8.3	3.1	%

Three Months Ended September 30,
2017 2016 % Change
Rooms $ 168.0
$ 163.2
2.9 %
Food and beverage 42.7
44.0
(3.0 )%
Other 12.8
13.0
(1.5 )%
Total revenues $ 223.5
$ 220.2
1.5 %

~~Our total~~Rooms revenues increased ~~$3.3~~by $1.3 million from ~~$220.2 million for~~ the three months ended September 30, ~~2016~~2022 to ~~$223.5 million for~~ the three months ended September 30, ~~2017. This~~2023, consisting of a $3.0 million increase ~~includes amounts that are not comparable quarter-over-quarter as follows:~~

•~~$0.1~~due to non-comparable properties, offset by a $1.7 million decrease ~~from~~at our comparable properties. The decrease of $1.7 million at our comparable properties was primarily due to a decline in occupancy and ADR at our resort hotels due to the ~~Hilton Garden Inn Chelsea/New York City, which was sold on July 7, 2016.~~normalizing of leisure demand, partially offset by higher occupancy at our urban hotels.

•~~$5.2 million increase from the L'Auberge de Sedona, which was acquired on February 28, 2017.~~

•~~$2.0 million increase from the Orchards Inn Sedona, which was acquired on February 28, 2017.~~

~~Excluding these non-comparable amounts our total revenues decreased $3.8 million, or 1.7%.~~

The following are key hotel operating statistics for the three months ended September 30, ~~2017~~2023 and ~~2016~~.2022. The ~~2016 amounts~~2022 operating statistics reflect the period in ~~2016~~2022 comparable to our ownership period in ~~2017~~2023 for ~~the L'Auberge de Sedona~~hotels acquired in 2023 and ~~Orchards Inn Sedona and exclude the hotels sold in 2016.~~2022.


	Three Months Ended September 30,
	2023			2022			% Change
Occupancy %	76.3		%	74.9		%	1.4	%
ADR	$	273.56		$	282.03		(3.0)	%
RevPAR	$	208.78		$	211.32		(1.2)	%

Three Months Ended September 30,
2017 2016 % Change
Occupancy % 85.4 % 84.0 % 1.4 percentage points
ADR $ 227.75
$ 224.91
1.3 %
RevPAR $ 194.42
$ 188.88
2.9 %

Excluding non-comparable amounts from our acquisitions and dispositions, the increase in room revenue is a result of an 8.0% increase in the business transient segment and a 2.5% increase in the group segment, partially offset by a 32.6% decrease in the contract segment and a 5.1% decrease in the leisure transient segment.

Food and beverage revenues ~~decreased $1.3~~increased $2.8 million from the three months ended September 30, ~~2016, which includes amounts that are not comparable quarter-over-quarter as follows:~~

•~~$1.7~~2022 to the three months ended September 30, 2023, $1.3 million ~~increase from the L'Auberge de Sedona,~~of which was ~~acquired on February 28, 2017.~~

•~~$0.9 million increase from the Orchards Inn Sedona, which was acquired on February 28, 2017.~~

~~Excluding these non-comparable amounts, food and beverage revenues decreased $3.9 million, or 9.0%, primarily~~ due to ~~a decrease in banquet and catering revenues.~~non-comparable properties. The remaining increase was the result of higher outlet revenues at our comparable properties.

~~Excluding non-comparable amounts from our acquisitions and dispositions, other~~Other revenues, which primarily represent spa, parking, resort fees and attrition and cancellation fees, ~~decreased~~increased by ~~$0.9~~$4.2 million from the three months ended September 30, 2022 to the three months ended September 30, 2023, $2.8 million of which was due to non-comparable properties. The remaining increase of $1.4 million was primarily due to ~~a decrease~~increases in ~~tenant lease income~~resort fees and parking ~~revenue.~~revenues at our comparable properties.

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


	Three Months Ended September 30,				Change
	2023		2022		$		%
Rooms	$	45,773	$	43,899	$	1,874	4.3	%
Food and beverage	45,428		43,227		2,201		5.1	%
Other departmental and support expenses	65,952		62,271		3,681		5.9	%
Management fees	7,323		6,697		626		9.3	%
Franchise fees	8,913		8,709		204		2.3	%
Other property-level expenses	25,704		21,047		4,657		22.1	%
Total hotel operating expenses	$	199,093	$	185,850	$	13,243	7.1	%

-28-

Table of Contents

Three Months Ended September 30,
2017 2016 % Change (B)/W
Rooms departmental expenses $ 41.9
$ 39.8
5.3 %
Food and beverage departmental expenses 30.8
29.1
5.8
Other departmental expenses 3.1
3.0
3.3
General and administrative 19.2
17.7
8.5
Utilities 6.5
6.7
(3.0 )
Repairs and maintenance 8.8
8.6
2.3
Sales and marketing 15.2
14.8
2.7
Franchise fees 6.2
5.5
12.7
Base management fees 3.4
5.4
(37.0 )
Incentive management fees 2.0
2.3
(13.0 )
Property taxes 13.1
12.3
6.5
Other fixed charges 3.2
2.8
14.3
Ground rent—Contractual 1.0
1.0
—
Ground rent—Non-cash 1.5
1.6
(6.3 )
Total hotel operating expenses $ 155.9
$ 150.6
3.5 %

Our hotel operating expenses increased ~~$5.3~~$13.2 million from $150.6 million for the three months ended September 30, 2016 to $155.9 million for the three months ended September 30, 2017. The increase in hotel operating expenses includes amounts that are not comparable quarter-over-quarter as follows:

•~~$0.1 million decrease from the Hilton Garden Inn Chelsea/New York City, which was sold on July 7, 2016.~~

•~~$4.3 million increase from the L'Auberge de Sedona, which was acquired on February 28, 2017.~~

•~~$1.5 million increase from the Orchards Inn Sedona, which was acquired on February 28, 2017.~~

~~Excluding the non-comparable amounts, hotel operating expenses decreased $0.4 million, or 0.3%,~~ from the three months ended September 30, ~~2016.~~

~~In connection with the change in hotel manager of the Courtyard Manhattan/Midtown East, we recognized $1.9 million of accelerated amortization of key money during~~2022 to the three months ended September 30, ~~2017. This amortization reduced base management fees during the three months ended September 30, 2017.~~2023, $5.8 million of which was due to non-comparable properties. The remaining increase in hotel operating expenses was primarily due to increased occupancy and related labor costs. Other property-level expenses increased due to higher property tax assessments and insurance premiums.

Depreciation and amortization. Depreciation and amortization is recorded on our hotel buildings over 40 years for the periods subsequent to acquisition. Depreciable lives of hotel furniture, fixtures and equipment are estimated as the time period between the acquisition date and the date that the hotel furniture, fixtures and equipment will be replaced. Our depreciation and amortization expense increased ~~$1.5~~$0.6 million, or ~~6.3%~~2.3%, from the three months ended September 30, ~~2016.~~2022 primarily due to properties acquired during 2022 and 2023.

~~Impairment losses.~~ ~~We recorded impairment losses totaling~~ ~~$2.4 million~~ for the three months ended September 30, 2017. The loss is comprised of $1.8 million from the write-off of construction in progress that was determined not to be recoverable and $0.6 million from the write-off of property and equipment damaged during Hurricane Irma in September 2017.

~~Hotel acquisition costs.~~ ~~During the three months ended September 30, 2017, we recorded a refund of $0.2 million of transfer taxes related to the acquisition of the Hotel Rex.~~

Business interruption insurance income. During the three months ended September 30, 2023, we recognized $0.5 million of business interruption insurance income related to ~~$6.1~~an electrical fire at the Hilton Garden Inn New York/Times Square Central that caused the hotel to be closed for seven days. No business interruption insurance income was recorded during the three months ended September 30, 2022.

Interest expense. Our interest expense increased $6.9 million, from $9.1 million for the three months ended September 30, ~~2017. The increase is primarily due~~2022 to the reversal of $0.7 million of previously recognized compensation expense resulting from the forfeiture of equity awards related to the resignation of our former Executive Vice President and Chief Operating Officer during the three months ended September 30, 2016 and an increase in other employee compensation during the three months ended September 30, 2017.

~~Interest expense.~~ ~~Our interest expense was $9.7 million and $9.5~~$16.0 million for the three months ended September 30, ~~2017~~2023, and ~~2016, respectively, and comprises~~was comprised of the following (in millions):


	Three Months Ended September 30,
	2023		2022
Mortgage debt interest	$	4.1	$	6.2
Unsecured term loan interest	11.0		4.1
Credit facility interest and unused fees	0.3		1.9
Amortization of debt issuance costs and debt premium	0.6		0.7

Interest rate swap mark-to-market	—		(3.8)
	$	16.0	$	9.1

~~Table of Contents~~

Three Months Ended September 30,
2017 2016
Mortgage debt interest $ 6.9
$ 8.2
Term loan interest 2.1
0.5
Credit facility interest and unused fees 0.2
0.3
Amortization of deferred financing costs and debt premium 0.5
0.5
$ 9.7
$ 9.5

~~The decrease in mortgage debt interest expense related to the repayment of the mortgage loan secured by the Lexington Hotel, which was prepaid on April 26, 2017.~~ The increase in ~~term loan~~ interest expense is primarily related to ~~the~~rising interest ~~expense~~rates on our ~~$200 million~~variable rate debt, our unsecured term ~~loan~~loans that we entered into in ~~April 2017.~~

~~Income taxes.~~ ~~We recorded income tax expense~~September 2022 and the conversion of $3.4 million for the three months ended September 30, 2017 and an income tax expense of $4.4 million for the three months ended September 30, 2016. The income tax expense for the three months ended September 30, 2017 includes $3.4 million of income tax expense on the $8.4 million pre-tax incomecertain of our ~~taxable REIT subsidiaries ("TRS"), $0.1 million~~interest rate swaps to cash flow hedges as of state franchise taxes, offset by $0.1 million of income tax benefit incurred on the $1.5 million pre-tax loss of the TRS that owns Frenchman's Reef. The income tax expense for the three months ended September 30, 2016 includes $4.3 million of income tax expense incurred on the $10.5 million pre-tax income of our TRS, less than $0.1 million of income tax expense incurred on the $0.1 million pre-tax income of the TRS that owns Frenchman's Reef, and $0.1 million of state franchise taxes.April 1, 2023.

Comparison of the Nine Months Ended September 30, ~~2017~~2023 to the Nine Months Ended September 30, ~~2016~~2022

Our results of operations for the nine months ended September 30, 2023 improved relative to the nine months ended September 30, 2022 as group and corporate travel demand increased.

Revenue. Revenue consists primarily of the room, food and beverage and other operating revenues from our hotels, as follows (dollars in millions):


	Nine Months Ended September 30,				Change
	2023		2022		$		%
Rooms	$	544.3	$	510.2	$	34.1	6.7	%
Food and beverage	192.9		176.3		16.6		9.4	%
Other	74.1		60.0		14.1		23.5	%
Total revenues	$	811.3	$	746.5	$	64.8	8.7	%

Nine Months Ended September 30,
2017 2016 % Change
Rooms $ 483.3
$ 498.7
(3.1 )%
Food and beverage 140.2
151.8
(7.6 )%
Other 39.5
39.4
0.3 %
Total revenues $ 663.0
$ 689.9
(3.9 )%

~~Our total~~Rooms revenues ~~decreased $26.9~~increased by $34.1 million from ~~$689.9 million for~~ the nine months ended September 30, ~~2016~~2022 to ~~$663.0 million for~~ the nine months ended September 30, ~~2017. This decrease includes amounts that are not comparable period-over-period as follows:~~

•~~$14.1~~2023, $10.0 million ~~decrease from the Orlando Airport Marriott,~~of which was ~~sold on June 8, 2016.~~due to non-comparable properties. The remaining increase of $24.1 million was the result of improved occupancy and ADR at our urban hotels as group and corporate business continued to improve, partially offset by declines in occupancy and ADR at our resort hotels due to the normalizing of leisure demand.

•~~$24.8 million decrease from the Minneapolis Hilton, which was sold on June 30, 2016.~~

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•~~$6.4 million decrease from the Hilton Garden Inn Chelsea/New York City, which was sold on July 7, 2016.~~Table of Contents

•~~$14.6 million increase from the L'Auberge de Sedona, which was acquired on February 28, 2017.~~

•~~$5.4 million increase from the Orchards Inn Sedona, which was acquired on February 28, 2017.~~

~~Excluding these non-comparable amounts our total revenues decreased $1.6 million, or 0.3%.~~

The following are key hotel operating statistics for the nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022. The ~~2016 amounts~~2022 operating statistics reflect the period in ~~2016~~2022 comparable to our ownership period in ~~2017~~2023 for ~~the L'Auberge de Sedona~~hotels acquired in 2023 and ~~Orchards Inn Sedona and exclude the hotels sold in 2016.~~2022.


	Nine Months Ended September 30,
	2023			2022			% Change
Occupancy %	73.3		%	68.7		%	4.6	%
ADR	$	281.92		$	289.03		(2.5)	%
RevPAR	$	206.76		$	198.55		4.1	%

Nine Months Ended September 30,
2017 2016 % Change
Occupancy % 81.5 % 80.9 % 0.6 percentage points
ADR $ 228.67
$ 225.55
1.4 %
RevPAR $ 186.46
$ 182.51
2.2 %

~~Table of Contents~~

Excluding non-comparable amounts from our acquisitions and dispositions, the increase in room revenue is a result of a 6.2% increase in the business transient segment and a 1.2% increase in the group segment, partially offset by an 10.9% decrease in the contract segment and a 2.2% decrease in the leisure transient segment.

Food and beverage revenues ~~decreased $11.6~~increased $16.6 million from the nine months ended September 30, ~~2016,~~2022 to the nine months ended September 30, 2023, of which ~~includes amounts that are not comparable period-over-period as follows:~~

•~~$4.7~~$2.4 million ~~decrease from the Orlando Airport Marriott, which~~ was ~~sold on June 8, 2016.~~

•~~$9.1~~due to non-comparable properties. The remaining increase of $14.2 million ~~decrease from the Minneapolis Hilton, which~~ was ~~sold on June 30, 2016.~~

•~~$0.1 million decrease from the Hilton Garden Inn Chelsea/New York City, which was sold on July 7, 2016.~~

•~~$4.6 million increase from the L'Auberge de Sedona, which was acquired on February 28, 2017.~~

•~~$2.5 million increase from the Orchards Inn Sedona, which was acquired on February 28, 2017.~~

~~Excluding these non-comparable amounts, food and beverage revenues decreased $4.8 million, or 3.5%,~~ primarily due to ~~a decrease~~an increase in banquet ~~and catering revenues.~~revenues, particularly at our urban hotels.

~~Excluding non-comparable amounts from our acquisitions and dispositions, other~~Other revenues, which primarily represent spa, parking, resort fees and attrition and cancellation fees, ~~decreased~~increased by ~~less than $1.0~~$14.1 million from the nine months ended September 30, 2022 to the nine months ended September 30, 2023, $8.8 million of which was due to non-comparable properties. The remaining increase of $5.3 million was primarily due to ~~a decrease~~increases in ~~tenant lease income~~resort fees and parking ~~revenue.~~revenues.

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


	Nine Months Ended September 30,				Change
	2023		2022		$		%
Rooms	$	131,092	$	120,374	$	10,718	8.9	%
Food and beverage	134,486		119,919		14,567		12.1	%
Other departmental and support expenses	193,365		170,328		23,037		13.5	%
Management fees	19,196		17,029		2,167		12.7	%
Franchise fees	26,393		23,212		3,181		13.7	%
Other property-level expenses	76,755		63,997		12,758		19.9	%
Total hotel operating expenses	$	581,287	$	514,859	$	66,428	12.9	%

Nine Months Ended September 30,
2017 2016 % Change (B)/W
Rooms departmental expenses $ 120.4
$ 121.7
(1.1 )%
Food and beverage departmental expenses 93.3
97.7
(4.5 )
Other departmental expenses 9.2
9.2
—
General and administrative 56.7
58.0
(2.2 )
Utilities 18.6
20.0
(7.0 )
Repairs and maintenance 26.3
27.1
(3.0 )
Sales and marketing 44.6
47.4
(5.9 )
Franchise fees 17.3
16.5
4.8
Base management fees 13.7
17.0
(19.4 )
Incentive management fees 4.6
6.0
(23.3 )
Property taxes 39.2
35.2
11.4
Other fixed charges 8.5
9.2
(7.6 )
Ground rent—Contractual 3.1
5.9
(47.5 )
Ground rent—Non-cash 4.6
4.2
9.5
Total hotel operating expenses $ 460.1
$ 475.1
(3.2 )%

Our hotel operating expenses ~~decreased $15.0~~increased $66.4 million from $475.1 million for the nine months ended September 30, 2016 to $460.1 million for the nine months ended September 30, 2017. The decrease in hotel operating expenses includes amounts that are not comparable period-over-period as follows:

•~~$9.1 million decrease from the Orlando Airport Marriott, which was sold on June 8, 2016.~~

•~~$19.4 million decrease from the Minneapolis Hilton, which was sold on June 30, 2016.~~

•~~$4.8 million decrease from the Hilton Garden Inn Chelsea/New York City, which was sold on July 7, 2016.~~

•~~$10.8 million increase from the L'Auberge de Sedona, which was acquired on February 28, 2017.~~

•~~$3.6 million increase from the Orchards Inn Sedona, which was acquired on February 28, 2017.~~

~~Excluding the non-comparable amounts, hotel operating expenses increased $3.9 million, or 0.9%,~~ from the nine months ended September 30, ~~2016.~~

~~The decrease in contractual ground rent period-over-period is due~~2022 to ~~the sale of the Hilton Minneapolis, which was sold on June 30, 2016. The increase in property taxes is primarily due to successful appeals for our two Chicago hotels during the nine~~

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~~months ended September 30, 2016, as well as increased assessments at our two Chicago hotels and our three Colorado hotels during~~ the nine months ended September 30, ~~2017.~~

~~In connection with the change in hotel manager of the Courtyard Manhattan/Midtown East, we recognized $1.9~~2023, $16.0 million of ~~accelerated amortization of key money during the nine months ended September 30, 2017. This amortization reduced base management fees during the nine months ended September 30, 2017.~~

~~The decrease in incentive management fees is~~which was due to non-comparable properties. Hotel operating expenses at our comparable properties increased primarily due to ~~our contribution~~increased occupancy and related labor costs. Other property-level expenses increased due to the renovation at the Chicago Marriott Downtown. There is no owner's priority; however, our accumulated contribution to the hotel's renovation is treated as a deduction spread over a period of time in calculating net operating income. As our accumulated contribution has increased, the incentive management fees have decreased.higher property tax assessments and insurance premiums.

Depreciation and amortization. Depreciation and amortization is recorded on our hotel buildings over 40 years for the periods subsequent to acquisition. Depreciable lives of hotel furniture, fixtures and equipment are estimated as the time period between the acquisition date and the date that the hotel furniture, fixtures and equipment will be replaced. Our depreciation and amortization expense increased ~~$1.3~~$1.9 million, or ~~1.8%~~2.3%, from the nine months ended September 30, ~~2016.~~2022 primarily due to the properties acquired during 2022 and 2023, as well as the renovations and rebrandings that were completed in 2022 and 2023.

Impairment losses. ~~We recorded impairment losses totaling $2.4 million for~~During the nine months ended September 30, ~~2017. The~~2023, we recorded an impairment loss ~~is comprised~~ of ~~$1.8~~$0.9 million ~~from~~related to the write-off of construction in progress that was determined not to be ~~recoverable and $0.6 million from the write-off of property and equipment damaged during Hurricane Irma in September 2017.~~

~~Hotel acquisition costs.~~ ~~We recorded $2.0 million of hotel acquisition expenses during~~recoverable. During the nine months ended September 30, ~~2017, which is comprised~~2022, we recorded an impairment loss of ~~$2.2~~$2.8 million ~~of costs incurred from~~on the ~~acquisitions of L'Auberge de Sedona and Orchards Inn Sedona, offset by a refund of $0.2 million of transfer taxes~~right-to-manage intangible asset related to ~~the~~rental management agreements at Tranquility Bay Beachfront Resort upon our acquisition of ~~the Hotel Rex.~~four third-party owned units.

Corporate expenses. Corporate expenses principally consist of employee-related costs, including ~~base~~ payroll, bonus, restricted stock and ~~restricted stock.~~benefits. Corporate expenses also include corporate operating costs, professional fees and directors’ fees. Our corporate expenses increased ~~$1.8~~$1.4 million, or 6.3%, from ~~$17.4~~$22.3 million for the nine months ended September 30, ~~2016~~2022 to ~~$19.2~~$23.7 million for the nine months ended September 30, ~~2017. The increase is partially~~2023, primarily due to increases in employee-related costs. Additionally, during the ~~fee paid for the recruitment of our new Executive Vice President and Chief Operating Officer in January 2017,~~nine months ended September 30, 2022, we recognized the reversal of ~~$0.7 million of previously recognized~~ compensation expense resulting from the forfeiture of ~~equity~~long-term incentive awards related to the resignation of our former Executive Vice President, Asset Management and Chief Operating ~~Officer during the three months ended September 30, 2016, and an increase in other employee compensation during~~Officer.

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Business interruption insurance income. During the nine months ended September 30, ~~2017.~~2023, we recognized $0.5 million of business interruption insurance income related to an electrical fire at the Hilton Garden Inn New York/Times Square Central that caused the hotel to be closed for seven days and $0.1 million related to an insurance claim at the Worthington Renaissance Fort Worth Hotel. During the nine months ended September 30, 2022, we recognized $0.5 million of business interruption insurance income related to the impact of the Caldor wildfire at The Landing Lake Tahoe Resort & Spa, which caused the hotel to be closed for 21 days in 2021.

Interest expense. Our interest expense ~~was $28.8~~increased $25.8 million, ~~and $32.2~~from $22.9 million for the nine months ended September 30, ~~2017 and 2016, respectively, and comprises the following (in millions):~~

Nine Months Ended September 30,
2017 2016
Mortgage debt interest $ 22.4
$ 28.5
Term loan interest 4.2
0.8
Credit facility interest and unused fees 0.7
1.1
Amortization of deferred financing costs and debt premium 1.5
1.7
Interest rate cap fair value adjustment —
0.1
$ 28.8
$ 32.2

~~The decrease in mortgage debt interest expense is primarily related~~2022 to the repayment of the mortgage loans secured by the Chicago Marriott Downtown, the Courtyard Manhattan Fifth Avenue, and the Lexington Hotel. The decrease is also attributed to the sale of the Hilton Minneapolis on June 30, 2016. The decrease in interest expense is partially offset by the increase in interest expense on our two unsecured term loans, entered into in May 2016 and April 2017.

~~Loss on early extinguishment of debt.~~ ~~We prepaid the $170.4 million mortgage loan previously secured by the Lexington Hotel on April 26, 2017 and recognized a loss on early extinguishment of debt of approximately $0.3 million.~~

~~Income taxes.~~ ~~We recorded income tax expense of $9.0~~$48.7 million for the nine months ended September 30, ~~2017~~2023, and ~~an income tax~~was comprised of the following (in millions):


	Nine Months Ended September 30,
	2023		2022
Mortgage debt interest	$	12.3	$	18.3
Unsecured term loan interest	31.9		11.5
Credit facility interest and unused fees	0.9		5.1
Amortization of debt issuance costs and debt premium	1.6		2

Interest rate swap mark-to-market	2.0		(14.0)
	$	48.7	$	22.9

The increase in interest expense is primarily related to rising interest rates on our variable rate debt, our unsecured term loans that we entered into in September 2022 and the change in the fair value of $11.4 million for the nine months ended September 30, 2016. The income tax expense for the nine months ended September 30, 2017 includes $8.4 million of income tax expense on the $20.7 million pre-tax incomecertain of our ~~TRSs, $0.2 million~~interest rate swaps not designated as cash flow hedges, which were designated as cash flow hedges as of April 1, 2023.

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of state franchise taxes, and $0.4 million of income tax expense incurred on the $6.3 million pre-tax income of the TRS that owns Frenchman's Reef. The income tax expense for the nine months ended September 30, 2016 includes $10.6 million of income tax expense incurred on the $25.8 million pre-tax income of our TRS, $0.6 million of foreign income tax expense incurred on the $8.1 million pre-tax income of the TRS that owns Frenchman's Reef, and $0.2 million of state franchise taxes.

Liquidity and Capital Resources

Our short-term liquidity requirements consist primarily of funds necessary to ~~fund distributions to~~pay our ~~stockholders to maintain our REIT status as well as to pay for~~scheduled debt service, operating expenses, ~~and~~ground lease payments, capital expenditures directly associated with our hotels, ~~funding of~~any share repurchases, ~~under~~distributions to our ~~share repurchase program,~~common and preferred stockholders, and the cost of acquiring additional hotels. We have one mortgage loan that matures within one year which has a principal balance of $74.8 million as of September 30, 2023. We intend to repay mortgage debt ~~repayments upon maturity and scheduled debt payments of interest and principal. We currently expect that our~~using cash flow from operations or available cash flows, which are generally provided through net cash from hotel operations, existing cash balances, equity issuances, proceeds from new financings and refinancings of maturing debt, proceeds from property dispositions, and, if necessary, short-term borrowings undercapacity on our senior unsecured credit facility, ~~will be~~which is sufficient to meet ~~our short-term liquidity requirements.~~the principal due within the next twelve months.

~~Some of our~~Our mortgage debt agreements contain “cash trap” provisions that are triggered when the hotel’s operating results

fall below a certain debt service coverage ratio. When these provisions are triggered, all of the excess cash flow generated by the hotel is deposited directly into cash management accounts for the benefit of our lenders until a specified debt service coverage ratio is reached and maintained for a certain period of time. Such provisions do not allow the lender the right to accelerate repayment of the underlying debt. As of September 30, 2023, we had no cash traps in place.

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 redemption of limited operating partnership units (“common OP units”), ground lease payments, share repurchases, and making distributions to our common and preferred 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. ~~The majority of our~~Our outstanding debt isconsists of fixed interest rate mortgage ~~debt.~~debt, unsecured term loans and periodic borrowings on our senior

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unsecured credit facility. We have a preference to maintain a significant portion of our portfolio as unencumbered ~~assets~~ in order to provide balance sheet flexibility. 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 ~~not~~ prudent to ~~increase~~reduce the inherent risk of highly cyclical lodging fundamentals through ~~the use of~~ a ~~highly~~low leveraged capital structure.

We prefer a relatively simple but efficient capital structure. We ~~have not invested in joint ventures and have not issued any operating partnership units or preferred stock. 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 September 30, ~~2017,~~2023, we had ~~$940.8 million~~$1.2 billion of debt outstanding with a weighted average interest rate of ~~3.8%~~5.07% and a weighted average maturity date of approximately ~~5.9~~2.7 years. We ~~maintain one of the most durable and lowest levered balance sheets among our lodging REIT peers. We maintain balance sheet flexibility with no~~have limited near-term mortgage debt maturities, ~~no borrowings outstanding under our senior unsecured credit facility~~ and 2032 of our 2836 hotels are unencumbered by mortgage debt. We remain committed to our core strategy of ~~maintaining a simple capital structure with conservative~~prudent leverage.

Information about our financing activities is available in Note 85 to the accompanying ~~condensed~~ consolidated financial statements.

ATM Program

We maintain 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 have not sold any shares under the ATM Program.

Share Repurchase Program

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Our board of directors has ~~approved~~authorized a ~~$150 million~~ share repurchase program ~~authorizing us~~pursuant to which we are authorized to repurchase ~~shares~~up to $200.0 million of our common ~~stock. Information about our share repurchase program is found in Note 5 to the accompanying condensed consolidated financial statements.~~stock through February 2025. During the nine months ended September 30, ~~2017,~~2023, we ~~did not repurchase any~~repurchased 318,454 shares of ~~our~~ common ~~stock. As~~stock at an average price of ~~November 7, 2017, we have $143.5 million~~$7.60 per share for a total purchase price of ~~authorized capacity remaining under our share repurchase program.~~$2.4 million.

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

We are party to a ~~$300~~Sixth Amended and Restated Credit Agreement that provides us with a $400 million senior unsecured revolving credit facility ~~expiring~~and two term loan facilities in ~~May 2020. Information about our senior unsecured~~the aggregate amount of $800 million. The revolving credit facility ismatures on September 27, 2026, which we may extend for an additional year upon the payment of applicable fees and satisfaction of certain standard conditions. The term loan facilities consist of a $500 million term loan that matures on January 3, 2028 and a $300 million term loan that matures on January 3, 2025. The maturity date of the $300 million term loan may be extended for an additional year upon the payment of applicable fees and satisfaction of certain standard conditions. We have the right to increase the aggregate amount of the facilities to $1.4 billion upon the satisfaction of certain standard conditions.

Additional information about the credit facilities, including a summary of significant covenants, can be found in Note 85 to the accompanying ~~condensed consolidated financial statements. As of September 30, 2017, we had no borrowings outstanding under our senior unsecured credit facility.~~

~~Unsecured Term Loans~~

We are party to a $100 million unsecured term loan expiring in May 2021 and a $200 million unsecured term loan expiring in April 2022. Information about our unsecured term loans is found in Note 8 to the accompanying condensed consolidated financial statements.

Sources and Uses of Cash

~~Our~~We expect that our principal sources of cash ~~are~~will include one or more of the following: net cash flow from hotel operations, sales of our equity and ~~borrowings under mortgage~~ debt ~~term loans, our senior unsecured credit facility, proceeds from hotel dispositions,~~securities, debt financings and proceeds from ~~insurance claims.~~any hotel dispositions. Our principal uses of cash are acquisitions of hotel properties, debt service ~~debt~~and maturities, share repurchases, capital expenditures, operating costs, ground lease payments, corporate expenses, ~~natural disaster remediation~~ and ~~repair costs,~~distributions to holders of common stock, common units and ~~dividends.~~preferred stock. As of September 30, ~~2017~~,2023, we had ~~$166.6~~$102.7 million of unrestricted ~~corporate~~ cash, ~~and~~ ~~$42.3~~$42.5 million of restricted cash ~~as well as full borrowing capacity under~~and no outstanding borrowings on our senior unsecured credit facility.

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Our net cash provided by operations was ~~$149.4~~$184.7 million for the nine months ended September 30, ~~2017~~.2023. Our cash from operations generally consists of the net cash flow from hotel operations, offset by cash paid for corporate expenses and other working capital changes.

Our net cash used in investing activities was ~~$168.9~~$101.2 million for the nine months ended September 30, ~~2017~~,2023, which consisted of ~~$93.8~~$67.4 million ~~paid for the acquisitions~~ of ~~L'Auberge de Sedona and Orchards Inn Sedona,~~ capital expenditures at our hotels, $1.8 million of ~~$77.5~~cash paid for the acquisition of a land parcel underlying the parking structure at the Worthington Renaissance Fort Worth Hotel, and $31.9 million~~, offset by~~ paid for the ~~net return~~acquisition of ~~$2.4 million from property improvement reserves included within restricted cash to fund capital expenditures.~~Chico Hot Springs Resort and adjacent ranch.

Our net cash used in financing activities was ~~$57.0~~$45.4 million for the nine months ended September 30, ~~2017~~,2023, which consisted of ~~our $170.4 million repayment of the mortgage debt secured by the Lexington Hotel, $75.5~~$25.5 million of ~~dividend payments, $9.1~~distributions paid to holders of common stock and common units, $7.4 million of distributions paid to holders of preferred stock, $7.1 million of scheduled mortgage debt principal payments, ~~$0.5~~$3.0 million ~~paid to repurchase~~of shares ~~upon the vesting of restricted stock~~repurchased for the payment of tax withholding obligations upon the vesting of restricted stock and ~~$1.6~~$2.4 million of ~~financing costs related to~~shares repurchased under our ~~unsecured term loan, partially offset by $200.0 million of proceeds from our new unsecured term loan.~~share repurchase program.

We currently anticipate our significant ~~sources~~source of cash for the remainder of the year ending December 31, ~~2017~~2023 will be the net cash flow from hotel ~~operations and potential insurance proceeds.~~operations. We expect our estimated uses of cash for the remainder of the year ending December 31, ~~2017~~2023 will be ~~regularly~~ scheduled debt service payments, capital expenditures, ~~remediation~~distributions to preferred and ~~repair costs, dividends,~~common stockholders, corporate expenses, ~~potential hotel acquisitions,~~ and potential share repurchases.

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 ~~TRS,~~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 qualify as a REIT under the Code, we generally must make distributions to our stockholders each year in an amount equal to at least:

•90% of our REIT taxable income determined without regard to the dividends paid deduction and excluding net capital gains, plus

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

•any excess non-cash income.

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.

We have paid the following dividends to holders of our common stock and distributions to holders of common OP units and LTIP units during ~~2017:~~2023, and through the date of this report:


Payment Date	Record Date	Dividend per Share
January 12, 2023	December 30, 2022	$	0.06
April 12, 2023	March 31, 2023	$	0.03
July 12, 2023	June 30, 2023	$	0.03
October 12, 2023	September 29, 2023	$	0.03

Payment Date Record Date
Dividend
per Share
January 12, 2017 December 30, 2016 $ 0.125
April 12, 2017 March 31, 2017 $ 0.125
July 12, 2017 June 30, 2017 $ 0.125
October 12, 2017 September 30, 2017 $ 0.125

We have paid the following dividends per share to holders of our Series A Preferred Stock during 2023, and through the date of this report:


Payment Date	Record Date	Dividend per Share
March 31, 2023	March 17, 2023	$	0.515625
June 30, 2023	June 20, 2023	$	0.515625
September 29, 2023	September 18, 2023	$	0.515625

Capital Expenditures

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The management and franchise agreements for each of our hotels provide for the establishment of separate property improvement funds 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 fund under the applicable management or franchise agreement. As of September 30, ~~2017~~,2023, we have set aside $36.5 million for capital projects in property improvement funds, which are included in restricted cash.

~~We spent~~In 2023, we expect to spend approximately ~~$77.5~~$100 million on capital improvements at our hotels, of which we have invested approximately $67.4 million during the nine months ended September 30, 2017, primarily related to the third phase of the Chicago Marriott Downtown renovation and the guest room renovations at the Gwen Chicago, Worthington Renaissance, Charleston Renaissance, and The Lodge at Sonoma. We expect to spend between $110 million and $120 million on capital improvements at our hotels in 2017.2023. Significant projects in ~~2017 include:~~2023 include the following:

~~Chicago Marriott Downtown:~~•The Dagny: We completed a comprehensive renovation to rebrand the Hilton Boston Downtown/Faneuil Hall as The Dagny, an independent lifestyle hotel, during the third ~~phase~~quarter of the multi-year renovation, which included the upgrade renovation of 340 guest rooms. We expect to commence the final phase of the multi-year renovation, which will include renovating the remaining 258 of 1,200 guest rooms during late 2017 with completion in early 2018.

2023.

~~The Gwen:~~•Salt Lake City Marriott: We completed ~~the~~a renovation of the ~~hotel's 311 guest rooms in April 2017.~~

guestrooms during the third quarter of 2023.

~~Worthington Renaissance:~~ •Hilton Burlington Lake Champlain:We ~~completed the renovation~~commenced a repositioning of the ~~hotel's 504 guest rooms~~hotel to rebrand it as a Curio Collection hotel. The repositioning is expected to be completed in ~~January 2017.~~

the summer of 2024 and includes a new restaurant concept by a well-known, award-winning chef.

~~Charleston Renaissance:~~ ~~We completed the renovation of the hotel's 166 guest rooms in February 2017.~~

~~The Lodge at Sonoma:We completed the renovation of the hotel's 182 guest rooms in April 2017.~~

~~Off-Balance Sheet Arrangements~~

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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, 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, 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.

Use and Limitations of Non-GAAP Financial Measures

Our management and Board of Directors use EBITDA, EBITDAre, 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

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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 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, EBITDAre and FFO

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

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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 isand EBITDAre are useful to an investor in evaluating our operating performance because ~~it helps~~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)~~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 EBITDAreas ~~one measure~~measures in determining the value of hotel acquisitions and dispositions.

The Company computes FFO in accordance with standards established by ~~the National Association of Real Estate Investment Trusts ("NAREIT"),~~Nareit, which defines FFO as net income determined in accordance with U.S. GAAP, excluding gains or losses from sales of properties and impairment losses, plus real estate related depreciation and amortization. The Company believes that the presentation of FFO provides useful information to investors regarding its operating performance because it is a measure of the Company's 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. The Company also uses FFO as one measure in assessing its operating results.

Adjustments to ~~EBITDA~~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 operating performance. We adjust EBITDAre and FFO for the following items:

•Non-Cash ~~Ground Rent~~Lease Expense and Other Amortization: We exclude the non-cash expense incurred from the straight line recognition of ~~rent~~expense from our ground ~~lease~~leases and other contractual obligations and the non-cash amortization of our favorable ~~lease assets.~~and unfavorable contracts, originally recorded in conjunction with certain hotel acquisitions. We exclude these non-cash items because they do not reflect the actual ~~rent~~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.

~~Non-Cash Amortization of Favorable and Unfavorable Contracts~~: We exclude the non-cash amortization of the favorable and unfavorable contracts recorded in conjunction with certain acquisitions because the non-cash amortization is based on historical cost accounting and is of lesser significance in evaluating our actual performance for that period.

•Cumulative Effect of a Change in Accounting Principle: ~~Infrequently, the~~The Financial Accounting Standards Board ~~(FASB)~~ promulgates new accounting standards that require or permit the consolidated statement of operations 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~~Company’s actual underlying performance for the current period.

•Gains or Losses from Early Extinguishment of Debt: We exclude the effect of gains or losses recorded on the early extinguishment of debt because these gains or losses result from transaction activity related to the ~~Company's~~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.

~~Table of Contents~~

•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 ~~Costs~~Items: We exclude the transition ~~costs~~items associated with a change in hotel manager because we believe these ~~costs~~items do not reflect the ongoing performance of the Company or our hotels.

•Hotel Pre-Opening Costs: We exclude 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.

•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: ~~pre-opening costs incurred with newly developed hotels;~~ lease preparation costs incurred to prepare vacant space for marketing; management or franchise contract termination fees; gains or losses from legal settlements; ~~bargain purchase gains incurred upon acquisition of a hotel;~~ costs incurred related to natural disasters;

and gains ~~from~~on property insurance ~~proceeds.~~claim settlements, other than income related to business interruption insurance.

In addition, to derive Adjusted EBITDA we exclude gains or losses on dispositions and impairment losses because we believe that including them in EBITDA does not reflect the ongoing performance of our hotels. Additionally, the gain or loss on dispositions and impairment losses are based on historical cost accounting and represent either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.

In addition, to derive Adjusted FFO we exclude any unrealized fair value adjustments to ~~debt instruments.~~interest rate swaps. We exclude these non-cash amounts because they do not reflect the underlying performance of the Company.

-35-

Table of Contents

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


	Three Months Ended September 30,							Nine Months Ended September 30,								Three Months Ended September 30,							Nine Months Ended September 30,
	2017			2016				2017			2016					2023				2022			2023		2022

Net income	$	21,623				$	29,937								$		67,105	$	90,890			Net income	$	27,330	$	28,555	$	75,652	$	91,316
Interest expense	9,692			9,504				28,790			32,242			Interest expense		15,973				9,072			48,712		22,866
Income tax expense	3,375			4,393				9,019			11,357			Income tax expense		224				312			420		949
Real estate related depreciation and amortization	25,083			23,605				75,031			73,731			Real estate related depreciation and amortization		27,683				27,053			82,995		81,097
EBITDA	59,773			67,439				179,945			208,220			EBITDA		71,210				64,992			207,779		196,228
Non-cash ground rent	1,591			1,568				4,756			4,230
Non-cash amortization of favorable and unfavorable contracts, net	(478		)	(478		)		(1,434		)	(1,434		)
Hotel acquisition costs (1)	(245		)	—				2,028			—
Natural disaster costs	1,493			—				1,493			—
Impairment losses	2,357			—				2,357			—			Impairment losses		—				—			941		2,843
Hotel manager transition costs (2)	(1,362		)	—				(1,362		)	—

EBITDAre														EBITDAre		71,210				64,992			208,720		199,071
Non-cash lease expense and other amortization														Non-cash lease expense and other amortization		1,533				1,551			4,620		4,675

Hotel pre-opening costs														Hotel pre-opening costs		496				—			1,038		—
Hotel manager transition items														Hotel manager transition items		—				11			—		247
Severance costs (1)														Severance costs (1)		—				—			—		(532)

Loss on early extinguishment of debt	—			—				274			—			Loss on early extinguishment of debt		—				9,698			—		9,698
Gain on sale of hotel properties	—			(2,198		)		—			(10,319		)
Severance costs (3)	—			(682		)		—			(563		)

Adjusted EBITDA	$	63,129		$	65,649			$	188,057		$	200,134		Adjusted EBITDA		$	73,239			$	76,252		$	214,378	$	213,159


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	DRH	New York Stock Exchange
8.250% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share	DRH Pr A	New York Stock Exchange



	September 30, 2017			December 31, 2016
ASSETS
Property and equipment, net	$	2,688,214		$	2,646,676
Restricted cash	42,317			46,069
Due from hotel managers	98,292			77,928
Favorable lease assets, net	26,795			18,013
Prepaid and other assets	77,694			37,682
Cash and cash equivalents	166,619			243,095
Total assets	$	3,099,931		$	3,069,463
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage debt, net of unamortized debt issuance costs	$	642,768		$	821,167
Term loans, net of unamortized debt issuance costs	298,037			99,372
Total debt	940,805			920,539

Deferred income related to key money, net	17,028			20,067
Unfavorable contract liabilities, net	71,212			72,646
Deferred ground rent	85,047			80,509
Due to hotel managers	70,972			58,294
Dividends declared and unpaid	25,627			25,567
Accounts payable and accrued expenses	56,618			55,054
Total liabilities	1,267,309			1,232,676
Stockholders’ Equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, $0.01 par value; 400,000,000 shares authorized; 200,305,232 and 200,200,902 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	2,003			2,002
Additional paid-in capital	2,059,919			2,055,365
Accumulated deficit	(229,300		)	(220,580		)
Total stockholders’ equity	1,832,622			1,836,787
Total liabilities and stockholders’ equity	$	3,099,931		$	3,069,463



Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	27,183	$	31,856
Cash paid for income taxes	$	2,688	$	1,621
Non-cash Investing and Financing Activities:
Unpaid dividends	$	25,627	$	23,586
Buyer assumption of mortgage debt on sale of hotel included in sale proceeds	$	—	$	89,486



	September 30, 2017		December 31, 2016
Westin Boston Waterfront Hotel Ground Lease	$	17,698	$	17,859
Orchards Inn Sedona Annex Sublease	8,967		—
Lexington Hotel New York Tenant Leases	130		154
	$	26,795	$	18,013



			Principal Balance as of
Property	Interest Rate	Maturity Date	September 30, 2017			December 31, 2016
Lexington Hotel New York	LIBOR + 2.25%	October 2017 (1)	$	—		$	170,368
Salt Lake City Marriott Downtown	4.25%	November 2020	57,122			58,331
Westin Washington D.C. City Center	3.99%	January 2023	65,346			66,848
The Lodge at Sonoma, a Renaissance Resort & Spa	3.96%	April 2023	28,432			28,896
Westin San Diego	3.94%	April 2023	65,220			66,276
Courtyard Manhattan / Midtown East	4.40%	August 2024	84,421			85,451
Renaissance Worthington	3.66%	May 2025	84,504			85,000
JW Marriott Denver at Cherry Creek	4.33%	July 2025	63,790			64,579
Boston Westin	4.36%	November 2025	198,922			201,470
Unamortized debt issuance costs			(4,989		)	(6,052		)
Total mortgage debt, net of unamortized debt issuance costs			642,768			821,167

Unsecured term loan	LIBOR + 1.45% (2)	May 2021	100,000			100,000
Unsecured term loan	LIBOR + 1.45% (3)	April 2022	200,000			—
Unamortized debt issuance costs			(1,963		)	(628		)
Unsecured term loan, net of unamortized debt issuance costs			298,037			99,372

Senior unsecured credit facility	LIBOR + 1.50%	May 2020 (4)	—			—

Total debt, net of unamortized debt issuance costs			$	940,805		$	920,539
Weighted-Average Interest Rate	3.75%


			(1)			Consists of severance costs incurred, or adjustments thereto, associated with the elimination of positions at our hotels, which are classified within other hotel expenses on the consolidated statements of operations and comprehensive income.


~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~


~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~



Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) ⁽¹⁾
July 1 - July 31, 2017	—	$	—	—	$	143,503
August 1 - August 31, 2017	—	$	—	—	$	143,503
September 1 - September 30, 2017	—	$	—	—	$	143,503


~~(1)~~Period	~~Represents amounts available under~~	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Company's $150 million share repurchase program. To facilitate repurchases, we make purchases pursuant to a trading plan under Rule 10b5-1 of the Exchange Act, which allows us to repurchase shares during periods when we otherwise may be prevented from doing so under insider trading lawsPlans or ~~because of self-imposed trading blackout periods. The share repurchase program may be suspended or terminated at any time without prior notice.~~Programs (in thousands) (1)
July 1 - July 31, 2023		—	$	—	—	$	185,324
August 1 - August 31, 2023		—	$	—	—	$	185,324
September 1 - September 30, 2023		—	$	—	—	$	185,324


Exhibit

~~Exhibit~~
3.1*










3.1						~~First Amendment to Fourth~~Fifth Amended and Restated Bylaws of DiamondRock Hospitality Company(incorporated by reference to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 1, 2023)

31.1* 31.1*						Certification of Chief Executive Officer Required by Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act

31.2* 31.2*						Certification of Chief Financial Officer Required by Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act

32.1* 32.1**						Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~Attached as Exhibit 101 to this report are the following materials from DiamondRock Hospitality Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 formatted in~~101.SCH*						Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) the related notes to these condensed consolidated financial statements.Taxonomy Extension Schema Document

101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*						Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)



* Filed herewith

** Furnished herewith


DiamondRock Hospitality Company

November 3, 2023

~~DiamondRock Hospitality Company~~
/s/ Jeffrey J. Donnelly
~~November 7, 2017~~Jeffrey J. Donnelly


~~/s/ Sean M. Mahoney~~
~~Sean M. Mahoney~~
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)


/s/ Briony R. Quinn
Briony R. Quinn
~~Chief Accounting Officer~~Senior Vice President and ~~Corporate Controller~~Treasurer
(Principal Accounting Officer)