1、Chatham Lodging Trust2021 Annual ReportChatham Lodging Trust is a self-advised,publicly-traded real estate investment trust focused primarily on investing in upscale extended-stay hotels and premium-branded,select-service hotels.Our high-quality hotels are located in major markets with high barriers
2、 to entry,near primary demand generators for both business and leisure guests.Our primary objective is to generate attractive returns for our shareholders through investing in hotel properties at prices that provide strong returns on invested capital,paying meaningful dividends and generating long-t
3、erm value appreciation.Chathams Brand Composition46%Residence Inn13%Homewood Suites11%Hampton Inn10%Courtyard6%Hilton Garden5%SpringHill Suites9%OtherBased on the percentage of hotel EBITDA for the twelve months ended December 31,2021Based on the percentage of hotel EBITDA for thetwelve months ended
4、 December 31,2021Chathams Brand CompositionChathams Top Markets13%NH/ME11%Greater NY9%Silicon Valley7%Dallas7%Los Angeles7%Houston6%San Diego5%DC35%OtherBased on the percentage of hotel EBITDA for thetwelve months ended December 31,2021Dear Shareholder,AS the COVID-19 pandemic recedes further in the
5、 rear-view mirror,Id like to reflect upon our remarkable accomplishments during this most difficult time,which will go down as the worst era in the history of our lodging industry,and emphasize the value I believe is forthcoming to all our shareholders and constituents.As we turn the page to 2022 he
6、althier than most of our peers,I am thankful for the remarkable efforts of our teams at Chatham and Island Hospitality,as well as their significant accomplishments that placed us in a great position moving forward with an outstanding portfolio.Our teams are more energized than ever to deliver great
7、results and meaningfully enhance shareholder value.Chatham is emerging from the pandemic with an even stronger balance sheet,more buying capacity and an even higher quality portfolio by executing numerous,meaningful transactions.Jeffrey H.FisherChairman,Chief Executive Officer and President1Chatham
8、Lodging TrustWe minimized cash burn throughout the pandemic by generating impressive operating results.Chatham was the second fastest hotel REIT to become corporate cash flow positive.In 2021,we generated positive cash flow before capital expenditures of$12 million,and,excluding principal amortizati
9、on,cash flow was$20 million.Since April 2020,essentially the start of the pandemic for our portfolio,cumulative cash burn before capital expenditures was$16 million.When excluding principal amortization,however,cash burn was zero,a remarkable achievement given the significant challenges faced during
10、 the worst era in the history of the lodging industry.Throughout the pandemic,Chatham preserved its capital structure and enhanced its liquidity by generating increased liquidity of$185 million through the issuance of$120 million of preferred equity in June 2021,the issuance of$25 million of common
11、equity,the issuance of a$40 million loan on the Warner Center Development and getting multiple amendments to its credit facility that maintained our ability to opportunistically sell and buy hotels.Since April 2020,we have repaid a$13 million mortgage,paid principal amortization of almost$16 million
12、 and paid down borrowings on our credit facility by$103 million.In fact,over this same period,we had the largest reduction in net debt of all hotel REITs.We should exit our covenant waiver period on our credit facility within the next six months,further enhancing our financial flexibility.We have no
13、 debt maturities in 2022 and only$114 million maturing in 2023.During 2021,the company acquired two,high-quality,premium-branded,extended-stay hotels comprising 269 rooms in Austin,Texas,at the Domain for$71 million.The Domain is a rapidly growing mixed-use development known as Austins“second downto
14、wn”with more than 4.2 million square feet of office space and 1.8 million square feet of retail space,plus another 2.8 million additional square feet(SF)of office space expected to be delivered over the next two years and another 3.8 million SF of office space planned thereafter.These two hotels are
15、 performing great,and that market is poised to explode with the return to office for most companies.Additionally,we are thrilled to have completed and recently opened the 170-room Home2 Suites Woodland Hills Los Angeles within Warner Center.Warner Center currently generates significant standalone de
16、mand with 10 million SF of office space with approximately 50,000 employees,almost 8 million SF of retail space and is home to over 20,000 residents.The city of Los Angeles introduced the Warner Center 2035 Plan,a development blueprint that emphasizes mixed-use and transit-oriented development,walka
17、bility and sustainability with a goal of further urbanizing the zoning district.The Warner Center 2035 Plan facilitates the creation of a Regional Center where people can live,work and play.The plan encompasses approximately 1,100 acres and allows for a net increase of 12.5 million SF of office,2.3
18、million SF of retail and 23.5 million SF of new residential apartments(across 20,000 units).Just prior to printing our annual report,we acquired the beachside 111-room Hilton Garden Inn Destin Miramar Beach,Fla.,in an off-market transaction for$31 million.Recently opened in 2020,the hotel is within
19、walking distance of the pristine white sands of the Gulf of Mexico.The hotels location in Miramar Beach is well situated in relation to the thriving Santa Rosa Beach and Destin markets.This hotel will generate strong cash flow and represents our third youngest hotel,and its RevPAR will 22021 Annual
20、Reportamount to a 2022 RevPAR premium of approximately 50%over our current portfolio.Additionally,the hotel further diversifies Chathams portfolio by adding a predominantly leisure hotel and expands the companys presence in the Sunbelt,which we believe will continue to benefit from population growth
21、.These four hotels are expected to generate a yield over 8%in the first year of stabilized results and will contribute meaningful hotel EBITDA growth in 2022 and 2023.We expect to be active recycling out of hotels that might be older and require extensive capital expenditures or exhibit lower growth
22、 characteristics and into newer hotels that fit our long-term investment criteria.We have emerged from the pandemic with a stronger balance sheet and have the capacity to make value-enhancing acquisitions and generate incremental cash flow.Operationally,performance has started to pick up since the b
23、eginning of the year with RevPAR and weekday occupancy significantly growing each month of 2022.RevPAR was$67 in January,$89 in February and has jumped to$105 through March 14,2022.If the fourteen-day level holds for the balance of the month,it will represent the third-highest monthly RevPAR since t
24、he start of the pandemic.Weekday occupancy,an indicator for the business traveler,was 48%in January,rising to 59%in February and has spiked to 67%through the first fourteen days of March.These are encouraging trends.We firmly believe that business travel is going to return with a vengeance as compan
25、ies re-invest in customer relationships,employee development and a new type of traveler emergesthe“bleisure”traveler who is able to work wherever they want or the“satellite employee”traveler who lives away from their corporate office and is asked to return periodically to his/her corporate or design
26、ated office.Having the highest concentration of extended-stay rooms of any lodging REIT at 60%,our portfolio will benefit from the business travel resurgence and these new types of travelers who are looking for longer stays in a room that will be comfortable and provide all the daily necessities.For
27、 us,our largest market,Silicon Valley,and other technology dependent markets,such as Bellevue,Washington,are poised to significantly outperform and deliver outsized earnings growth as the business traveler returns,international travel opens,technology-related training and product development resumes
28、 and,importantly,the intern programs return.These five hotels are going to generate substantial hotel EBITDA growth for us in 2022 and 2023 as they produced approximately$35 million of hotel EBITDA in 2019 compared to a mere$5 million of Hotel EBITDA in 2020 and only$7 million in 2021.From an operat
29、ing margin standpoint,we have implemented intense cost-control mechanisms across the portfolio.Originally used to protect liquidity in the early days of the pandemic,the controls are helping us deliver strong operating margins on much lower RevPAR compared to pre-pandemic levels.Looking at our 2021
30、fourth quarter,which is a good indicator as our hotels were in essence fully staffed,our 2021 fourth quarter gross operating profit margins were a strong 41%on RevPAR of$92,only down 100 basis points to 2019 when RevPAR was$26 higher at$118.We expect our operating margins will exceed 2019 levels as
31、RevPAR recovers.3Chatham Lodging TrustHaving no deferred maintenance entering the pandemic allowed us to significantly reduce our capital expenditures and preserve liquidity.We reduced our 2020 expenditures to approximately$14 million and further reduced that by 50 percent to approximately$7 million
32、 in 2021.We will be very judicious with our capital expenditures moving forward and expect to commence renovations at a handful of hotels in 2022.In early 2021,we launched the Corporate Responsibility section of our website and are keenly aware of our responsibilities with respect to all things Envi
33、ronmental,Social and Governance(ESG).This portion of our website includes our Corporate Responsibility Report and highlights our past achievements and refreshed approach to sustainability,social matters and governance.We published a supplement to our Report this quarter that includes disclosures in
34、compliance with Global Reporting Initiative(GRI),Sustainability Accounting Standards Board(SASB)and Task Force on Climate-related Financial Disclosures(TCFD).Chatham is fully committed to sustainability,social matters and proper corporate governance.In 2021,we announced that the accompanying proxy s
35、tatement would include a proposal for approval to allow shareholders the right to amend our corporate bylaws.Also,we fully intend to participate in the Global Real Estate Sustainability Benchmark(GRESB)assessment in 2022.We are committed to Diversity,Equity and Inclusion(DEI),and I have joined the C
36、EO Action for Diversity and Inclusion initiative,personally pledging to continue advancing diversity and inclusion within our workplace and our Board of Trustees.During 2021,we added two trustees,and our Board now consists of two women and one person from an underrepresented minority group.We formed
37、 an ESG committee comprised of members of management and our Board of Trustees that will oversee our commitment to DEI.Last year was yet another difficult year across all fronts,and Im proud of the efforts made by our employees across the country.Our successes in 2021 result from the great teams we
38、have at Chatham and Island.I want to close by reminding everyone that our strong performance to-date and our expected performance moving forward will be significantly enhanced in 2022 and 2023 by three key factors:first,tremendous upside in our tech-driven markets;second,meaningful,incremental,new c
39、ash flow from our Austin and Destin acquisitions,as well as the opening of our new Home2 Suites Woodland Hills Los Angeles;and third,recycling capital from the sales of lower tier hotels into higher returning acquisitions.Thank you for your support and continued confidence in Chatham Lodging Trusts
40、leadership and associates.We hope to see many of our shareholders and key constituents in person in 2022.Sincerely,Jeffrey H.FisherChairman,Chief Executive Officer and PresidentMarch 14,202242021 Annual ReportUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-KANNUAL REPORT P
41、URSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2021 ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number:001-34693CHATHAM LODGING TRUST(Exact Name o
42、f Registrant as Specified in Its Charter)Maryland 27-1200777(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S.EmployerIdentification No.)222 Lakeview Avenue,Suite 200 West Palm Beach,Florida 33401(Address of Principal Executive Offices)(Zip Code)(561)802-4477(Registrants Telephone
43、Number,Including Area Code)Securities registered pursuant to Section 12(b)of the Act:Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which RegisteredCommon Shares of Beneficial Interest,$0.01 par value per shareCLDTNew York Stock Exchange6.625%Series A Cumulative Redeemable Preferred Sh
44、aresCLDT-PANew York Stock ExchangeSecurities registered pursuant to Section 12(g)of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursu
45、ant to Section 13 or Section 15(d)of the Act.Yes NoIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to fil
46、e such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the prec
47、eding 12 months(or for such shorter period that the registrant was required to submit such files).Yes NoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definition
48、s of“large accelerated filer,”“accelerated filer”,“smaller reporting company”and emerging growth company in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filer Non-accelerated filer Smaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check ma
49、rk if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements
50、 assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.Indicate by check mark whether the registrant is a shell company(as define
51、d in Rule 12b-2 of the Exchange Act).Yes NoThe aggregate market value of the 47,731,159 common shares of beneficial interest held by non-affiliates of the registrant was$614,300,016 based on the closing sale price on the New York Stock Exchange for such common shares of beneficial interest as of Jun
52、e 30,2021.The number of common shares of beneficial interest outstanding as of February 25,2022 was 48,804,085.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrants Definitive Proxy Statement for its 2022 Annual Meeting of Shareholders(to be filed with the Securities and Exchange Commission
53、 on or before April 30,2022)are incorporated by reference into this Annual Report on Form 10-K in response to Part III hereof.TABLE OF CONTENTS PagePART I.Item 1.Business5Item 1A.Risk Factors16Item 1B.Unresolved Staff Comments36Item 2.Properties37Item 3.Legal Proceedings38Item 4.Mine Safety Disclosu
54、res38PART II.Item 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities39Item 6.Reserved41Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations42Item 7A.Quantitative and Qualitative Disclosures about Market
55、Risk57Item 8.Consolidated Financial Statements and Supplementary Data58Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure58Item 9AControls and Procedures58Item 9B.Other Information58Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections58
56、PART III.Item 10.Trustees,Executive Officers and Corporate Governance59Item 11.Executive Compensation59Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters59Item 13.Certain Relationships and Related Transactions,and Trustee Independence59Item 14.Prin
57、cipal Accountant Fees and Services59PART IVItem 15.Exhibits and Financial Statement Schedules602CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,as amended(the Securities Act)and Secti
58、on 21E of the Securities Exchange Act of 1934 as amended(the Exchange Act),and as such may involve known and unknown risks,uncertainties,assumptions and other factors which may cause our actual results,performance or achievements to be materially different from future results,performance or achievem
59、ents expressed or implied by such forward-looking statements.Forward-looking statements,which are based on certain assumptions and describe our future plans,strategies and expectations,are generally identified by our use of words,such as intend,plan,may,should,will,project,estimate,anticipate,believ
60、e,expect,continue,potential,opportunity,or similar expressions,whether in the negative or affirmative.These forward-looking statements include information about possible or assumed future results of our business,financial condition,liquidity,results of operations,plans and objectives.Statements rega
61、rding the following subjects,among others,are forward-looking by their nature:our business and investment strategy;our forecasted operating results;completion of hotel acquisitions and dispositions;completion of hotel developments;our ability to obtain future financing arrangements;our expected leve
62、rage levels;our understanding of our competition;market and lodging industry trends and expectations;our investment in joint ventures;anticipated capital expenditures;andour ability to maintain our qualification as a real estate investment trust(REIT)for U.S.federal income tax purposes.The forward-l
63、ooking statements are based on our beliefs,assumptions and expectations of our future performance,taking into account all information available to us at the time the forward-looking statements are made.These beliefs,assumptions and expectations can change as a result of many possible events or facto
64、rs,not all of which are known to us.If a change occurs,our business,prospects,financial condition,liquidity and results of operations may vary materially from those expressed in our forward-looking statements.You should carefully consider these risks when you make an investment decision concerning o
65、ur common shares.Additionally,the following factors could cause actual results to vary from our forward-looking statements:the factors included in this report,including those set forth under the sections titled“Business,”“Risk Factors”and“Managements Discussion and Analysis of Financial Condition an
66、d Results of Operations”and in other reports that we file with the United States Securities and Exchange Commission(SEC),or in other documents that we publicly disseminate;general volatility of the financial markets and the market price of our securities;performance of the lodging industry in genera
67、l;business interruptions due to cyber-attacks;impacts on our business of a prolonged government shutdown;decreased travel because of geopolitical events,including terrorism,outbreaks of disease like the novel coronavirus(COVID-19)and current U.S.government policies;the ultimate geographic spread,sev
68、erity and duration of pandemics such as the recent outbreak of COVID-19,actions that may be taken by governmental authorities to contain or address the impact of such pandemics,and the potential negative impacts of such pandemics on the global economy and our financial condition and results of opera
69、tions;changes in our business or investment strategy;availability,terms and deployment of capital;availability of and our ability to attract and retain qualified personnel;our leverage levels;our capital expenditures;3changes in our industry and the markets in which we operate,interest rates or the
70、general U.S.or international economy;our ability to maintain our qualification as a REIT for U.S.federal income tax purposes;andthe degree and nature of our competition.All forward-looking statements speak only as of the date of this report or,in the case of any document incorporated by reference,th
71、e date of that document.All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section.New risks and uncertainties arise over time and it is not possible to predict those events or how they m
72、ay affect us.We undertake no obligation to update or publicly release any revisions to forward-looking statements to reflect events,circumstances or changes in expectations after the date of this report,except as required by law.Such forward-looking statements should be read in light of the risk fac
73、tors identified in the Risk Factors section of this Annual Report on Form 10-K.4PART IItem 1.BusinessDollar amounts presented in this Item 1 are in thousands,except per share data.Overview Chatham Lodging Trust(“we,”“us”or the“Company”)was formed as a Maryland real estate investment trust on October
74、 26,2009.We elected to be taxed as a REIT for federal income tax purposes commencing with our 2010 taxable year.The Company is internally-managed and invests primarily in upscale extended-stay and premium-branded select-service hotels.We had no operations prior to the consummation of our initial pub
75、lic offering(IPO)in April 2010.The net proceeds from our share offerings are contributed to Chatham Lodging,L.P.,our operating partnership(the“Operating Partnership”),in exchange for partnership interests.Substantially all of the Companys assets are held by,and all of its operations are conducted th
76、rough,the Operating Partnership.Chatham Lodging Trust is the sole general partner of the Operating Partnership and owns 100%of the common units of limited partnership interest in the Operating Partnership(common units).Certain of the Companys executive officers hold vested and unvested long-term inc
77、entive plan units in the Operating Partnership(LTIP Units),which are presented as non-controlling interests on our consolidated balance sheets.As of December 31,2021,the Company owned 41 hotels with an aggregate of 6,169 rooms located in 16 states and the District of Columbia.Prior to September 23,2
78、021,the Company held a 10.0%noncontrolling interest in a joint venture(the Inland JV)with affiliates of Colony Capital,Inc.(CLNY),which owned 48 hotels acquired from Inland American Real Estate Trust,Inc.(Inland),comprising an aggregate of 6,402 rooms.Chatham sold its interest in the Inland JV in Se
79、ptember 2021.Prior to March 18,2021,the Company also held a 10.3%noncontrolling interest in a joint venture(the“NewINK JV”)with affiliates of CLNY,which owned 46 hotels acquired from a joint venture(the Innkeepers JV)between the Company and Cerberus Capital Management(“Cerberus”),comprising an aggre
80、gate of 5,948 rooms.Chatham sold its interest in the NewINK JV in March 2021 for$2.8 million.To maintain our qualification as a REIT,the Company cannot operate its hotels.Therefore,the Operating Partnership and its subsidiaries lease our wholly owned hotels to taxable REIT subsidiary lessees(“TRS Le
81、ssees”),which are wholly owned by the Companys taxable REIT subsidiary(“TRS”)holding company.Each hotel is leased to a TRS Lessee under a percentage lease that provides for rental payments equal to the greater of(i)a fixed base rent amount or(ii)a percentage rent based on hotel room revenue.The init
82、ial term of each of the TRS leases is 5 years.Lease revenue from each TRS Lessee is eliminated in consolidation.The TRS Lessees have entered into management agreements with third-party management companies that provide day-to-day management for the hotels.As of December 31,2021,Island Hospitality Ma
83、nagement Inc.(“IHM”),which is 100%owned by Jeffrey H.Fisher,the Companys Chairman,President and Chief Executive Officer,managed all of the Companys hotels.As of December 31,2021,our hotels include upscale extended-stay hotels that operate under the Residence Inn by Marriott brand(seventeen hotels),H
84、omewood Suites by Hilton brand(seven hotels),and the TownePlace Suites by Marriott brand(one hotel),as well as premium-branded select-service hotels that operate under the Courtyard by Marriott brand(five hotels),the Hampton Inn or Hampton Inn and Suites by Hilton brand(three hotels),the Hilton Gard
85、en Inn by Hilton brand(four hotels),the SpringHill Suites by Marriott brand(one hotel),the Hyatt Place brand(two hotels),and all-suite hotels that operate under the upper scale Embassy Suites brand(one hotel).We primarily invest in upscale extended-stay hotels such as Homewood Suites by Hilton,Resid
86、ence Inn by Marriott,Home2 Suites by Hilton,and TownePlace Suites by Marriott.We also invest in upscale or upper upscale all-suite hotels such as SpringHill Suites by Marriott and Embassy Suites.Extended-stay and all-suite hotels typically have the following characteristics:principal customer base i
87、ncludes business travelers,whether short-term transient travelers or those on extended assignments and corporate relocations;services and amenities include complimentary breakfast and evening hospitality hour,high-speed internet access,in-room movie channels,limited meeting space,daily linen and roo
88、m cleaning service,24-hour front desk,guest grocery services,and an on-site maintenance staff;and physical facilities include large suites,quality construction,full separate kitchens in each guest suite or suites that include a wet bar,refrigerator and microwave,quality room furnishings,pool,and exe
89、rcise facilities.5 Additionally,we invest in premium-branded select-service hotels such as Courtyard by Marriott,Hampton Inn,Hampton Inn and Suites by Hilton,Hyatt Place and Hilton Garden Inn by Hilton.The service and amenity offerings of these hotels typically include complimentary breakfast or a s
90、maller for pay breakfast or evening dining option,high-speed internet access,local calls,in-room movie channels,and daily linen and room cleaning service.Financial Information About Industry SegmentsWe evaluate all of our hotels as a single industry segment because all of our hotels have similar eco
91、nomic characteristics and provide similar services to similar types of customers.Accordingly,we do not report segment information.Business Strategy Our primary objective is to generate attractive returns for our shareholders through investing in hotel properties(whether wholly owned or through a joi
92、nt venture)at prices that provide strong returns on invested capital,paying dividends and generating long-term value appreciation.We believe we can create long-term value by pursuing the following strategies:Disciplined acquisition of hotel properties:We invest primarily in premium-branded upscale e
93、xtended-stay and select-service hotels with a focus on the 25 largest metropolitan markets in the United States.We focus on acquiring hotel properties at prices below replacement cost in markets that have strong demand generators and where we expect demand growth will outpace new supply.We also seek
94、 to acquire properties that we believe are undermanaged or undercapitalized.Opportunistic hotel repositioning:We employ value-added strategies,such as re-branding,renovating,expanding or changing management,when we believe such strategies will increase the operating results and values of the hotels
95、we acquire.Aggressive asset management:Although as a REIT we cannot operate our hotels,we proactively manage our third-party hotel manager in seeking to maximize hotel operating performance.Our asset management activities seek to ensure that our third-party hotel manager effectively utilizes franchi
96、se brands marketing programs,develop effective sales management policies and plans,operate properties efficiently,control costs,and develop operational initiatives for our hotels that increase guest satisfaction.As part of our asset management activities,we regularly review opportunities to reinvest
97、 in our hotels to maintain quality,increase long-term value and generate attractive returns on invested capital.Selective hotel development:We may consider developing a limited number of hotels in cases where we believe newly developed hotels will generate attractive returns and enhance the quality
98、of our hotel portfolio.Flexible selection of hotel management companies:We are flexible in our selection of hotel management companies and select managers that we believe will maximize the performance of our hotels.We utilize independent management companies,including IHM,a hotel management company
99、100%owned by Mr.Fisher that as of December 31,2021,managed all of our hotels.We believe this strategy increases the universe of potential acquisition opportunities we can consider because many hotel properties are encumbered by long-term management contracts.Selective investment in hotel debt:We may
100、 consider selectively investing in debt collateralized by hotel property if we believe we can foreclose on or acquire ownership of the underlying hotel property in the relative near term.We do not intend to invest in any debt where we do not expect to gain ownership of the underlying property or to
101、originate any debt financing.We plan to maintain a prudent capital structure and intend to maintain our leverage over the long term at a ratio of net debt to investment in hotels at cost(defined as our initial acquisition price plus the gross amount of any subsequent capital investment and excluding
102、 any impairment charges)at a level that will be similar to the levels at which we have operated in the past.We have maintained a leverage ratio between the high 20s and the low 50s.A subsequent decrease in hotel property values will not necessarily cause us to repay debt to comply with this target.A
103、t December 31,2021,our leverage ratio was approximately 30.6 percent,which decreased from 35.8 percent at December 31,2020.Over time,we intend to finance our growth with free cash flow,debt and issuances of common shares and/or preferred shares.Our debt may include mortgage debt collateralized by ou
104、r hotel properties and unsecured debt.When purchasing hotel properties,we may issue common units in our Operating Partnership as full or partial consideration to sellers who may desire to take advantage of tax deferral on the sale of a hotel or participate in the potential appreciation in value of o
105、ur common shares.Competition We face competition for investments in hotel properties from institutional pension funds,private equity investors,6REITs,hotel companies and others who are engaged in hotel investments.Some of these entities have substantially greater financial and operational resources
106、than we have or may be willing to use higher leverage.This competition may increase the bargaining power of property owners seeking to sell,reduce the number of suitable investment opportunities available to us and increase the cost of acquiring our targeted hotel properties.The lodging industry is
107、highly competitive.Our hotels compete with other hotels,and alternative lodging marketplaces,for guests in each market in which they operate.Competitive advantage is based on a number of factors,including location,convenience,brand affiliation,room rates,range of services and guest amenities or acco
108、mmodations offered and quality of customer service.Competition is often specific to the individual markets in which our hotels are located and includes competition from existing and new hotels and alternative lodging market places.Furthermore,we have experienced,and continue to experience,heightened
109、 competition due to the ongoing COVID-19 pandemic due to,among other factors:(i)increased fears regarding travel and lodging,which has lowered the number of domestic and international travelers,and(ii)governmental responses to the ongoing COVID-19 pandemic,which have restricted lodging operations.Co
110、mpetition could adversely affect our occupancy rates,our average daily rates(ADR)and revenue per available room(“RevPAR”),and may require us to provide additional amenities or make capital improvements that we otherwise would not have to make,which may reduce our profitability.Seasonality Demand for
111、 our hotels is affected by recurring seasonal patterns.Generally,we expect that we will have lower revenue,operating income and cash flow in the first and fourth quarters and higher revenue,operating income and cash flow in the second and third quarters.These general trends are,however,influenced by
112、 overall economic cycles and the geographic locations of our hotels.To the extent that cash flow from operations is insufficient during any quarter,due to temporary or seasonal fluctuations in revenue,we expect to utilize cash on hand or borrowings under our credit facility to pay expenses,debt serv
113、ice or to make distributions to our equity holders.RegulationOur properties are subject to various covenants,laws,ordinances and regulations,including regulations relating to common areas and fire and safety requirements.We believe each of our hotels has the necessary permits and approvals to operat
114、e its business,and each is adequately covered by insurance.Americans with Disabilities ActOur properties must comply with Title III of the Americans with Disabilities Act of 1990(ADA)to the extent that such properties are public accommodations as defined by the ADA.Under the ADA,all public accommoda
115、tions must meet federal requirements related to access and use by disabled persons.The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable.Although we believe that our hotel propertie
116、s substantially comply with present requirements of the ADA,we have not conducted a comprehensive audit or investigation of all of these properties to determine compliance,and one or more properties may not be fully compliant with the ADA.If we are required to make substantial modifications to our h
117、otel properties,whether to comply with the ADA or other changes in governmental rules and regulations,our financial condition,results of operations,the market price of our common shares and our ability to make distributions to our shareholders could be adversely affected.The obligation to make readi
118、ly achievable accommodations is ongoing,and we will continue to assess our properties and to make alterations as appropriate.Environmental Regulations Under various federal,state and local laws,ordinances and regulations,an owner of real property may be liable for the costs of removal or remediation
119、 of certain hazardous or toxic substances on or in such property.Such laws often impose such liability without regard to whether the owner knew of or was responsible for,the presence of such hazardous or toxic substances.The cost of any required remediation and the owners liability therefore as to a
120、ny property are generally not limited under such laws and could exceed the value of the property and/or the aggregate assets of the owner.The presence of such substances,or the failure to properly remediate contamination from such substances,may adversely affect the owners ability to sell the real e
121、state or to borrow funds using such property as collateral,which could have an adverse effect on our return from such investment.Furthermore,various court decisions have established that third parties may recover damages for injury caused by release of hazardous substances and for property contamina
122、tion.For instance,a person exposed to asbestos while working at or 7staying in a hotel may seek to recover damages if he or she suffers injury from the asbestos.Lastly,some of these environmental issues restrict the use of a property or place conditions on various activities.One example is laws that
123、 require a business using chemicals to manage them carefully and to notify local officials if regulated spills occur.Although it is our policy to require an acceptable Phase I environmental site assessment for all real property in which we invest prior to our investment,such surveys are limited in s
124、cope.As a result,there can be no assurance that a Phase I environmental site assessment will uncover any or all hazardous or toxic substances on a property prior to our investment in that property.We cannot assure you that:there are not existing environmental liabilities related to our properties of
125、 which we are not aware;future laws,ordinances or regulations will not impose material environmental liability;or the current environmental condition of a hotel will not be affected by the condition of properties in the vicinity of the hotel(such as the presence of leaking underground storage tanks)
126、or by third parties unrelated to us.Tax Status We elected to be taxed as a REIT for federal income tax purposes commencing with our short taxable year ended December 31,2010 under the Internal Revenue Code of 1986,as amended(the“Code”).Our qualification as a REIT depends upon our ability to meet,on
127、a continuing basis,through actual investment and operating results,various complex requirements under the Code relating to,among other things,the sources of our gross income,the composition and values of our assets,our distribution levels and the diversity of ownership of our shares of beneficial in
128、terest.We believe that we are organized in conformity with the requirements for qualification as a REIT under the Code and that our current and intended manner of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT for federal income tax purposes.As
129、 a REIT,we generally will not be subject to federal income tax on our REIT taxable income that we distribute to our shareholders.Under the Code,REITs are subject to numerous organizational and operational requirements,including a requirement that they distribute each year at least 90%of their REIT t
130、axable income,determined without regard to the deduction for dividends paid and excluding any net capital gains.If we fail to qualify for taxation as a REIT in any taxable year and do not qualify for certain statutory relief provisions,our income for that year will be taxed at regular corporate rate
131、s,and we will be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT.Even if we qualify as a REIT for federal income tax purposes,we may still be subject to state and local taxes on our income and assets and to federal income
132、 and excise taxes on our undistributed income.Additionally,any income earned by our TRS Lessees will be fully subject to federal,state and local corporate income tax.During the third quarter of 2018,we were notified that the tax return of our TRS was going to be examined by the Internal Revenue Serv
133、ice(the IRS)for the tax year ended December 31,2016.During the third quarter of 2021,we were also notified that various entities related to the Company are being examined by the State of New Hampshire for the tax years ended December 31,2019 and 2018.Both examinations remain open.We believe we do no
134、t need to record a liability related to matters contained in the tax periods open to examination.However,should we experience an unfavorable outcome in either of the matters,such outcome could have a material impact on our results of operations,financial position and cash flows.8Hotel Management Agr
135、eementsThe management agreements with IHM have an initial term of five years and will automatically renew for two successive five-year periods unless IHM provides written notice no later than 90 days prior to the then-current terms expiration date of their intent not to renew.The IHM management agre
136、ements provide for early termination at the Companys option upon sale of any IHM-managed hotel for no termination fee,with six months advance notice.The IHM management agreements may be terminated for cause,including the failure of the managed hotel to meet specified performance levels.Base manageme
137、nt fees are calculated as a percentage of the hotels gross room revenue.If certain financial thresholds are met or exceeded,an incentive management fee is calculated as 10%of the hotels net operating income less fixed costs,base management fees and a specified return threshold.The incentive manageme
138、nt fee is capped at 1%of gross hotel revenues for the applicable calculation.9As of December 31,2021,terms of our management agreements for our 41 hotels were as follows(dollars are not in thousands):PropertyManagement CompanyBase Management FeeMonthly Accounting FeeMonthly Revenue Management FeeInc
139、entive Management Fee CapHomewood Suites by Hilton Boston-Billerica/Bedford/BurlingtonIHM 3.0%$1,200$1,000 1.0%Homewood Suites by Hilton Minneapolis-Mall of AmericaIHM 3.0%1,200 1,000 1.0%Homewood Suites by Hilton Nashville-BrentwoodIHM 3.0%1,200 1,000 1.0%Homewood Suites by Hilton Dallas-Market Cen
140、terIHM 3.0%1,200 1,000 1.0%Homewood Suites by Hilton Hartford-FarmingtonIHM 3.0%1,200 1,000 1.0%Homewood Suites by Hilton Orlando-MaitlandIHM 3.0%1,200 1,000 1.0%Hampton Inn&Suites Houston-Medical CenterIHM 3.0%1,000 1,000 1.0%Residence Inn Long Island HoltsvilleIHM 3.0%1,000 1,000 1.0%Residence Inn
141、 White PlainsIHM 3.0%1,000 750 1.0%Residence Inn New RochelleIHM 3.0%1,000 750 1.0%Residence Inn Garden GroveIHM 3.0%1,200 1,000 1.0%Homewood Suites by Hilton San Antonio River WalkIHM 3.0%1,200 1,000 1.0%Residence Inn Washington DCIHM 3.0%1,200 1,000 1.0%Residence Inn Tysons CornerIHM 3.0%1,200 1,0
142、00 1.0%Hampton Inn Portland DowntownIHM 3.0%1,000 550 1.0%Courtyard HoustonIHM 3.0%1,000 550 1.0%Hyatt Place Pittsburgh North ShoreIHM 3.0%1,500 1,000 1.0%Hampton Inn ExeterIHM 3.0%1,200 1,000 1.0%Hilton Garden Inn Denver TechIHM 3.0%1,500 1,000 1.0%Residence Inn BellevueIHM 3.0%1,200 1,000 1.0%Spri
143、nghill Suites SavannahIHM 3.0%1,200 1,000 1.0%Residence Inn Silicon Valley IIHM 3.0%1,200 1,000 1.0%Residence Inn Silicon Valley IIIHM 3.0%1,200 1,000 1.0%Residence Inn San MateoIHM 3.0%1,200 1,000 1.0%Residence Inn Mountain ViewIHM 3.0%1,200 1,000 1.0%Hyatt Place Cherry CreekIHM 3.0%1,500 1,000 1.0
144、%Courtyard AddisonIHM 3.0%1,500 1,000 1.0%Courtyard West University HoustonIHM 3.0%1,500 1,000 1.0%Residence Inn West University HoustonIHM 3.0%1,200 1,000 1.0%Hilton Garden Inn Burlington IHM 3.0%1,500 1,000 1.0%Residence Inn San Diego GaslampIHM 3.0%1,500 1,000 1.0%Hilton Garden Inn Marina del Rey
145、IHM 3.0%1,500 1,000 1.0%Residence Inn DedhamIHM 3.0%1,200 1,000 1.0%Residence Inn Il LuganoIHM 3.0%1,500 1,000 1.0%Hilton Garden Inn PortsmouthIHM 3.0%1,500 1,000 1.0%Courtyard SummervilleIHM 3.0%1,500 1,000 1.0%Embassy Suites SpringfieldIHM 3.0%1,500 1,000 1.0%Residence Inn SummervilleIHM 3.0%1,500
146、 1,000 1.0%Courtyard DallasIHM 3.0%1,500 1,000 1.0%Residence Inn Austin Northwest/The Domain AreaIHM 3.0%1,500 1,000 1.0%TownePlace Suites Austin Northwest/The Domain AreaIHM 3.0%1,500 1,000 1.0%10Management fees totaled approximately$7.2 million,$5.3 million and$10.8 million,respectively,for the ye
147、ars ended December 31,2021,2020 and 2019.Hotel Franchise AgreementsThe fees associated with the franchise agreements are calculated as a specified percentage of the hotels gross room revenue.Terms of our franchise agreements for our hotels as of December 31,2021 were as follows:11PropertyFranchise C
148、ompanyFranchise/Royalty FeeMarketing/Program FeeExpirationHomewood Suites by Hilton Boston-Billerica/Bedford/BurlingtonPromus Hotels,Inc.4.0%4.0%2025Homewood Suites by Hilton Minneapolis-Mall of AmericaPromus Hotels,Inc.4.0%4.0%2025Homewood Suites by Hilton Nashville-BrentwoodPromus Hotels,Inc.4.0%4
149、.0%2025Homewood Suites by Hilton Dallas-Market CenterPromus Hotels,Inc.4.0%4.0%2025Homewood Suites by Hilton Hartford-FarmingtonPromus Hotels,Inc 4.0%4.0%2025Homewood Suites by Hilton Orlando-MaitlandPromus Hotels,Inc.4.0%4.0%2025Hampton Inn&Suites Houston-Medical CenterHampton Inns Franchise LLC 6.
150、0%4.0%2035Residence Inn Long Island HoltsvilleMarriott International,Inc.5.5%2.5%2025Residence Inn White PlainsMarriott International,Inc.5.5%2.5%2030Residence Inn New RochelleMarriott International,Inc.5.5%2.5%2030Residence Inn Garden GroveMarriott International,Inc.5.0%2.5%2031Homewood Suites by H
151、ilton San Antonio River WalkPromus Hotels,Inc.4.0%4.0%2026Residence Inn Washington DCMarriott International,Inc.5.5%2.5%2033Residence Inn Tysons CornerMarriott International,Inc.5.0%2.5%2031Hampton Inn Portland DowntownHampton Inns Franchise LLC 6.0%4.0%2032Courtyard HoustonMarriott International,In
152、c.5.5%2.0%2030Hyatt Place Pittsburgh North ShoreHyatt Hotels,LLC 5.0%3.5%2030Hampton Inn ExeterHampton Inns Franchise LLC 6.0%4.0%2031Hilton Garden Inn Denver TechHilton Garden Inns Franchise LLC 5.5%4.3%2028Residence Inn BellevueMarriott International,Inc.5.5%2.5%2033Springhill Suites SavannahMarri
153、ott International,Inc.5.0%2.5%2033Residence Inn Silicon Valley IMarriott International,Inc.5.5%2.5%2029Residence Inn Silicon Valley IIMarriott International,Inc.5.5%2.5%2029Residence Inn San MateoMarriott International,Inc.5.5%2.5%2029Residence Inn Mountain ViewMarriott International,Inc.5.5%2.5%202
154、9Hyatt Place Cherry CreekHyatt Hotels,LLC 5.0%3.5%2034Courtyard AddisonMarriott International,Inc.5.5%2.0%2029Courtyard West University HoustonMarriott International,Inc.5.5%2.0%2029Residence Inn West University HoustonMarriott International,Inc.6.0%2.5%2024Hilton Garden Inn BurlingtonHilton Garden
155、Inns Franchise LLC 5.5%4.3%2029Residence Inn San Diego GaslampMarriott International,Inc.6.0%2.5%2035Hilton Garden Inn Marina del ReyHilton Franchise Holding LLC 5.5%4.3%2030Residence Inn DedhamMarriott International,Inc.6.0%2.5%2030Residence Inn Il LuganoMarriott International,Inc.6.0%2.5%2045Hilto
156、n Garden Inn PortsmouthHilton Garden Inns Franchise LLC 5.5%4.0%2037Courtyard SummervilleMarriott International,Inc.6.0%2.5%2037Embassy Suites SpringfieldHilton Franchise Holding LLC 5.5%4.0%2037Residence Inn SummervilleMarriott International,Inc.6.0%2.5%2038Courtyard DallasMarriott International,In
157、c.4.0%to 6.0%2.0%2038Residence Inn Austin Northwest/The Domain AreaMarriott International,Inc.5.5%to 6.0%2.5%2036TownePlace Suites Austin Northwest/The Domain AreaMarriott International,Inc.3.0%to 5.5%2.0%2041Franchise and marketing/program fees totaled approximately$16.6 million,$11.6 million and$2
158、5.9 million,respectively,for the years ended December 31,2021,2020 and 2019.12Operating LeasesThe Residence Inn San Diego Gaslamp hotel is subject to a ground lease with an expiration of January 31,2065 and we have an extension option of up to three additional terms of ten years each.Monthly payment
159、s are currently approximately$44,400 per month and increase 10%every five years.The hotel is subject to supplemental rent payments annually calculated as 5%of gross revenues during the applicable lease year,minus 12 times the monthly base rent scheduled for the lease year.The Residence Inn New Roche
160、lle hotel is subject to an air rights lease and a garage lease,each of which expires on December 1,2104.The lease agreements with the City of New Rochelle cover the space above the parking garage that is occupied by the hotel as well as 128 parking spaces in a parking garage that is attached to the
161、hotel.The annual base rent for the garage lease is the hotels proportionate share of the citys adopted budget for the operations,management and maintenance of the garage and established reserves to fund for the cost of capital repairs.Aggregate rent for 2021 under these leases amounted to approximat
162、ely$30,000 per quarter.The Hilton Garden Inn Marina del Rey hotel is subject to a ground lease with an expiration of December 31,2067.Minimum monthly payments are currently approximately$47,500 per month and a percentage rent payment equal to 5%to 25%of gross income based on the type of income less
163、the minimum rent is due in arrears.The Company entered into a corporate office lease in September 2015.The lease is for a term of 11 years and includes a 12-month rent abatement period and certain tenant improvement allowances.The Company has a renewal option of up to two successive terms of five ye
164、ars each.The Company shares the space with related parties and is reimbursed for the pro-rata share of rentable space occupied by the related parties.The Company is the lessee under ground,air rights,garage and office lease agreements for certain of its properties,all of which qualify as operating l
165、eases as of December 31,2021.The leases typically provide multi-year renewal options to extend the term as lessee at the Companys option.Option periods are included in the calculation of the lease obligation liability only when options are reasonably certain to be exercised.In calculating the Compan
166、ys lease obligations,the Company uses discount rates estimated to equal what the Company would have to pay to borrow on a collateralized basis over a similar term,for an amount equal to the lease payments,in a similar economic environment.The following table includes information regarding the Compan
167、ys leases for which it is the lessee,as of December 31,2021,for each of the next five calendar years and thereafter(in thousands):Total Future Lease PaymentsAmount 2022$2,072 2023 2,093 2024 2,115 2025 2,186 2026 1,894 Thereafter 64,825 Total lease payments$75,185 13Human CapitalAs of February 25,20
168、22,we had 17 employees.All persons employed in the day-to-day operations of our hotels are employees of the management companies engaged by our TRS Lessees to operate such hotels.None of our employees are represented by a collective bargaining agreement,however,certain hotel level employees of IHM a
169、re represented under a collective bargaining agreement.Our key human capital management objectives are to attract,recruit,hire,develop and promote a deep and diverse set of talent that translates into a strong and successful workforce.To support these objectives,our human resource programs are desig
170、ned to develop talent to prepare employees for critical roles and leadership positions for the future;reward and support employees through competitive pay and benefit programs;enhance our culture through efforts to foster,promote and preserve a culture of diversity and inclusion;and invest in techno
171、logy,tools,and resources to enable employees at work.Corporate ResponsibilityWe are committed to creating value while being responsible stewards at our hotels,in the community,and in our industry.While 2020 presented tumultuous challenges,the new reality we experienced reinforced our desire to forma
172、lize our historical efforts relating to Environmental,Social,and Governance(ESG)issues into a more structured corporate responsibility strategy.We are proud to have published our first Corporate Responsibility Report in March 2021,which is available on our website at .In January 2022,this report was
173、 enhanced to include reporting with standards from the Global Reporting Initiative(GRI),Sustainability Accounting Standards Board(SASB)and Task Force on Climate-related Financial Disclosures(TCFD).This updated report also includes the addition of 2018 and 2019 waste data.In February 2022,the Company
174、 established a standalone Environmental Social and Governance Committee made up of members of the Board of Trustees and Management.Environmental and SustainabilityOur initiatives are intended to improve energy efficiency at our hotels but also to enhance the value and profitability of our hotels.Amo
175、ng these energy efficiency programs are the installation of energy efficient lighting,guestroom“smart”thermostats that adjust room conditions based upon occupancy status,low-flow toilet systems,and recycling laundry water.We are committed to seeking new environmental initiatives to implement across
176、our portfolio.Corporate Citizenship and Community Impact The Company prioritizes the need to invest in the communities in which our properties are located.In addition,we have made a significant effort to give back to the local charitable organizations in the West Palm Beach area,where our corporate
177、office is located.In combination with IHM,we have engaged in events for charitable organizations in a number of ways including participating in race events for charity,collecting food and feeding those in need,and reading and providing gifts to underprivileged children during the holidays.Our employ
178、ees volunteer efforts have directly added value to our local community.Diversity,Equity and InclusionThe Company maintains a strong focus on achieving its objectives with respect to diversity,equity and inclusion.In August 2021,the Company increased racial and gender diversity in the composition of
179、its board.25.0%of Chathams board members are female and 12.5%identify as members of an underrepresented group.In January 2022,the Company and the CEO became proud participants in the CEO Action for Diversity and Inclusion pledge.As part of the pledge,the Company commits to cultivate a diverse and in
180、clusive workplace environment with the free exchange of ideas.14Available Information Our Internet website is .We make available free of charge through our website our annual reports on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K,Section 16 reports on Forms 3,4 and 5 and ame
181、ndments to those reports filed or furnished pursuant to Section 13(a)or 15(d)of the Exchange Act as soon as reasonably practicable after such documents are electronically filed with,or furnished to,the SEC.All reports that we have filed with the SEC,including this annual report on Form 10-K,our quar
182、terly reports on Form 10-Q and our current reports on Form 8-K,can also be obtained free of charge from the SECs website www.sec.gov.In addition,our website includes corporate governance information,including the charters for committees of our Board of Trustees,our Corporate Governance Guidelines,Co
183、nflict of Interest Policy and our Code of Business Conduct.This information is available in print to any shareholder who requests it by writing to Investor Relations,Chatham Lodging Trust,222 Lakeview Avenue,Suite 200,West Palm Beach,FL 33401.The information on our website is not,and shall not be de
184、emed to be,a part of this report or incorporated into any other filings that we make with the SEC.15Item 1A.Risk FactorsOur business faces many risks.The risks described below may not be the only risks we face.Additional risks that we do not yet know of or that we currently believe are immaterial ma
185、y also impair our business operations.If any of the events or circumstances described in the following risk factors actually occurs,our business,financial condition or results of operations could suffer,our ability to make cash distributions to our shareholders could be impaired and the trading pric
186、e of our common shares could decline.You should know that many of the risks described may apply to more than just the subsection in which we grouped them for the purpose of this presentation.SUMMARYRisks Related to Our BusinessThe current COVID-19 pandemic has had,and may continue to have,or a futur
187、e pandemic could have,adverse effects on our financial condition,results of operations,cash flows and performance.Our investment policies are subject to revision from time to time at our Board of Trustees discretion.We depend on the efforts and expertise of our key executive officers whose continued
188、 service is not guaranteed.Our future growth depends on obtaining new financing.We must rely on third-party management companies to operate our hotels in order to qualify as a REIT.The management of the hotels in our portfolio is currently concentrated in one hotel management company.Our franchisors
189、 could cause us to expend additional funds on upgraded operating standards.Our franchisors may cancel or fail to renew our existing franchise licenses.Fluctuations in our financial performance,capital expenditure requirements and excess cash flow could adversely affect our ability to make distributi
190、ons.Future debt service obligations could adversely affect our overall operating results or cash flow and may require us to liquidate our properties.If we are unable to repay our debt obligations in the future,we may be forced to refinance debt or dispose of or encumber our assets,which could advers
191、ely affect distributions to shareholders.Interest expense on our debt may limit our cash available to fund growth strategies and shareholder distributions.Failure to hedge effectively against interest rate changes may adversely affect us.Changes in the method pursuant to which the LIBOR rates are de
192、termined and phasing out of LIBOR after 2021 may affect our financial results.Joint venture investments that we may make could be adversely affected by our lack of decision-making authority,our reliance on joint venture partners financial condition and disputes between us and our joint-venture partn
193、ers.We may from time to time make distributions to our shareholders in the form of our common shares,which could result in shareholders incurring tax liability without receiving sufficient cash to pay such tax.Our conflict of interest policy may not be successful in eliminating the influence of futu
194、re conflicts of interest that may arise between us and our trustees,officers and employees.There may be conflicts of interest between us and affiliates owned by our Chief Executive Officer.Hotel development is subject to timing,cost,and other risks.Risks Related to the Lodging IndustryThe lodging in
195、dustry has experienced significant declines in the past and failure of the lodging industry to exhibit improvement may adversely affect our ability to execute our business strategy.Our ability to make distributions to our shareholders may be affected by operating risks in the lodging industry.Compet
196、ition for acquisitions may reduce the number of properties we can acquire.Competition for guests may lower our hotels revenues and profitability.The cyclical nature of the lodging industry may adversely affect the return on our investments.Due to our concentration therein,a downturn in the lodging i
197、ndustry would adversely affect our business.The ongoing need for capital expenditures at our hotel properties may adversely affect our business.16The increasing use by consumers of Internet travel intermediaries and alternative lodging market places may adversely affect our profitability.The need fo
198、r business-related travel may be adversely affected by the use of business-related technology.We and our hotel managers rely on information technology in our operations,and any material failure,inadequacy,interruption or security failure of that technology could harm our business.Future terrorist at
199、tacks or changes in terror alert levels could adversely affect travel and hotel demand.We may assume liabilities in connection with the acquisition of hotel properties,including unknown liabilities.Uninsured and underinsured losses could adversely affect our operating results.We face risks associate
200、d with natural disasters and the direct and indirect physical effects of climate change,which may include more frequent and more severe storms,hurricanes,flooding,droughts and wildfires,any of which could have a material adverse effect on our hotel properties,operations,cash flows and financing opti
201、ons.Noncompliance with environmental laws and governmental regulations could adversely affect our business.Compliance with the ADA and other changes in governmental rules and regulations could substantially increase our cost of doing business.The outbreak of widespread contagious disease,such as COV
202、ID-19,could reduce travel.General Risks Related to the Real Estate IndustryIlliquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our hotel properties.Increases in our property taxes would adversely affect our ability to make
203、 distributions to our shareholders.Our hotel properties may contain or develop harmful mold,which could lead to liabilities and remediation costs.Risks Related to Our Organization and StructureOur rights and the rights of our shareholders to take action against our trustees and officers are limited.
204、Provisions of Maryland law may limit the ability of a third party to acquire control of our Company.Provisions of our declaration of trust may limit the ability of a third party to acquire control of our Company.Failure to make required distributions would subject us to tax.Failure to maintain our q
205、ualification as a REIT would subject us to federal income tax and potentially other taxes.Our TRS Lessee structure subjects us to the risk of increased hotel operating expenses.Our TRS structure increases our overall tax liability.Our transactions with our TRS will cause us to be subject to a 100%pe
206、nalty tax on certain income or deductions if those transactions are not conducted on arms-length terms.If our leases with our TRS Lessees are not respected as true leases for federal income tax purposes,we would fail to qualify as a REIT.Dividends payable by REITs do not qualify for the reduced tax
207、rates available for some dividends.If our hotel managers do not qualify as eligible independent contractors,we would fail to qualify as a REIT.Our ownership limitations may restrict or prevent you from engaging in certain transfers of our common shares.The ability of our Board of Trustees to revoke
208、our REIT qualification without shareholder approval may cause adverse consequences to our shareholders.The ability of our Board of Trustees to change our major policies may not be in our shareholders interest.If we fail to maintain an effective system of internal controls,we may not be able to accur
209、ately determine our financial results or prevent fraud.As a result,our investors could lose confidence in our reported financial information,which could harm our business and the value of our shares.Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquida
210、te otherwise attractive investments.We may be subject to adverse legislative or regulatory tax changes.We may be unable to generate sufficient cash flows from our operations to make distributions to our shareholders at any time in the future.Our revolving credit facility may limit our ability to pay
211、 dividends on common shares.The market price of our equity securities may vary substantially.The number of shares available for future sale could adversely affect the market price of our common shares.Future offerings of debt or equity securities or incurrence of debt may adversely affect the market
212、 price of our common shares.17Risks Related to Our Business The current COVID-19 pandemic has had,and may continue to have,or a future pandemic could have,adverse effects on our financial condition,results of operations,cash flows and performance.The global pandemic caused by the coronavirus known a
213、s COVID-19 has had a severe and negative impact on both the U.S.economy and the global economy.Financial markets experienced significant volatility in 2020 and 2021,which is expected to continue over the upcoming quarters.Globally and throughout the United States,federal and local governments have i
214、nstituted quarantines,restrictions on travel,school closings,shelter in place orders,and restrictions on types of businesses that may continue operations.These restrictions have had a severe impact on the U.S.lodging industry and some of our hotels continue to operate at a significantly reduced occu
215、pancy.While the uncertainty regarding the continuing severity and duration of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact of COVID-19,the spread of COVID-19 has resulted in,and may continue to result in,significant disruption of the global financial markets and a
216、 high rate of unemployment in the United States.Although the FDA has approved certain therapies and vaccines for use and distribution to most people,there remain uncertainties as to the overall efficacy of the vaccines,especially as new variants of COVID-19 emerge,which can have a higher level of re
217、sistance to the vaccines.Until such therapies and vaccines are widely administered and remain effective,the pandemic and public and private responses to the pandemic may lead to deterioration of economic conditions,an economic downturn and/or a recession,at a global scale,which could materially affe
218、ct our performance,financial condition,results of operations and cash flows.The following factors should be considered since the COVID-19 pandemic has significantly adversely affected the ability of our hotel managers to successfully operate our hotels and has had,or the continued and prolonged effe
219、cts of the COVID-19 pandemic may have,a significant adverse effect on our financial condition,results of operations and cash flows:significant reduction of operations at some of our properties;a variety of factors related to the COVID-19 pandemic have caused,and are expected to continue to cause,a s
220、harp decline in group,business and leisure travel,including but not limited to(i)restrictions on travel mandated by governmental entities or voluntarily imposed by employers,(ii)the postponement or cancellation of conventions and conferences,music and arts festivals,sporting events and other large p
221、ublic gatherings,(iii)the closure of amusement parks,museums and other tourist attractions,(iv)the closure of colleges and universities,and(v)negative public perceptions of travel and public gatherings in light of the perceived risks associated with COVID-19;travelers are,and may continue to be,wary
222、 to travel where,or because,they may view the risk of contagion as increased and contagion or virus-related deaths linked or alleged to be linked to travel to our properties,whether accurate or not,may injure our reputation;travelers may be dissuaded from traveling due to possible enhanced COVID-19-
223、related screening measures and vaccine mandates which have been or may be implemented across multiple markets we serve;travelers may be dissuaded from traveling due to the concern that additional travel restrictions implemented between their departure and return may affect their ability to return to
224、 their homes;commercial airline service has been reduced or previously suspended to many of the areas in which our hotels are located,and if scheduled airline service does not increase or return to normal levels it could negatively affect our revenues;there remain uncertainties as to the amount of v
225、accine available for distribution,particularly internationally,the publics willingness and ability to get vaccinated and the overall efficacy of the vaccines,especially as new strains of COVID-19 have emerged or may emerge;the reduced economic activity could also result in an economic recession,and
226、increased unemployment,which could negatively impact future ability or desire to travel lodging demand and,therefore,our revenues,even when temporary restrictions are not in place;a decrease in the ancillary revenue from amenities at our properties;the financial impact of the COVID-19 pandemic could
227、 negatively impact our future compliance with the financial covenants of our credit facility or other debt obligations,and result in a default and potentially an acceleration of indebtedness which would adversely affect our financial condition and liquidity;difficulty in accessing debt and equity ca
228、pital on attractive terms,or at all,and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital;the general decline in business activity and demand for real estate transactions adversely affecting our a
229、bility to acquire additional properties;the potential negative impact on the health of our personnel,particularly if a significant number of them are impacted,could result in a deterioration in our ability to ensure business continuity during and after this disruption;18the increase in number of our
230、 employees working remotely has increased certain risks to our business,including increased demand on our information technology resources and systems,greater potential for phishing and other cybersecurity attacks,and an increase in the number of points of potential attack;we may be subject to incre
231、ased risks related to employee matters,including increased employment litigation and claims for severance or other benefits tied to termination or furloughs as a result of reduced operations prompted by the effects of the pandemic;and the reduction in our cash flows caused the suspension of dividend
232、s during the first quarter of 2020,and continued suspension through 2021,and could impact our ability to pay dividends to our stockholders at expected levels in the future.The rapid development and fluidity of the COVID-19 pandemic make it extremely difficult to assess the pandemics full adverse eco
233、nomic impact,and future impact,on our financial condition,results of operations,cash flows and performance.In addition,an outbreak of another disease or similar public health threat,or fear of such an event,that affects travel demand,travel behavior or travel restrictions could have a material adver
234、se impact on our business,financial condition and operating results.Outbreaks of other diseases could also result in increased government restrictions and regulation,such as those actions described above or otherwise,which could adversely affect our operations.The effects of the COVID-19 pandemic al
235、so could intensify or otherwise affect many of the other risk factors enumerated in this Annual Report on Form 10-K.Our investment policies are subject to revision from time to time at our Board of Trustees discretion,which could diminish shareholder returns below expectations.Our investment policie
236、s may be amended or revised from time to time at the discretion of our Board of Trustees,without a vote of our shareholders.Such discretion could result in investments that may not yield returns consistent with investors expectations.We depend on the efforts and expertise of our key executive office
237、rs whose continued service is not guaranteed.We depend on the efforts and expertise of our chief executive officer,as well as our other senior executives,to execute our business strategy.The loss of their services,and our inability to find suitable replacements,could have an adverse effect on our bu
238、siness.Our future growth depends on obtaining new financing and if we cannot secure financing in the future,our growth will be limited.The success of our growth strategy depends on access to capital through use of excess cash flow,borrowings or subsequent issuances of common shares or other securiti
239、es.Acquisitions of new hotel properties will require significant additional capital and existing hotels(including those owned through joint ventures)require periodic capital improvement initiatives to remain competitive.We may not be able to fund acquisitions or capital improvements solely from cash
240、 provided from our operating activities because we must distribute at least 90%of our REIT taxable income(determined without regard to the deduction for dividends paid and excluding any net capital gains)each year to satisfy the requirements for qualification as a REIT for federal income tax purpose
241、s.As a result,our ability to fund capital expenditures for acquisitions through retained earnings is very limited.Our ability to grow through acquisitions of hotels will be limited if we cannot obtain satisfactory debt or equity financing,which will depend on capital markets conditions.We cannot ass
242、ure you that we will be able to obtain additional equity or debt financing or that we will be able to obtain such financing on favorable terms.19We must rely on third party management companies to operate our hotels in order to qualify as a REIT under the Code and,as a result,we have less control th
243、an if we were operating the hotels directly.To maintain our qualification as a REIT under the Code,third parties must operate our hotels.We lease each of our hotels to our TRS Lessees.Our TRS Lessees,in turn,have entered into management agreements with third party management companies to operate our
244、 hotels.While we expect to have some input on operating decisions for those hotels leased by our TRS Lessees and operated under management agreements,we have less control than if we were managing the hotels ourselves.Even if we believe that our hotels are not being operated efficiently,we may not be
245、 able to require an operator to change the way it operates our hotels.If this is the case,we may decide to terminate the management agreement and potentially incur costs associated with the termination.Additionally,Mr.Fisher,our Chairman and Chief Executive Officer,controls IHM,a hotel management co
246、mpany that,as of December 31,2021,managed all of our hotels,and may manage additional hotels that we acquire in the future.See There may be conflicts of interest between us and affiliates owned by our Chief Executive Officer below.The management of the hotels in our portfolio is currently concentrat
247、ed in one hotel management company.As of December 31,2021,IHM managed all 41 of our hotels.As a result,a substantial portion of our revenue is generated by hotels managed by IHM.This significant concentration of operational risk in one hotel management company makes us more vulnerable economically t
248、han if our hotel management was more diversified among several hotel management companies.Any adverse developments in IHMs business and affairs,financial strength or ability to operate our hotels efficiently and effectively could have a material adverse effect on our business,financial condition,or
249、results of operations and our ability to make distributions to our shareholders.We cannot provide assurance that IHM will satisfy its obligations to us or effectively and efficiently operate out hotel properties.Our franchisors could cause us to expend additional funds on upgraded operating standard
250、s,which may reduce cash available for distribution to shareholders.Our hotels operate under franchise agreements,and we may become subject to the risks that are found in concentrating our hotel properties in one or several franchise brands.Our hotel operators must comply with operating standards and
251、 terms and conditions imposed by the franchisors of the hotel brands under which our hotels operate.Pursuant to certain of the franchise agreements,certain upgrades are required approximately every six years,and the franchisors may also impose upgraded or new brand standards,such as substantially up
252、grading the bedding,enhancing the complimentary breakfast or increasing the value of guest awards under its frequent guest program,which can add substantial expense for the hotel.The franchisors also may require us to make certain capital improvements to maintain the hotel in accordance with system
253、standards,the cost of which can be substantial and may reduce cash available for distribution to our shareholders.Our franchisors may cancel or fail to renew our existing franchise licenses,which could adversely affect our operating results and our ability to make distributions to shareholders.Our f
254、ranchisors periodically inspect our hotels to confirm adherence to the franchisors operating standards.The failure of a hotel to maintain standards could result in the loss or cancellation of a franchise license.We rely on our hotel managers to conform to operational standards.In addition,when the t
255、erm of a franchise license expires,the franchisor has no obligation to issue a new franchise license.The loss of a franchise license could have a material adverse effect on the operations or the underlying value of the affected hotel because of the loss of associated name recognition,marketing suppo
256、rt and centralized reservation systems provided by the franchisor.The loss of a franchise license or adverse developments with respect to a franchise brand under which our hotels operate could also have a material adverse effect on our financial condition,results of operations and cash available for
257、 distribution to shareholders.Fluctuations in our financial performance,capital expenditure requirements and excess cash flow could adversely affect our ability to make distributions to our shareholders.As a REIT,we are required to distribute at least 90%of our REIT taxable income each year to our s
258、hareholders(determined without regard to the deduction for dividends paid and excluding any net capital gains).In the event of downturns in our operating results and financial performance or unanticipated capital improvements to our hotels(including capital improvements that may be required by franc
259、hisors or joint venture partners),we may be unable to declare or pay distributions to our shareholders,or maintain our then-current dividend rate.The timing and amount of distributions are in the sole discretion of our Board of Trustees,which considers,among other factors,our financial performance,d
260、ebt service obligations and applicable debt covenants(if any),and capital expenditure requirements.We cannot assure you we will generate sufficient cash 20in order to fund distributions.Among the factors which could adversely affect our results of operations and distributions to shareholders are red
261、uctions in hotel revenues;increases in operating expenses at the hotels leased to our TRS Lessees;increased debt service requirements,including those resulting from higher interest rates on our indebtedness;cash demands from the joint ventures and capital expenditures at our hotels,including capital
262、 expenditures required by the franchisors of our hotels,and unknown liabilities,such as environmental claims.Hotel revenue can decrease for a number of reasons,including increased competition from new hotels and decreased demand for hotel rooms.These factors can reduce both occupancy and room rates
263、at hotels and could directly affect us negatively by:reducing the hotel revenue that we recognize with respect to hotels leased to our TRS Lessees;and correspondingly reducing the profits(or increasing the loss)of hotels leased to our TRS Lessees.We may be unable to reduce many of our expenses in ta
264、ndem with revenue declines,(or we may choose not to reduce them for competitive reasons),and certain expenses may increase while our revenue declines.Future debt service obligations could adversely affect our overall operating results or cash flow and may require us to liquidate our properties,which
265、 could adversely affect our ability to make distributions to our shareholders and our share price.We plan to maintain a prudent capital structure and intend to maintain our leverage over the long term at a ratio of net debt to investment in hotels(at cost)(defined as our initial acquisition price pl
266、us the gross amount of any subsequent capital investment and excluding any impairment charges)at a level that will be similar to the levels at which we have operated in the past.A subsequent decrease in hotel property values will not necessarily cause us to repay debt to comply with this limitation.
267、We may be able to incur substantial additional debt,including secured debt,in the future.Incurring additional debt could subject us to many risks,including the risks that:operating cash flow will be insufficient to make required payments of expenses,principal and interest;our leverage may increase o
268、ur vulnerability to adverse economic and industry conditions;we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt,thereby reducing cash available for distribution to our shareholders,funds available for operations and capital expenditures,futu
269、re business opportunities or other purposes;the terms of any refinancing will not be as favorable as the terms of the debt being refinanced;and the terms of our debt may limit our ability to make distributions to our shareholders.If we violate covenants in our debt agreements,we could be required to
270、 repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms,if at all.If we are unable to repay our debt obligations in the future,we may be forced to refinance debt or dispose of or encumber our assets,whi
271、ch could adversely affect distributions to shareholders.If we do not have sufficient funds to repay our outstanding debt at maturity or before maturity in the event we breach our debt agreements and our lenders exercise their right to accelerate repayment,we may be required to refinance the debt thr
272、ough additional debt or additional equity financings.Covenants applicable to our existing and future debt could impair our planned investment strategy and,if violated,result in a default.If we are unable to refinance our debt on acceptable terms,we may be forced to dispose of hotel properties on dis
273、advantageous terms,potentially resulting in losses.We have placed mortgages on certain of our hotel properties,have assumed mortgages on other hotels we acquired and may place additional mortgages on certain of our hotels to secure other debt.To the extent we cannot meet any future debt service obli
274、gations,we will risk losing some or all of our hotel properties that are pledged to secure our obligations to foreclosure.Interest expense on our debt may limit our cash available to fund our growth strategies and shareholder distributions.Higher interest rates could increase debt service requiremen
275、ts on debt under our credit facility and any floating rate debt that we incur in the future,as well as any amounts we seek to refinance,and could reduce the amounts available for distribution to our shareholders,as well as reduce funds available for our operations,future business opportunities,or ot
276、her purposes.Interest expense on our credit facility is based on floating interest rates.21Failure to hedge effectively against interest rate changes may adversely affect our results of operations and our ability to make shareholder distributions.We may obtain in the future one or more forms of inte
277、rest rate protection,such as swap agreements,interest rate cap contracts or similar agreements,to hedge against the possible negative effects of interest rate fluctuations.However,such hedging implies costs and we cannot assure you that any hedging will adequately relieve the adverse effects of inte
278、rest rate increases or that counterparties under these agreements will honor their obligations thereunder.Furthermore,any such hedging agreements would subject us to the risk of incurring significant non-cash losses on our hedges due to declines in interest rates if our hedges were not considered ef
279、fective under applicable accounting standards.Changes in the method pursuant to which the LIBOR rates are determined and phasing out of LIBOR after 2021 may affect our financial results.The chief executive of the United Kingdom Financial Conduct Authority(FCA),which regulates LIBOR,has recently anno
280、unced(the FCA Announcement)that the FCA intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.It is not possible to predict the effect of these changes,other reforms or the establishment of alternative reference rates in the United Kingdom or elsewhere.Furthermore,
281、in the United States,efforts to identify a set of alternative U.S.dollar reference interest rates include proposals by the Alternative Reference Rates Committee of the Federal Reserve Board and the Federal Reserve Bank of New York.The U.S.Federal Reserve,in conjunction with the Alternative Reference
282、 Rates Committee,a steering committee comprised of large US financial institutions,is considering replacing U.S.dollar LIBOR with the Secured Overnight Financing Rate(“SOFR”),a new index calculated based on short-term repurchase agreements,backed by Treasury securities.The Federal Reserve Bank of Ne
283、w York began publishing SOFR rates in April 2018.The market transition away from LIBOR and towards SOFR is expected to be gradual and complicated.There are significant differences between LIBOR and SOFR,such as LIBOR being an unsecured lending rate and SOFR a secured lending rate,and SOFR is an over
284、night rate and LIBOR reflects term rates at different maturities.These and other differences create the potential for basis risk between the two rates.The impact of any basis risk between LIBOR and SOFR may negatively affect our operating results.Any of these alternative methods may result in intere
285、st rates that are higher than if LIBOR were available in its current form,which could have a material adverse effect on results.Any changes announced by the FCA,including the FCA Announcement,other regulators or any other successor governance or oversight body,or future changes adopted by such body,
286、in the method pursuant to which the LIBOR rates are determined may result in a sudden or prolonged increase or decrease in the reported LIBOR rates.If that were to occur,the level of interest payments we incur may change.In addition,although certain of our LIBOR based obligations provide for alterna
287、tive methods of calculating the interest rate payable on certain of our obligations if LIBOR is not reported,uncertainty as to the extent and manner of future changes may result in interest rates and/or payments that are higher than,lower than or that do not otherwise correlate over time with the in
288、terest rates and/or payments that would have been made on our obligations if LIBOR rate was available in its current form.Joint venture investments that we may make could be adversely affected by our lack of decision-making authority,our reliance on joint venture partners financial condition and dis
289、putes between us and our joint-venture partners.We were co-investors with CLNY in each of the NewINK JV and the Inland JV,which owned 46 and 48 hotels,respectively,and we may invest in additional joint ventures in the future.We may not be in a position to exercise decision-making authority regarding
290、 the properties owned through joint ventures that we may invest in.Our joint-venture partners may be able to make certain important decisions about our joint venture and the joint-venture properties without our approval or consent.Investments in joint ventures may,under certain circumstances,involve
291、 risks not present when a third party is not involved,including reliance on our joint-venture partners and the possibility that joint-venture partners might become bankrupt or fail to fund their share of required capital contributions,thus exposing us to liabilities in excess of our share of the inv
292、estment.Joint-venture partners may have business interests or goals that are inconsistent with our business interests or goals,and may be in a position to take actions contrary to our policies or objectives.Such investments may also have the potential risk of impasses on decisions,such as a sale,bec
293、ause neither we nor the partner would have full control over the partnership or joint venture.Any disputes that may arise between us and our joint-venture partners may result in litigation or arbitration that would increase our expenses and prevent our officers and/or trustees from focusing their ti
294、me and effort on our business.Consequently,actions by,or disputes with,our joint-venture partners might result in subjecting properties owned by the partnership or joint venture to additional risk.In addition,we may in certain circumstances be liable for the actions of our third-party partners.22We
295、may from time to time make distributions to our shareholders in the form of our common shares,which could result in shareholders incurring tax liability without receiving sufficient cash to pay such tax.Although we have no current intention to do so,we may in the future distribute taxable dividends
296、that are payable in cash or common shares.Taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for federal income tax purposes.As a result,shareholders may be req
297、uired to pay income taxes with respect to such dividends in excess of the cash dividends received.If a U.S.shareholder sells the common shares that it receives as a dividend in order to pay this tax,the sales proceeds may be less than the amount included in income with respect to the dividend,depend
298、ing on the market price of our shares at the time of the sale.Furthermore,with respect to certain non-U.S.shareholders,we may be required to withhold federal income tax with respect to such dividends,including in respect of all or a portion of such dividend that is payable in common shares.In additi
299、on,if a significant number of our shareholders sell common shares in order to pay taxes owed on dividends,it may put downward pressure on the trading price of our common shares.Our conflict of interest policy may not be successful in eliminating the influence of future conflicts of interest that may
300、 arise between us and our trustees,officers and employees.We have adopted a policy that any transaction,agreement or relationship in which any of our trustees,officers or employees has a direct or indirect pecuniary interest must be approved by a majority of our disinterested trustees.Other than thi
301、s policy,however,we have not adopted and may not adopt additional formal procedures for the review and approval of conflict of interest transactions generally.As such,our policies and procedures may not be successful in eliminating the influence of conflicts of interest.There may be conflicts of int
302、erest between us and affiliates owned by our Chief Executive Officer.Our Chief Executive Officer,Mr.Fisher,owned 100%of IHM,a hotel management company that,as of December 31,2021,managed all of our hotels,and may manage additional hotels that we acquire or own(wholly or through a joint venture)in th
303、e future.Because Mr.Fisher is our Chairman and Chief Executive Officer and controls IHM,conflicts of interest may arise between us and Mr.Fisher as to whether and on what terms new management contracts will be awarded to IHM,whether and on what terms management agreements will be renewed upon expira
304、tion of their terms,enforcement of the terms of the management agreements and whether hotels managed by IHM will be sold.Hotel development is subject to timing,cost,and other risks.As of December 31,2021,we were in the process of developing a hotel in Los Angeles,California.Hotel development involve
305、s a number of risks,including the following:possible environmental problems;construction delays or cost overruns that may increase project costs;receipt of and expense related to zoning,occupancy and other required governmental permits and authorizations;development costs incurred for projects that
306、are not pursued to completion;acts of God such as earthquakes,hurricanes,floods or fires that could adversely affect a project;inability to raise capital;andgovernmental restrictions on the nature or size of a project.We cannot provide assurance that this development project,or any other development
307、 project,will be completed on time or within budget.Our inability to complete a project on time or within budget could adversely affect our financial position,results of operations,and cash flows or the market price of our shares.Risks Related to the Lodging Industry The lodging industry has experie
308、nced significant declines in the past and failure of the lodging industry to exhibit improvement may adversely affect our ability to execute our business strategy.The performance of the lodging industry has historically been closely linked to the performance of the general economy and,specifically,g
309、rowth in U.S.gross domestic product,or GDP.It is also sensitive to business and personal discretionary spending levels.Declines in corporate budgets and consumer demand due to adverse general economic conditions,risks affecting or reducing travel patterns,lower consumer confidence or adverse politic
310、al conditions can lower the revenues and profitability of our future hotel properties and therefore the net operating profits of our TRS.23A substantial part of our business strategy is based on the belief that the lodging markets in which we invest will experience improving economic fundamentals in
311、 the future.We cannot predict the extent to which lodging industry fundamentals will improve.In the event conditions in the industry do not improve,or deteriorate,our ability to execute our business strategy would be adversely affected,which could adversely affect our financial condition,results of
312、operations,the market price of our common shares and our ability to make distributions to our shareholders.Our ability to make distributions to our shareholders may be affected by various operating risks common in the lodging industry.Hotel properties are subject to various operating risks common to
313、 the hotel industry,many of which are beyond our control,including:competition from other hotel properties and alternative lodging market places in the markets in which we operate,some of which may have greater marketing and financial resources;an over-supply or over-building of hotel properties in
314、the markets in which we operate,which could adversely affect occupancy rates and revenues;dependence on business and commercial travelers and tourism;increases in energy costs and other expenses and factors affecting travel,which may affect travel patterns and reduce the number of business and comme
315、rcial travelers and tourists;increases in operating costs due to inflation and other factors that may not be offset by increased room rates;necessity for periodic capital reinvestment to repair and upgrade hotel properties;changes in interest rates and in the availability,cost and terms of debt fina
316、ncing;changes in governmental laws and regulations,fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations,fiscal policies and ordinances;unforeseen events beyond our control,such as terrorist attacks,travel related health concerns including pandemics and
317、epidemics such as COVID-19,H1N1 influenza(swine flu),avian bird flu,SARS and Zika virus,political instability,regional hostilities,imposition of taxes or surcharges by regulatory authorities,travel related accidents and unusual weather patterns,including natural disasters such as hurricanes,tsunamis
318、,earthquakes,wildfires and flooding;disruptions to the operations of our hotels caused by organized labor activities,including strikes,work stoppages or slowdowns;adverse effects of a downturn in the economy or in the hotel industry;and risk generally associated with the ownership of hotel propertie
319、s and real estate,as we discuss in detail below.These factors could reduce the net operating profits of our TRS and the rental income we receive from our TRS Lessees,which in turn could adversely affect our ability to make distributions to our shareholders.Competition for acquisitions may reduce the
320、 number of properties we can acquire.We compete for hotel investment opportunities with competitors that may have a different tolerance for risk or have substantially greater financial resources than are available to us.This competition may generally limit the number of hotel properties that we are
321、able to acquire and may also increase the bargaining power of hotel owners seeking to sell,making it more difficult for us to acquire hotel properties on attractive terms,or at all.Competition for guests may lower our hotels revenues and profitability.The upscale extended-stay and mid-price segments
322、 of the hotel business are highly competitive.Our hotels compete on the basis of location,room rates and quality,service levels,reputation,and reservation systems,among many other factors.Competitors may have substantially greater marketing and financial resources than our operators or us.New hotels
323、 create new competitors,in some cases without corresponding increases in demand for hotel rooms.The result in some cases may be lower revenue,which would result in lower cash available for distribution to our shareholders.The cyclical nature of the lodging industry may cause the return on our invest
324、ments to be substantially less than we expect.The lodging industry is cyclical in nature.Fluctuations in lodging demand and,therefore,operating performance,are caused largely by general economic and local market conditions,which subsequently affects levels of business and leisure travel.In addition
325、to general economic conditions,new hotel room supply is an important factor that can affect the lodging 24industrys performance and overbuilding has the potential to further exacerbate the negative impact of an economic recession.Room rates and occupancy,and thus RevPAR,tend to increase when demand
326、growth exceeds supply growth.Decline in lodging demand,or a continued growth in lodging supply,could result in returns that are substantially below expectations or result in losses,which could have a material adverse effect on our business,financial condition,results of operations and our ability to
327、 make distributions to our shareholders.Due to our concentration in hotel investments,a downturn in the lodging industry would adversely affect our operations and financial condition.Our entire business is related to the hotel industry.Therefore,a downturn in the hotel industry,in general,will have
328、a material adverse effect on our revenues,net operating profits and cash available for distribution to our shareholders.The ongoing need for capital expenditures at our hotel properties may adversely affect our business,financial condition and results of operations and limit our ability to make dist
329、ributions to our shareholders.Hotel properties have an ongoing need for renovations and other capital improvements,including replacements,from time to time,of furniture,fixtures and equipment.The franchisors of our hotels also require periodic capital improvements as a condition of keeping the franc
330、hise licenses.In addition,our lenders require us to set aside amounts for capital improvements to our hotel properties.These capital improvements may give rise to the following risks:possible environmental problems;construction cost overruns and delays;possibility that revenues will be reduced tempo
331、rarily while rooms or restaurants offered are out of service due to capital improvement projects;a possible shortage of available cash to fund capital improvements and the related possibility that financing for these capital improvements may not be available on affordable terms;uncertainties as to m
332、arket demand or a loss of market demand after capital improvements have begun;and disputes with franchisors/managers regarding compliance with relevant management/franchise agreements.The costs of all these capital improvements could adversely affect our business,financial condition,results of opera
333、tions and cash available for distribution to our shareholders.The increasing use by consumers of Internet travel intermediaries and alternative lodging market places may adversely affect our profitability.Some of our hotel rooms are booked through Internet travel intermediaries.As Internet bookings increase,these intermediaries may be able to obtain higher commissions,reduced room rates or other s
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