Business Experience (1)

Nominees for re-election at the Annual Meeting:

Mr. Bunting has served as President of GB Corporation since January 2011. From 1985 until 2010, Mr. Bunting served as President and Chief Executive Officer of American KB Properties, Inc., which developed and managed shopping centers. Mr. Bunting was a director of Cornerstone Realty Income Trust, Inc., of which Glade M. Knight was Chairman and Chief Executive Officer, from 1993 until its merger with Colonial Properties Trust in 2005. He also served as a member of the Board of Directors of Landmark Apartment Trust of America until 2016 when it merged with and into an affiliate of Starwood Capital Group. Mr. Bunting served as a director of Apple Two, Apple Five, Apple Seven and Apple Eight until the companies were sold to a third party or merged with the Company, as described in Note 1 below. Mr. Bunting received a Bachelor of Business Administration degree from Campbell University. The Board of Directors believes his extensive management and REIT experience and strong background in commercial real estate, investment, strategic planning and finance provide him with the skills and qualifications to serve as a director.

Business Experience

Mr. Fosheim was the Chief Executive Officer of Oak Hill REIT Management, LLC from 2005 until his retirement in 2011. Oak Hill REIT Management, LLC is a hedge fund specializing in REIT investments. From 1985 until 2005, Mr. Fosheim was a Principal and Co-founder of Green Street Advisors, a REIT advisory and consulting firm. Prior to that, Mr. Fosheim worked in institutional sales at Bear Stearns & Co., a global investment bank, and worked in the tax department at Touche Ross and Co. (now Deloitte LLP), an international accounting firm. Mr. Fosheim currently serves on the Board of Directors of DigitalBridge Group, Inc., formerly Colony Capital, Inc., and serves on the Audit Committee and isas chair of the Nominating and Corporate GovernanceCompensation Committee of such board. Mr. Fosheim attended the University of South Dakota, earning Bachelor of Arts, Master of Business Administration, and Juris Doctor degrees. The Board of Directors believes his extensive investment management, finance, strategic planning and REIT experience and his leadership and management background provide him with the skills and qualifications to serve as a director.

Business Experience (1)

Mrs. Gathright has served as Executive Vice President and Chief Operating Officer for the Company sincefrom its inception.inception until her retirement on March 31, 2020. In addition, Mrs. Gathright held various senior management positions with each of the former Apple REIT Companies from inception until they were sold to a third party or merged with the Company, as described in Note 1 below. Prior to her service with these companies, Mrs. Gathright served as Assistant Vice President and Investor Relations Manager for Cornerstone Realty Income Trust, Inc., a REIT that owned and operated apartment communities in Virginia, North Carolina, South Carolina, Georgia and Texas. She also worked as an Asset Manager and Regional Controller of the Northern Region Operations for United Dominion Realty Trust, Inc., a REIT, and began her career with Ernst & Young LLP. Mrs. Gathright currently serves on the Board of Directors of Spirit Realty Capital, Inc. and serves on the Nominating and Corporate Governance Committee of such board. Mrs. Gathright joined Derive Ventures as an advisor in 2022. Mrs. Gathright previously served on the Board of Directors of the American Hotel and& Lodging Association and as President of the Courtyard Franchise Advisory Council, andCouncil. Mrs. Gathright serves on the distribution advisory councils for Marriott and Hilton.Advisory Board of the McIntire School of Commerce at the University of Virginia. Mrs. Gathright holds a Bachelor of Science degree, Graduate with Distinction, in Accounting from the McIntire School of Commerce at the University of Virginia, Charlottesville, Virginia. The Board of Directors believes her extensive hotel industry and real estate experience providesand her background in strategic planning, leadership and management provide her with the skills and qualifications to serve as a director. Mrs. Gathright announced that she plans to retire from her role

Business Experience (1)

Mr. Knight is the founder of the Company and has served as Executive Vice PresidentChairman since May 2014, and previously served as Chairman and Chief OperatingExecutive Officer of the Company since its inception. Mr. Knight was also the founder of each of the Apple REIT Companies and served as their Chairman and Chief Executive Officer from their inception until the companies were sold to a third party or merged with the Company, as described in Note 1 below. In addition, Mr. Knight served as Chairman and Chief Executive Officer of Cornerstone Realty Income Trust, Inc., a REIT, from 1993 until it merged with Colonial Properties Trust, a REIT, in 2005. Following the merger in 2005 until April 2011, Mr. Knight served as a trustee of Colonial Properties Trust. Cornerstone Realty Income Trust, Inc. owned and operated apartment communities in Virginia, North Carolina, South Carolina, Georgia and Texas. Mr. Knight is a partner and Chief Executive Officer of Energy 11 GP, LLC, the general partner of Energy 11, L.P., and Energy Resources 12 GP, LLC, the general partner of Energy Resources 12, L.P., partnerships focused on investments in the first quarteroil and gas industry. Mr. Knight is the founding Chairman of 2020.Southern Virginia University in Buena Vista, Virginia. Additionally, he is a founding member of Brigham Young University’s Entrepreneurial Department of the Graduate School of Business Management. The Board of Directors believes his extensive REIT executive experience and extensive background in real estate, the hotel industry, investment, corporate finance and strategic planning, as well as his entrepreneurial background, provide him with the skills and qualifications to serve as a director. On February 12, 2014, Mr. Knight, Apple Seven, Apple Eight, Apple Nine and their related advisory companies entered into settlement agreements with the SEC. Along with Apple Seven, Apple Eight, Apple Nine and their advisory companies, and without admitting or denying the SEC’s allegations, Mr. Knight consented to the entry of an administrative order, under which Mr. Knight and the noted companies each agreed to cease and desist from committing or causing any violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), 14(a), and 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rules 12b-20, 13a-1, 13a-13, 13a-14, 14a-9, and 16a-3 thereunder.

Glade M. Knight is the father of Justin G. Knight, the Company’s Chief Executive Officer, and Nelson G. Knight, the Company’s President, Real Estate and Investments.

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Proposal 2.2. Advisory Vote On Executive Compensation Paid by the Company

In accordance with Section 14A of the Exchange Act, the Company is providing its shareholders with the opportunity to approve, on a non-binding, advisory basis, the compensation paid to the Company’s named executive officers as disclosed in this proxy statement. The Board of Directors has adopted a policy, which shareholders approved by a non-binding advisory vote, of providing for an annual “say-on-pay” advisory vote. The Company encourages shareholders to read the disclosure under “Compensation Discussion and Analysis” for more information concerning the Company’s compensation philosophy, programs and practices, the compensation and governance-related actions taken in fiscal 2018year 2021 and the compensation paid to the named executive officers.

Accordingly, the Company is asking you to approve the adoption of the following resolution:

RESOLVED: That the shareholders of the Company approve, on a non-binding, advisory basis, the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion in the proxy statement.

The affirmative vote of a majority of the votes cast will be necessary to approve this proposal. Abstentions and broker non-votes will have no effect on the outcome of this proposal. The shareholder vote on this proposal is advisory and non-binding and serves only as a recommendation to the Board of Directors. Although the vote is non-binding, the Compensation Committee and the Board of Directors value the opinions of shareholders and will consider the outcome of the vote when making future compensation decisions.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ABOVE PROPOSAL.

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Proposal 3.3. Ratification of the Appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm

The firm of Ernst & Young LLP served as the independent registered public accounting firm for the Company in 2018.2021. A representative of Ernst & Young LLP is expected to be present at the Annual Meeting. The representative will have an opportunity to make a statement if he or she so desires and will be available to answer appropriate questions from shareholders. The Board of Directors has approved the retention of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2019,2022, based on the recommendation of the Audit Committee. Independent accounting fees for the last two fiscal years are shown in the table below:

All services rendered by Ernst & Young LLP are permissible under applicable laws and regulations, and the annual audit of the Company was pre-approved by the Audit Committee, as required by applicable law. The nature of each of the services categorized in the preceding table is described below:

Audit Fees. These are fees for professional services rendered for the audit of the Company’s annual financial statements included in the Company’s Annual Report on Form 10-K, reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q, or services normally provided by the independent auditor in connection with statutory or regulatory filings or engagements, and other accounting and financial reporting work necessary to comply with the standards of the Public Company Accounting Oversight Board (“PCAOB”) and fees for services that only the Company’s independent auditor can reasonably provide.

Audit-Related Fees. These are fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements. Such services include accounting consultations, internal control reviews, audits in connection with acquisitions, attest services related to financial reporting that are not required by statute or regulation and required agreed-upon procedure engagements.

Tax Fees. Such services include tax compliance, tax advice and tax planning. The Company engaged Ernst & Young LLP to perform tax compliance and advisory services in December 2017.

All Other Fees. These are fees for other permissible work that does not meet the above category descriptions.  Such services include information technology and technical assistance provided to the Company. Generally, this category would include permitted corporate finance assistance, advisory services and licenses to technical accounting research software.

These accounting services are actively monitored (as to both spending level and work content) by the Audit Committee to maintain the appropriate objectivity and independence in the core area of accounting work performed by Ernst & Young LLP, which is the audit of the Company’s consolidated financial statements.

Pre-Approval Policy for Audit and Non-Audit Services. In accordance with the Sarbanes-Oxley Act of 2002, all audit and non-audit services provided to the Company by its independent auditors must be pre-approved by the Audit Committee. As authorized by that act, the Audit Committee has delegated to the Chair of the Audit Committee the authority to pre-approve up to $25,000 in audit and non-audit services. This authority may be exercised when the Audit Committee is not in session. Any decisions by the Chair of the Audit Committee under this delegated authority will be reported at the next meeting of the Audit Committee. All services reported in the preceding fee table for fiscal years 20172020 and 20182021 were pre-approved by the full Audit Committee, as required by then applicable law.

The Company is asking you to vote on the adoption of the following resolution:

RESOLVED: That the shareholders of the Company ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019.

2022.

The affirmative vote of a majority of the votes cast will be necessary to approve this proposal. Abstentions will have no effect on the outcome of this proposal. The shareholder vote on this proposal is advisory and non-binding and serves only as a recommendation to the Board of Directors. If the shareholders do not ratify the appointment of Ernst & Young LLP by the affirmative vote of a majority of the votes cast at the meeting, the Audit Committee will reconsider whether or not to retain Ernst & Young LLP.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ABOVE PROPOSAL.

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Corporate Responsibility Overview

The Company has always worked to uphold high environmental, social and governance standards. Alignment with the best interests of the Company’s shareholders is at the forefront of Apple Hospitality’s values. Apple Hospitality is committed to maintaining strong governance practices that align with the best interests of its shareholders, minimizing the environmental impact of the Company and its hotels, and making a positive impact throughout the Company, the hospitality industry, local communities and the many communities served by the Company’s hotels. Together with brand affiliates, hotel management teams and industry colleagues, Apple Hospitality is focused on advancing sustainability initiatives that effectively balance environmental stewardship with the Company’s business goals, improving communities through thoughtful outreach programs, and promoting diversity, equity and inclusion.

The Company remains focused on enhancing its Corporate Responsibility disclosures to provide stakeholders with a better understanding of the Company’s policies, programs, procedures and initiatives related to environmental stewardship, social responsibility and corporate governance. In 2020, the Company formally adopted the following policies:

All of the above policies are available within the Corporate Responsibility section of the Company's website at https://applehospitalityreit.com/corporate-responsibility/. Apple Hospitality’s policies are supported by the Board of Directors, and the Nominating and Corporate Governance Committee reviews the Company’s policies, programs and practices related to corporate responsibility and sustainability, including environmental, social, human capital and other matters. The Company’s senior management team is responsible for providing oversight over policy enforcement and updating the Company’s Board of Directors on implementation efforts. The Company commits to reporting publicly to its stakeholders on its progress and to considering stakeholder feedback to support the ongoing evolution of programs and strategies in support of the Company’s policies. The Company’s Environmental, Social and Governance (“ESG”) Advisory Committee is comprised of key Company leaders and is responsible for overseeing the Company’s ESG policies, initiatives and disclosures. The Company’s Chief Financial Officer serves as the executive sponsor for the ESG Advisory Committee.

The Company is working towards the publication of a Corporate Responsibility Report that it expects to publish later in 2022 that will convey its corporate responsibility strategy and priorities in detail, including the Company’s responsible investments, sustainability initiatives, environmental stewardship, social impact initiatives, community outreach and governance practices, including various metrics. To further advance the Company’s environmental, social and governance initiatives and standards, the Company is actively working towards the establishment of environmental stewardship and social responsibility targets.

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Corporate Governance Practices

Below are some highlights of the Company’s corporate governance practices.

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Corporate Governance, Risk Oversight and Procedures for Shareholder Communications

Board of Directors. The Company’s Board of Directors has determined that all of the Company’s directors (and nominees for director), except Mrs. Kristian M. Gathright, Mr. Glade M. Knight and Mr. Justin G. Knight, are “independent” within the meaning of the rules of the New York Stock Exchange (“NYSE”). In making this determination, the Board considered all relationships between the applicable director and the Company, including commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships.

March 31, 2020.

The Board has adopted a categorical standard that a director is not independent (a) if he or she receives any personal financial benefit from, on account of or in connection with a relationship between the Company and the director (excluding directors’ fees and equity-based awards); (b) if he or she is a partner, officer, employee or managing member of an entity that has a business or professional relationship with, and that receives compensation from, the Company; or (c) if he or she is a non-managing member or shareholder of such an entity and owns 10% or more of the membership interests or common stock of that entity. The Board may determine that a director with a business or other relationship that does not fit within the categorical standard described in the immediately preceding sentence is nonetheless independent, but in that event, the Board is required to disclose the basis for its determination in the Company’s then current annual proxy statement.

In order to optimize the effectiveness and independence of the Board, the independent directors have designated an independent, non-employee director to serve as the Company’s Lead Independent Director, which currently is held by Jon Fosheim. See “Committees of the Board and Board Leadership.”

Code of Ethics. The Board has adopted a Code of Business Conduct and Ethics for the Company’s officers, directors and employees, which is available at the Company’s website, www.applehospitalityreit.com. The purpose of the Code of Business Conduct and Ethics is to promote (a) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest; (b) full, fair, accurate, timely and understandable disclosure in periodic reports required to be filed by the Company; and (c) compliance with all applicable rules and regulations that apply to the Company and its officers, directors and employees. Any waiver of the Code of Business Conduct and Ethics for the Company’s executive officers or Board may be made only by the Board or one of the Board’s committees. The Company anticipates that any waivers of the Code of Business Conduct and Ethics will be posted on the Company’s website.

Corporate Governance Guidelines Guidelines. The Board has adopted Corporate Governance Guidelines that set forth the guidelines and principles for the conduct of the Board of Directors, which is available at the Company’s website, www.applehospitalityreit.com. The Corporate Governance Guidelines reflect the Board of Directors’ commitment to monitoring the effectiveness of decision-making at the Board and management level and ensuring adherence to good corporate governance principles, all with a goal of enhancing shareholder value over the long term.

Risk OversightOversight.. The Board believes that risk oversight is a key function of a Board of Directors. It administers its oversight responsibilities through its Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee. All members of each of these committees are independent directors. The entire Board is kept abreast of and involved in the Company’s risk oversight process. It is through the approval of officers and compensation plans, as well as management updates on property performance, industry performance, financing strategy, acquisitions and dispositions strategy and capital improvements, that the Board has input to manage the Company’s various risks. Additionally, through the Audit Committee, the Board reviews management’s and independent auditors’ reports on the Company’s internal controls and any associated potential risks of fraudulent activities.activities as well as risks related to cyber security. Through the Nominating and Corporate Governance Committee, the Board reviews the Company’s Corporate Governance Guidelines and related risks.risks, as well as the Company’s policies, programs and practices related to corporate responsibility and sustainability, including environmental and related risks, social, human capital and other matters. Through the Compensation Committee, the Board oversees risk related to compensation practices with the objective of balancing risk/rewards to overall business strategy.strategy, including the Company’s corporate responsibility initiatives. Risk oversight is also one of the factors considered by the Board in establishing its leadership structure. The Company has separated the roles of Executive Chairman and Chief Executive Officer to create a leadership structure that the Board believes strikes the appropriate balance between the authority of those who oversee the Company and

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those who manage it on a day-to-day basis and also has a Lead Independent Director to optimize the effectiveness and independence of the Board.

Shareholder CommunicationsCommunications.. The Company and the Board value the views and opinions of the Company’s shareholders and believe strong corporate governance practices demand consistent outreach, effective communication and regular engagement with shareholders. Regular shareholder engagement better positions the Company to: understand which issues are most important to its shareholders and provide relevant information; provide transparency related to its business, operations, strategies, governance and compensation; recognize expectations for future performance; identify emerging issues that may affect its business, operations, strategies, governance or compensation; and obtain valuable feedback of its business and the lodging industry in general. The Company’s shareholder and investor interaction includes industry conferences, analyst meetings, investor road shows and individual meetings, both in person and virtually. The Company also provides information to stakeholders through its website, quarterly earnings calls, SEC filings, proxy statement, news releases, investor presentations and other communication channels. Shareholders and other interested parties may send communications to the Board or to specified individual directors. Any such communications should be directed to the attention of the Lead Independent Director at Apple Hospitality REIT, Inc., 814

East Main Street, Richmond, Virginia 23219. The Lead Independent Director will decide what action should be taken with respect to the communication, including whether such communication should be reported to the full Board.

Share Ownership Guidelines. Guidelines.  The Board believes that equity ownership by directors and executive officers will align their interests with shareholders’ interests. To that end, the Company has adopted formal share ownership guidelines, included in the Company’s Corporate Governance Guidelines, applicable to all of its directors and executive officers. On an annual basis, the Company evaluates the ownership status of the directors and executive officers. Directors and executive officers are required to own securities of the Company with a value equal to the following multiple of their annual base cash retainer (for directors) or their annual base salary (for executive officers):

New directors or executive officersand the Chief Executive Officer are required to comply with the ownership requirements within two years of becoming a member of the Board or Chief Executive Officer and other new executive officers are required to comply with the ownership requirements by January 1^st of the year following the fourth anniversary of being named an executive officer. In February 2022, the Board increased the share ownership requirement applicable to directors from two times the annual base cash retainer to four times the annual base cash retainer with a transition period of two years. All current directors and executive officers currently comply withhave either met the equity ownership guidelines.

levels of the guidelines or are within the applicable transition period.

The Nominating and Corporate Governance Committee may waive the stock ownership requirements in the event of financial hardship or other good cause.

Hedging and Pledging of Company Securities.The Company’sInsider Trading Policy prohibits directors and employees, including the executive officers, from hedging their ownership of the Company’s stock, including a prohibition on engaging in the following transactions: (i) trading in call or put options involving the Company’s securities and other derivative securities; (ii) engaging in short sales of the Company’s securities; (iii) holding the Company’s securities in a margin account; (iv) other hedging or monetization transactions related to the Company’s securities, including the use of financial instruments such as prepaid variable forwards, equity swaps, collars and (iv)exchange funds; and (v) pledging more than 50% of the number of the Company’s securities held individually to secure margin or other loans.

Board Self-Evaluation.Pursuant to the Company’s Corporate Governance Guidelines and the charters of the Compensation, Audit and Nominating and Corporate Governance Committees of the Board of Directors, the Nominating and Corporate Governance Committee oversees the annual self-evaluation of the Board and each committee. The self-evaluation requires each director to complete a detailed questionnaire soliciting input on matters such as board structure and composition, committee structure, board and committee meeting conduct, board support, education, and board and committee performance. The Nominating and Corporate Governance Committee reports the assessments to the Board, and if the Board determines that changes in its governance practices need to be made, management and the Nominating and Corporate Governance Committee will work with the Board to implement the necessary changes. 

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Consideration of Director Nominees

Director Qualifications. The Company believes the Board should encompass a diverse range of talent, skill and expertise sufficient to provide sound and prudent guidance with respect to the Company’s operations and interests. Each director also is expected to exhibit high standards of integrity, practical and mature business judgment, including the ability to make independent analytical inquiries, and be willing to devote sufficient time to carrying out their duties and responsibilities effectively.

The Board has determined that the Board of Directors as a whole must have the right mix of characteristics and skills for the optimal functioning of the Board in its oversight of the Company. The Board believes it should be comprised of persons with skills in areas such as finance, real estate, investment, banking, strategic planning, human resources, leadership of business organizations, and legal matters. Although itthe Board does not have a diversity policy, the Board is committed to diversity and believes it is desirable for the Board to be composed of individuals who represent a mix of viewpoints, experiences and backgrounds. 

new director candidates is diverse and includes women, individuals from minority groups and underrepresented communities. In addition to the targeted skill areas, the Board looks for a strong record of achievement in key knowledge areas that it believes are critical for directors to add value to the Board, including:

Nomination ProceduresProcedures.. The Board has established a Nominating and Corporate Governance Committee that oversees the nomination process and recommends nominees to the Board. As outlined above, in selecting a qualified nominee, the Board considers such factors as it deems appropriate, which may include the current composition of the Board; the range of talents of the nominee that would best complement those already represented on the Board; the extent to which the nominee would diversify the Board; the nominee’s standards of integrity, commitment and independence of thought and judgment; and the need for specialized expertise. Applying these criteria, the Board considers candidates for Board membership suggested by its members, as well as management and shareholders. Shareholders of record may nominate directors in accordance with the Company’s bylaws which require, among other items, notice sent to the Company’s Secretary not less than 60 days prior to a shareholder meeting that will include the election of Board members. No nominations other than those proposed by the Nominating and Corporate Governance Committee were received for the Annual Meeting.

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Committees of the BoardBoard and Board Leadership

Summary.Summary. The Board of Directors has four standing committees, which are specified below. The following table shows each committee’s function, membership and the number of meetings held during 2018:2021:

* Indicates Committee Chair

^ Indicates Audit Committee Financial Expert

Mrs. Kristian M. Gathright was appointed to the Board in March 2019 by the vote of the remaining directors.

Board Leadership.  The Board recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. The Board understands that there is no single generally accepted approach to providing Board

leadership and the right Board leadership structure may vary as circumstances warrant. Consistent with this understanding, the independent directors periodically consider the Board’s leadership structure. Currently, the roles of Executive Chairman and Chief Executive Officer are held by different directors. Mr. Glade M. Knight serves as Executive Chairman and Mr. Justin G. Knight serves as President and Chief Executive Officer. The Board believes that this structure provides the appropriate balance between the authority of those who oversee the Company and those who manage it on a day-to-day basis. The Executive Chairman of the Board

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presides at all meetings of the shareholders and of the Board as a whole. The Executive Chairman performs such other duties, and exercises such powers, as from time to time shall be prescribed in the bylaws or by the Board.

Additionally, the Board has appointed Mr. Jon A. Fosheim to serve as Lead Independent Director. The Lead Independent Director’s responsibilities include, among other things, presiding at meetings or executive sessions of the independent directors and non-employee directors, serving as a liaison to facilitate communications between the Executive Chairman, the President and Chief Executive Officer and other members of the Board, without inhibiting direct communications between and among such persons, and serving as a liaison to shareholders who request direct communications and consultations with the Board.

Audit Committee Independence Independence. The Board of Directors has determined that each current member of the Audit Committee is “independent,”“independent” as defined in the listing standards of the NYSE. To be considered independent, a member of the Audit Committee must not (other than in his or her capacity as a director or committee member, and subject to certain other limited exceptions) either (a) accept directly or indirectly any consulting, advisory, or other compensatory fee from the Company or any subsidiary; or (b) be an affiliate of the Company or any subsidiary. The Audit Committee currently has threetwo members, Mr. Jon A. Fosheim Ms. Blythe J. McGarvie and Mr. L. Hugh Redd, who are “financial experts” within the meaning of the regulations issued by the Securities and Exchange Commission. The Company’s management believes that the combined experience and capabilities of the Audit Committee members are sufficient for the current and anticipated operations and needs of the Company.In this regard, the Board has determined that each Audit Committee member is “financially literate” and that at least threetwo members have “accounting or related financial management expertise,” as all such terms are defined by the rules of the NYSE.

Board Meetings,, Attendance and Related Information. The Board held a total of fourthree meetings during 20182021 (including regularly scheduled and special meetings). It is the policy of the Company that directors should attend each annual meeting of shareholders. All directors at the time of the meeting attended the 20182021 Annual Meeting, except Ms. Blythe J. McGarvie. Ms. McGarvie had a previous commitment made prior to her appointment to the Board in February 2018 and was therefore unable to attend.Meeting. The Company also expects directors to attend each regularly scheduled and special meeting of the Board, but recognizes that, from time to time, other commitments may preclude full attendance. In 2018,2021, each director attended at least 75% of the aggregate of (a) the total number of meetings of the Board of Directors that were held during the period in which he or she was a director, and (b) the total number of meetings held by all committees of the Board on which he or she served during the period in which he or she served.

Executive Sessions. The independent members of the Board of Directors meet independentindependently of management and the non-independent Directorsdirectors in executive sessions on a regular basis, presided by the Lead Independent Director.

During 2021, the independent members of the Board of Directors met four times.

2018 2021 Compensation of Directors

The compensation of the directors is reviewed and approved annually by the Board of Directors. During 2018,2021, the directors of the Company were compensated as follows:

Reimbursements to Directors in 2018.2021. All directors were reimbursed by the Company for travel and other out-of-pocket expenses incurred by them to attend meetings of the directors and committee meetings and in conducting the business of the Company. 

Compensation of IndependentNon-Employee Directors. With respect toIn 2021, the period prior to February 16, 2018, the independentnon-employee directors (classified by the Company as all directors other than Mr. Glade M. Knight and Mr. Justin G. Knight) received (i) a $140,000 annual retainer, with $60,000 paid in cash and $80,000 paid in vested stock grants, paidwere scheduled to receive the following compensation in quarterly installments, and (ii) a $1,000 fee for each meeting of the Board of Directors or any committee of the Board of Directors in excess of eight meetings per year for each of the Board or applicable committee (measured from June 1 through May 31 of the following year).  Additionally, the Chair of the Audit Committee received an additional annual retainer fee of $7,000 (in addition to $1,000 per meeting for service on the Company’s Disclosure Committee) and the Chair of the Compensation Committee and the Nominating and Corporate Governance Committee each received an additional annual retainer fee of $5,000, each paid in quarterly installments.installments:

In January 2018,2022, the Nominating and Corporate Governance Committee engaged FPL AssociatesFerguson Partners Consulting L.P. (“FPL”FPC”) to evaluate the independent directors’ compensation. Utilizing a similarthe same peer group as the report prepared for executive compensation discussed below under “Compensation Discussion and Analysis,” the independent directors’ 2017 compensationannual retainer paid to the non-employee directors, was indetermined to be on the 9^th percentilelower end of the peer group’s 2016 compensation.group, ranking in the 25th percentile;

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separately it was found that the proportion of compensation paid in the form of equity was amongst the highest of the peer group, ranking in the top decile. After reviewing the report and considering FPL’sFPC’s recommendations, the Nominating and Corporate Governance Committee recommended to the Board of Directors a change to the independentnon-employee directors’ compensation to bring the compensation close to the median of the peer group. The Nominating and Corporate Governance Committee believes the change was important to continue to attract and retain superior board members. Upon review and discussion of the Nominating and Corporate Governance Committee’s recommendation, the Board of Directors approved the following independentnon-employee director compensation effective February 16, 2018:beginning March 2022: (i) an annual retainer, calculated from March of $165,000the current year through February of the following year, of $185,000 ($100,000115,000 paid in vested stock grants and $65,000$70,000 paid in cash) paid in quarterly installments, (ii) an annual retainer for the Chair of the Audit Committee of $15,000$20,000 (in addition to fees for service on the Company’s Disclosure Committee) paid in cash in quarterly installments, and (iii) an annual retainer for the Chair of the Compensation Committee, the Chair of the Nominating and Corporate Governance Committee and the Lead Independent Director of $10,000$15,000, each paid in cash in quarterly installments.  There will no longer be fees paid for meetings of the Board of Directors or any committee of the Board of Directors in excess of eight meetings per year.

Non-Employee Director Deferral Program.Deferral Program. In 2018, effective Effective June 1, 2018, the Board of Directors adopted the Non-Employee Director Deferral Program (the “Director Deferral Program”) under the Apple Hospitality REIT, Inc. 2014 Omnibus Incentive Plan (the “2014 Omnibus Incentive Plan”) for the purpose of providing non-employee members of the Board the opportunity to elect to defer receipt of all or a portion of the annual retainer payable to them for their service on the Board, including the portion of the annual retainer amounts payable in cash (including for service as a Chair of a committee of the Board or Lead Independent Director) and the portion of the annual retainer amounts payable in fully vested Common shares.Shares. As specified by the director, the receipt of payment may be deferred until either (i) the date that his or her service on the Board has ended, (ii) a specified date, or (iii) the earlier of the specified date or the date that his or her service on the Board has ended. The deferred amounts will also be paid if, prior to the time specified by the director, the Company experiences a change in control or upon death of the director. For the portion of the director fees payable in shares, the director may elect to defer his or her fees in the form of deferred stock units, and for the portion of the director fees payable in cash, the director may elect to defer his or her fees either in the form of deferred stock units or as deferred cash fees.

Under the Director Deferral Program, the Company has established a notional deferral account (for bookkeeping purposes only) for each non-employee director who has elected to participate and all deferred fees are credited to this account, whether in cash or stock, as of the date the fee otherwise would have been paid to the director (the “Quarterly Deferral Date”). Deferred fees converted into deferred stock units are credited to the deferral account based on the fair market value of the Company’s common sharesCommon Shares on the Quarterly Deferral Date. On each Quarterly Deferral Date, dividends earned on deferred stock units are credited to the deferral account in the form of additional deferred stock units based on dividends declared by the Company on its outstanding common shares

Common Shares during the quarter and the fair market value of the stock on such date. Additionally, on each Quarterly Deferral Date, deferred cash fees are credited with an additional deferred cash amount based on the dividends declared by the Company during the quarter on its outstanding common sharesCommon Shares and the share equivalent, as defined in the Director Deferral Program, of the deferred cash balance from the preceding quarter. Upon the applicable payment date, as described above in the preceding paragraph, any deferred stock units credited to a director’s deferral account will be settled solely by delivering an amount of the Company’s Common Shares equal to the number of such deferred stock units, and, with respect to any deferred cash fees credited to the director’s deferral account, such fees will be paid solely in the form of cash. Directors have no rights as shareholders of the Company with respect to deferred stock units credited to their deferral accounts.

During 2018, four2021, three of the non-employee directors elected to participate in the Director Deferral Program by deferring all or a portion of their annual retainer fees in the form of deferred stock units.units and/or deferred cash fees.

Non-IndependentEmployee Directors.  Mr. Glade M. Knight and Mr. Justin G. Knight and Mrs. Kristian M. Gathright are non-independentemployee directors of the Company and receiveaccordingly, during 2021, they received no compensation from the Company during their term of employment for their services as directors.

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Director Compensation.Compensation. The following table shows the amounts earned in 20182021 by the Company’s non-employee directors.

Outstanding Stock Option Awards. Option Awards. In 2008, the Company adopted the Apple REIT Nine, Inc. 2008 Non-Employee Directors Stock Option Plan (the “Directors’ Plan”). The Directors’ Plan provided for automatic grants of options to acquire Common Shares. The Directors’ Plan applied to directors of the Company who were not employees or executive officers of the Company. In May 2015, theThe Directors’ Plan was terminated effective upon the listing of the Company’s Common Shares on the NYSE on May 18, 2015 (the “Listing”). No further grants can be made under the Directors’ Plan, provided however,

the termination did not affect any outstanding director option awards previously issued under the Directors’ Plan. Following the termination of the Directors’ Plan, all awards to directors are made under the 2014 Omnibus Incentive Plan.

Since adoption of the Directors’ Plan, none of the current directors have exercised any of their options to acquire Common Shares. See “Ownership of Certain Beneficial Owners and Management” for the number of outstanding options that were granted to certain directorsMr. Glenn W. Bunting under the Directors’ Plan, which are all fully vested, as of the Record Date. There were noSince adoption of the Directors’ Plan, Mr. Bunting has not exercised any of his options to acquire Common Shares. The directors did not have any other outstanding option awards granted to directors as of the Record Date.

Audit Committee Report

The Audit Committee of the Board of Directors is currently composed of fourthree directors. All fourthree directors are independent directors as defined under “Committees of the Board and Board Leadership—Audit Committee Independence.” The Audit Committee operates under a written charter that was adopted by the Board of Directors and is annually reassessed and updated, as needed, in accordance with applicable rules of the Securities and Exchange Commission. The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. In fulfilling its oversight duties, the Audit Committee reviewed and discussed the audited financial statements for fiscal year 20182021 with management and the Company’s independent auditors, Ernst & Young LLP, including the quality and acceptability of the accounting principles, the reasonableness of significant judgments, any critical audit matters identified during the audit and the clarity of disclosure in the financial statements. The Audit Committee also reviewed management’s report on its assessment of the effectiveness of the Company’s internal control over financial reporting and Ernst & Young LLP’s report on the effectiveness of the Company’s internal control over financial reporting. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements, accounting and financial reporting principles, internal controls, and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Ernst & Young LLP is responsible for performing an independent audit of the consolidated financial statements and the notes thereto in accordance with generally accepted auditing standards.

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The Audit Committee also has discussed with the independent auditors the matters required to be discussed pursuant to the applicable requirements of the PCAOB Auditing Standard No. 1301, “Communication with Audit Committees.”and the Securities and Exchange Commission. Additionally, the Audit Committee has received the written disclosures and letter from the independent auditors required by the applicable requirements of the PCAOB Ethics and Independence Rule 3526, “Communicationsregarding the independent auditor’s communications with the Audit Committees Concerning Independence,”Committee concerning independence and has discussed, with the independent auditors, the independent auditors’ independence.

Based on the review and discussions described in this Report, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20182021 for filing with the Securities and Exchange Commission.

The Audit Committee Report above does not constitute “soliciting material” and will not be deemed “filed” or incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, that might incorporate SEC filings by reference, in whole or in part, notwithstanding anything to the contrary set forth in those filings.

Certain Relationships and Agreements

The Company has, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed to be at arm’s length and the results of the Company’s operations may be different if these transactions were conducted with non-related parties. The Company’s independent members of the Board of Directors overseeare responsible for overseeing and annually reviewreviewing the Company’s related party relationships (including the relationships discussed in this section) and are required to approve any significant modifications to the existing relationships, as well as any new significant related party transactions. The Board of Directors is not required to approve each individual transaction that falls under the related party relationships. However, under the direction of the Board of Directors, at least one member of the Company’s senior management team approves each related party transaction. 

Mr. Glade M. Knight, the Company’s Executive Chairman, of the Company, owns Apple Realty Group, Inc. (“ARG”), which receives support services from the Company and reimburses the Company for the cost of these costsservices as discussed below. Also, an entity controlled by Mr. Knight is currently a member of and Mr. Knight is Chief Executive Officer of Energy 11 GP, LLC and Energy Resources 12 GP, LLC, which are the respective general partners of Energy 11, L.P. and Energy Resources 12, L.P., each of which receive support services from ARG. As an executive officer of the Company, Mr. Knight’s total annual compensation in 2021, 2020 and 2019 was $1,445,716, $849,417 and $1,192,975 respectively, calculated in accordance with the determination of compensation in the Summary Compensation Table in the section titled “Executive Compensation—Summary Compensation Table” below.

Cost Sharing with Related Entities

The Company provides support services, including the use of the Company’s employees and corporate office, to ARG and is reimbursed by ARG for the cost of these services. Under this cost sharing structure, amounts reimbursed to the Company include both compensation for personnel and office-related costs (including office rent, utilities, office supplies, etc.) used by ARG. The amounts reimbursed to the Company are based on the actual costs of the services and a good faith estimate of the proportionate amount of time incurred by the Company’s employees on behalf of ARG. Total reimbursed costs allocated by the Company to ARG for 20182021 totaled approximately $1.1$0.8 million.

As part of the cost sharing arrangement, certain day-to-day transactions may result in amounts due to or from the Company and ARG. To efficiently manage cash disbursements, the Company or ARG may make payments for the other company. Under this cash management process, each company may advance or defer up to $1 million at any time. Each quarter, any outstanding amounts are settled between the companies. This process allows each company to minimize its cash on hand and reduces the cost for each company. The amounts outstanding at any point in time are not significant to either of the companies. As of December 31, 2018,2021, total amounts due from ARG for reimbursements under the cost sharing structure totaled approximately $0.4$0.3 million.

The Company, through its wholly-owned subsidiary, Apple Air Holding, LLC, owns a Learjet used primarily for acquisition, asset management, renovation and investor and public relations purposes. The aircraft is also leased to affiliates of the Company based on third party rates, which leasing activity was not significant during 2018.2021. The

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Company also utilizes one aircraft, owned through two entities, one ofby an entity which is owned by the Company’s Executive Chairman, and the other, by its President and Chief Executive Officer, for acquisition, asset management, renovation and investor and public relations purposes, and reimburses these entitiesthe entity at third party rates. Total costs incurred for the use of thesethe aircraft during 20182021 were approximatelyless than $0.1 million.

Executive Officers

Each executive officer is appointed annually by the Board of Directors at its meeting prior to the annual meeting of shareholders.Directors. The following table sets forth biographical information regarding the Company’s executive officers, who held positions during 2018, other than Mr. Glade M. Knight, Executive Chairman and Mr. Justin G. Knight, President and Chief Executive Officer, who also serve as directors and Kristian M. Gathright, Executive Vice President and Chief Operating Officer, whose information is provided above in the section titled “Proposals to be Voted Upon—Proposal 1. Election of Directors”:

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Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the Company’s executive compensation arrangements for the Company’s named executive officers for 2021 and explains the structure and rationale associated with each material element of the 2021 compensation arrangements. The named executive officers for 2021 are as follows:

Much like 2020, 2021 proved to be a challenging year on a global scale. The COVID-19 pandemic and associated variants of the virus have reduced travel and have had a detrimental impact on regional and global economies. The global, national and local impact of the pandemic has continued to evolve and many countries, including the U.S., as well as state and local governments, have reacted and continue to react with a wide variety of measures intended to control its spread, including states of emergency, mandatory quarantines, implementation of stay-at-home orders, business closures, border closings, and restrictions on travel and large gatherings, which has resulted in, and may continue to result in, cancellation of events, including sporting events, conferences and meetings. Despite the challenges brought on by COVID-19, the Company has been successful in navigating the pandemic, with improving operational performance as well as strong relative stock outperformance as compared to its peer group.

COVID-19 continues to have a significant impact on the hospitality industry contributing to an environment with relatively low visibility into future trends. In light of the uncertainties related to the ongoing COVID-19 pandemic, and the lack of visibility into more predictable operating fundamentals and trends, the Company did not issue 2021 operational and financial guidance, which was generally consistent with the approach taken in 2021 by other members of the Company’s peer group. However, the Company and the executive team remained focused on a number of critical areas to effectively and successfully navigate the Company through the pandemic. As a result, and as discussed in further detail below, in February 2021, the Compensation Committee approved an annual incentive program that provided that one-half (50%) of 2021 incentive compensation would be based on discretionary operational performance goals and one-half (50%) of the incentive program would continue to be based on shareholder return performance consistent with the Company’s historical incentive programs based 75% on relative shareholder return metrics and 25% on total shareholder return metrics over one-year, two-year, and three-year periods. The first half of the year—for the period of January 1 to June 30, 2021—was based on operational performance goals established by the Compensation Committee at the beginning of the year, including goals regarding portfolio occupancy growth, expense management, successful negotiation of covenant waivers to the Company’s credit facilities and effective allocation of capital to drive incremental returns, with no specific target or weighting assigned to each metric. After the first half of the year, the Compensation Committee evaluated whether more specific quantitative metrics could reasonably be established for the rest of the year; however, it was deemed to not be feasible due to the continued impact of COVID-19, specifically the rise of COVID-19 cases due to the emergence of the Delta variant which caused additional disruptions during this period. Therefore, operational performance goals for the period of July 1 to December 31, 2021 were set by the

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Compensation Committee in August 2021 and continued to be based on goals with no specific target or weighting assigned to each goal, including goals regarding top line growth, bottom line growth, capital allocation and balance sheet management. The Compensation Committee will continue to maintain a rigorous framework, one that requires outperformance (55^th percentile) to achieve target level payout for the relative total shareholder return metrics.  

Key Executive Compensation Practices

The following is a summary of the Company’s key practices to align executive compensation with the interests of its shareholders, with target compensation percentages based on the Compensation Committee’s determinations:

Changes in Executive Officers

On April 15, 2019, Mr. David P. Buckley will retire from all positions that he holds with the Company. In addition, in March 2019, Mrs. Kristian M. Gathright advised the Company that she plans to retire as Executive Vice President and Chief Operating Officer of the Company in the first quarter of 2020 and Mr. Bryan F. Peery announced that he plans to retire from all positions that he holds with the Company in the first quarter of 2020.

Compensation Discussion and Analysis

Advisory Vote on Executive Compensation

The Company provides its shareholders annually with the opportunity to cast an advisory vote on executive compensation, and in 20182021 approximately 94%97% of the shares voted were in support of the 20172020 compensation of the executive officers. The Compensation Committee viewed this advisory vote as an expression by the shareholders of their general satisfaction with the Company’s executive compensation program. Consistent with the advisory vote of the shareholders at the 2017

annual meeting of shareholders, the Company will hold advisory votes on executive compensation annually until the next say-on-frequency vote is conducted, which will be no later than 2023.

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Executive Compensation SummaryTable of contents

This Compensation Discussion and Analysis describes the Company’s executive compensation arrangements

Pay for the Company’s named executive officers for 2018 and explains the structure and rationale associated with each material element of the 2018 compensation arrangements.  The named executive officers for 2018 are as follows:Performance Philosophy 

The Company believes that a significant portion of each named executive officer’s total compensation should be incentive-basedincentive based to best align their interest with those of its shareholders. As a result, for 2018,2021, the averageCompensation Committee approved a target compensation for the named executive officers hadwith the following incentive/baseaverage compensation mix:

All incentive compensation is performance based:

50% on shareholder return metrics

50% on operational performance goals

The 20182021 incentive compensation was 100% objective andplan was based on three keymultiple discretionary operational metricsperformance goals and six objective shareholder return metrics. To further align interests with its shareholders, 75% of the target incentive compensation was payable in Common Shares of the Company, of which one-third was restricted and subject to a one-year vesting period.period and the remaining two-thirds being vested at issuance. Based on FPL’sFPC’s 2021 peer group report discussed below, at that time the Company hashad the highest percentage of target executive compensation based on objective share and operating performance targets compared to its peer group. Also, based on FPL’s report, the amount of the Company’s executive compensation had the highest correlation to the level of shareholder return over the previous three years as compared to the peer group.

Shareholder Return

Since listing its shares on the NYSE on May 18, 2015, the Company has delivered above average cumulative total shareholder returns as compared to its peer group (consisting of Ashford Hospitality Trust, Inc., Chatham Lodging Trust, Hersha Hospitality Trust, RLJ Lodging Trust and Summit Hotel Properties, Inc.) and the SNL U.S. REIT Hotel Index, as shown below, however, the Company’s shareholder returns for the three years ended December 31, 2018 were below its peer group

and the SNL U.S. REIT Hotel Index. The graph below assumes the reinvestment of dividends for the period from May 18, 2015, the date of the Listing, to December 31, 2018, for the three year period ended December 31, 2018, for the two year period ended December 31, 2018, and for the full year of 2018, as applicable.  The SNL U.S. REIT Hotel Index is comprised of publicly traded REITs which focus on investments in hotel properties.

Despite the Company’s shareholder return over the past three years, it has continued to achieve strong relative operational performance. For example, for the three-year period ended December 31, 2018, the Company increased modified funds from operations per share (Modified Funds From Operations as defined on pages 40 and 41 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, divided by the Company’s weighted average common shares outstanding for the year ended December 31, 2018) approximately 8%, compared to a 7% average decrease for the peer group used for comparison of shareholder return. The Company’s increase in modified funds from operations per share was the highest average in this peer group.

General Philosophy and Objectives

The Company’s executive compensation philosophy continues to focus on attracting, motivating and retaining a superior management team that can maximize shareholder value. The compensation arrangements are designed to reward performance relative to financial and other metrics that the Company believes are key metrics that will enhance shareholder value and to reward executive officers for performance at levels that the Compensation Committee believes to be competitive with other public hospitality REITs. The compensation arrangements consist of both base salary and incentive compensation which is intended to incentivize executive officers to manage the Company in a prudent manner without encouraging unnecessary risk-taking. In establishing the compensation arrangements, the Compensation Committee believes the best way to maintain the alliancealignment of management and shareholder objectives is to have a larger variable component tied to key metrics. On average approximately 77% of target compensation of the named executive officers was designed to be variable in 2021. The incentive goals in the incentive compensation program are set at competitive levels which are expected to require stretch performance but are believed to be achievable. AsHowever, as a result approximately 80% of target compensation of the named executive officers is variable.uncertainties in 2021 related to the effect of COVID-19 on the hospitality industry, no specific targets or weightings were initially assigned by the Compensation Committee to the individual operational performance goals. The Compensation Committee also reviews and considers the management team’s overall compensation. The Company has not adopted a formal policy or guideline for allocating compensation between long-term and short-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation.

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Role of the CompensationCompensation Committee

Pursuant to the Compensation Committee’s charter, the Compensation Committee assists the Board of Directors in discharging the Board of Directors’ responsibilities relating to compensation of the Company’s officers. The Compensation Committee’s duties and responsibilities include, among other things, the following:

The Compensation Committee’s charter permits it to delegate its functions to one or more subcommittees as permitted by law.

law and to retain consultants and other advisors to assist the Compensation Committee in carrying out its duties in evaluation of executive officer compensation.

In reviewing the Company’s executive compensation structure, the Compensation Committee evaluates data regarding executive compensation paid by, and executive compensation plans of, other public hospitality REITs and other peer group information aswhich has been provided every two years since 2014 by FPL.FPC, most recently in 2021. The Compensation Committee utilizes FPL’sFPC’s recommendations in conjunction with market data to determine annual executive compensation. Target compensation for 20182021 for each named executive officer was approved by the Compensation Committee after consideration of each individual’s experience in their position and the industry, the risks and deterrents associated with their positions, the anticipated difficulty to replace the individual, and total compensation paid to each named executive officer in prior years. The Compensation Committee consulted with FPL as its independent executive compensation consultant regarding compensation arrangements in 2014, 2016 and 2018.  

Role of the Chief Executive Officer

In connection with determining compensation of executive officers other than the Chief Executive Officer, the Compensation Committee may seek input from the Company’s Chief Executive Officer. Any recommendations given by the Chief Executive Officer will be based upon the Chief Executive Officer’s assessment of the Company’s overall performance, each executive officer’s individual performance and employee retention considerations. The Compensation Committee reviews the Chief Executive Officer’s recommendations, and in its sole discretion determines all executive officer compensation. The Chief Executive Officer will not provide any recommendations to the Compensation Committee regarding his own compensation.

Compensation Consultant

The Compensation Committee periodically consults with FPLFPC as its independent executive compensation consultant regarding compensation arrangements, most recently in 2018.arrangements. The Compensation Committee’s charter authorizes the Compensation Committee to retain or obtain the advice of a compensation consultant to advise it in the evaluation of executive officer compensation. In connection with developing the executive compensation structure and making executive compensation decisions, the Compensation Committee relies upon FPLFPC to:

Peer Group Information

In connection with its comprehensive review of the executive compensation arrangements for all of the Company’s executive officers, the Compensation Committee relies upon FPLFPC to provide, among other things, compensation information and data regarding executive officers in the Company’s peer group. The peer group

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compensation information and data isare one factor the Compensation Committee considers in establishing the Company’s executive compensation arrangements. TheAt the time of FPC’s 2021 report, the peer group currently consistsconsisted of the following 10nine public company REITs in the hospitality industry with similar market capitalization to the Company, with an overall median market capitalization of approximately $3.2$2.3 billion at the time of FPL’s 2018FPC’s 2021 report (the Company’s market capitalization at the time of the report was $4.0$2.9 billion):

The CompanyCompensation Committee believes the peer group above represents companies with which the Company competes for talent and business. The Compensation Committee usesused data from this peer group to provide the Compensation Committee with a context in which to make base salary determinations and decisions regarding appropriate payout levels for incentive compensation.

Elements of Executive Compensation

The Company’s executive compensation arrangements consist of base salary and incentive compensation. 

Annual Base Salary

Annual base salary is a fixed level of compensation that reflects each named executive officer’s position and individual performance and comprises,is intended to comprise, on average, approximately 20% of each named executive officer’s target compensation. Base salary is designed to serve as a retention tool throughout the executive’s career. In determining base salaries, the Compensation Committee considers the salary information and data obtained for the executive officers in the peer group of companies identified above, each executive officer’s role and responsibility, unique skills, future potential with the Company, and internal pay equity considerations. After evaluating these factors, the Compensation Committee approved the following annual base salary of each named executive officer for 2018, which is a 5% increase from 2017.officer.

Incentive Compensation

The named executive officers are eligible to earn variable incentive compensation awards designed to reward the achievement of annual operational/financial performance measures and annual/multi-year total shareholder return measures. The Compensation Committee establishes

target annual incentive award opportunities for each named executive officer, consisting of an annual cash bonus award and an equity compensation award opportunity, following an analysis of market information and data for executive officers in the peer group of companies identified above, each executive officer’s role and responsibility, unique skills, future potential with the Company, and internal pay equity considerations. The Compensation Committee considers all relevant facts and circumstances when evaluating performance, including changing market conditions and broad corporate strategic initiatives, along with overall responsibilities and contributions, and retains the ability to exercise its judgment and discretion to adjust an incentive compensation award.

For 2018,2021, approximately 75% of the target incentive compensation of the named executive officers was intended to be provided through equity awards and the remainder as an annual cash bonus, with one-third of the target equity award being restricted and subject to a one-year vesting period and the remaining two-thirds of the target equity

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award being fully vested. Target equityincentive compensation awards earned upon the achievement of the performance goals consist of (i) for the shareholder return metrics discussed below, one-half of the total award in restricted Common Shares that vest on the second Friday of December in the year issued, i.e., December 13, 2019,9, 2022, and the remaining one-half in fully vested Common Shares and (ii) for the operating metrics discussed below, one-half of the total award in fully vested Common Shares and the other half of the award isas the annual cash bonus mentioned above.bonus.

2018IncentiveThe Compensation Award OpportunityCommittee’s normal practice is to adopt annual performance goals for the annual incentive compensation awards following a review of the Company’s business plan and Actual Award Earned

In 2018,budget, which typically occurs in February of each namedyear. Named executive officer wasofficers employed as of the end of the year are eligible to receive incentive compensation awards to be determined pursuant to a weighted average formula based on the achievement of certain performance measures, consisting of shareholder return metrics and operational performance measures. For 2021, as discussed further below, the ongoing effects of the COVID-19 pandemic disrupted the Compensation Committee’s ability to set normal objective operational performance measures. 

Performance Measures

For 2021, the Compensation Committee adopted performance goals for the 2021 incentive compensation awards, consisting of shareholder return metrics and operational performance goals. The shareholder return metrics for the full year were set in February 2021, as were the operational performance goals for the first six months of the year, following a review of the Company’s business plan for the year. As discussed further below, the Compensation Committee determined to delay setting operational performance goals for the second half of 2021 until later in the year, at a point in time when the Compensation Committee expected to have additional information and clarity regarding potential trends and outlook for the Company and the industry as a whole. At the time each of the performance goals were set, the Compensation Committee believed that the goals that had been established were substantially uncertain to be achieved.

The Compensation Committee determined that the operational performance measures for 2021 would need to be based on discretionary goals for the first and second halves of the year based on the overall progress of the industry and economy due to the high level of economic uncertainty, but the shareholder return performance measures should be based on objective goals (consistent with normal practice). The Compensation Committee did not set separate performance goals for individual executive officers. As described in greater detail in the sections that follow, the incentive compensation awards for 2021 were based on the following operational and shareholder return performance goals and resulted in the following payout achievement levels: