APPLE HOSPITALITY REIT, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

The following discussion and analysis should be read in conjunction with Item 8,
the Consolidated Financial Statements and Notes thereto, the introduction of
Part I regarding "Forward-Looking Statements," and Item 1A, "Risk Factors"
appearing elsewhere in this Annual Report on Form 10-K.

Overview

The Company is a Virginia corporation that has elected to be treated as a REIT
for federal income tax purposes. The Company is self-advised and invests in
income-producing real estate, primarily in the lodging sector, in the U.S. As of
December 31, 2021, the Company owned 219 hotels with an aggregate of 28,747
rooms located in urban, high-end suburban and developing markets throughout 36
states. Substantially all of the Company's hotels operate under Marriott or
Hilton brands. The hotels are operated and managed under separate management
agreements with 16 hotel management companies, none of which are affiliated with
the Company. The Company's common shares are listed on the NYSE under the ticker
symbol "APLE."

The impact of COVID-19 on business and the hospitality industry

Since it was first reported in December 2019COVID-19 has spread globally, including all states in the we At March 11, 2020the World Health Organization declared COVID-19 a pandemic, and the March 13, 2020the we
declared a national emergency with respect to COVID-19.

The COVID-19 pandemic has not only specifically reduced travel, but also has had
a detrimental impact on regional and global economies and financial markets. The
global, national and local impact of the pandemic has continued to evolve and
many countries, including the U.S., as well as state and local governments, have
reacted and continue to react with a wide variety of measures intended to
control its spread, including states of emergency, mandatory quarantines,
implementation of "stay at home" orders, business closures, border closings, and
restrictions on travel and large gatherings, which has resulted in, and may
continue to result in, cancellation of events, including sporting events,
conferences and meetings.

The effects of the COVID-19 pandemic on the hotel industry are unprecedented.
COVID-19 has disrupted the industry and has dramatically reduced business and
impacted leisure travel, which has had a significant adverse impact on, and
management expects COVID-19 will continue to significantly adversely impact and
disrupt, the Company's business, financial performance and condition, operating
results and cash flows. While a number of initial restrictions put into place
during 2020 have eased, occupancy and average daily rate ("ADR") during 2021
were still generally below 2019 pre-pandemic levels. Additionally, while the
development and distributions of vaccines have helped contribute to improved
conditions in 2021, there can be no assurances that the vaccines will contain
the spread of the virus and its variants and allow the industry to fully
recover. The Company expects the decline in revenue associated with COVID-19 and
the overall influence on the U.S. economy to continue to negatively impact the
Company's operating results for the foreseeable future. While the Company has
experienced significant recovery in leisure travel in 2021, the Company does not
expect a full recovery in results until business travel improves and
COVID-related government restrictions and other regulations impacting travel and
business operations are lifted more broadly.

Since the beginning of the pandemic, the Company, its management companies and
its brands have taken steps to minimize costs and cash outflow to maintain a
sound liquidity position. The Company has implemented cost elimination and
efficiency initiatives at each of the Company's hotels by adjusting operations
to manage total labor costs, reducing or eliminating certain amenities and
reducing rates under various service contracts; enhanced its sales efforts by
focusing on COVID-19-specific demand opportunities in certain markets and has
strategically targeted and maximized performance based on available demand;
reduced capital improvement projects planned for 2021; and entered into
amendments to its unsecured credit facilities that provided for the temporary
waiver of financial covenant testing for the majority of its financial
maintenance covenants (the Company exited the waiver period in July 2021 due to
improved financial performance). Cost reduction initiatives, including those
discussed above, are not expected to fully, or even materially, offset revenue
losses from COVID-19. The extent and duration of COVID-19 effects continue to
remain unknown, and these uncertainties continue to make it difficult to predict
operating results for the Company's hotels for the near future. While the
Company has experienced improvement in 2021 and expects further
improvement, future revenues and operating results could be negatively impacted
by, among other things, historical seasonal trends, an increase in COVID-19
cases, new COVID-19 variants, state and local governments and businesses
reverting to tighter mitigation restrictions, deterioration of consumer
sentiment, changes in business travel, labor shortages and resulting pressure on
wages, or significant inflationary impacts. Therefore, there can be no
assurances that the Company will not experience setbacks or further declines in
hotel revenues or

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earnings at its hotels and the Company cannot predict how long the effects will
continue to impact the Company's operating results as compared to pre-pandemic
levels.

Recent activities of the hotel portfolio

The Company continually monitors market conditions and attempts to maximize
shareholder value by investing in properties that it believes provide superior
value over the long term. Consistent with this strategy and the Company's focus
on investing in rooms-focused hotels, in 2019 the Company entered into a
contract to purchase a 176-room Hilton Garden Inn to be constructed in Madison,
Wisconsin. Construction of the hotel was completed in February 2021 and the
Company acquired the hotel on February 18, 2021 for a gross purchase price of
$49.6 million, utilizing borrowings under the Company's revolving credit
facility. In 2021, the Company also acquired seven existing hotels for an
aggregate purchase price of approximately $311.9 million: a 178-room AC Hotel in
Portland, Maine; a 130-room Hyatt Place in Greenville, South Carolina; a
157-room Aloft in Portland, Maine; a 150-room Hilton Garden Inn in Memphis,
Tennessee; a 157-room Hilton Garden Inn in Fort Worth, Texas; a 112-room
Homewood Suites in Fort Worth, Texas; and a 243-room Hampton Inn & Suites in
Portland, Oregon. The Company utilized available cash (including a portion of
the proceeds from the sale of 20 hotels in July 2021) and borrowings under its
revolving credit facility to fund the acquisitions and plans to utilize its
credit facilities available at closing for any additional acquisitions. In
addition, on August 16, 2021, the Company purchased the fee interest in the land
at its Seattle, Washington Residence Inn that was previously under a ground
lease for a purchase price of $80.0 million, consisting of a $24.0 million cash
payment utilizing a portion of the proceeds from the sale of 20 hotels in July
2021 and a one-year note payable to the seller for $56.0 million.

As of December 31, 2021 the Company had an outstanding contract for the
potential purchase of a hotel under development in Madison, Wisconsin for a
purchase price of $78.6 million, which is expected to be completed as a 260-room
Embassy Suites and opened for business in early 2024, at which time the Company
expects to complete the purchase of this hotel. Although the Company is working
towards acquiring this hotel, there are a number of conditions to closing that
have not yet been satisfied and there can be no assurance that closing on this
hotel will occur under the outstanding purchase contract.

For its existing portfolio, the Company monitors each property's profitability,
market conditions and capital requirements and attempts to maximize shareholder
value by disposing of properties when it believes that superior value can be
provided from the sale of the property. As a result, in 2021, the Company sold
23 hotels for a total combined gross sales price of $234.6 million and
recognized a gain on sale, after giving effect to impairment charges discussed
below, of approximately $3.6 million. The Company used the net proceeds from the
sales to pay down borrowings under the Company's revolving credit facility, for
acquisitions of hotel properties in 2021 and for general corporate purposes.

See Note 2 titled "Investment in Real Estate" and Note 3 titled "Dispositions"
of the Consolidated Financial Statements and Notes thereto in Part II, Item 8,
in this Annual Report on Form 10-K, for additional information concerning these
transactions.

Hotel Operations

As of December 31, 2021, the Company owned 219 hotels with a total of 28,747
rooms as compared to 234 hotels with a total of 29,937 rooms as of December 31,
2020. Results of operations are included only for the period of ownership for
hotels acquired or disposed of during all periods presented. During 2021, the
Company acquired eight hotels and sold 23 hotels. During 2020, the Company
acquired four hotels and sold three hotels. See further discussion in Note 2
titled "Investments in Real Estate" and Note 3 titled "Dispositions" of the
Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this
Annual Report on Form 10-K. As a result, in addition to the impacts of COVID-19,
the comparability of results for the years ended December 31, 2021 and 2020 as
discussed below is also impacted by these transactions.

When evaluating financial condition and operational performance, the most important metrics the Company focuses on are revenue metrics, such as average occupancy, ADR and RevPAR, and expenses, such as hotel operating expenses, general and administrative expenses and other expenses described below.

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The following is a summary of the operating results of the Company’s hotels for their respective periods of Company ownership:

                                                                         Year Ended December 31,
                                            Percent                     Percent        Change                       Percent        Change
(in thousands, except                          of                          of         2020 to                          of         2019 to
statistical data)               2021        Revenue         2020        Revenue         2021           2019         Revenue         2020
Total revenue                 $ 933,869        100.0 %   $  601,879       

100.0% 55.2% $1,266,597 100.0% -52.5% Hotel operating expenses 542,178 58.1% 402,278 66.8% 34.8% 724,416 57.2% -44.5% Property taxes, insurance and other

  expense                        71,980          7.7 %       78,238         13.0 %         -8.0 %        77,498          6.1 %          1.0 %
General and administrative
expense                          41,038          4.4 %       29,374          4.9 %         39.7 %        36,210          2.9 %        -18.9 %

Loss on impairment of
depreciable
  real estate assets             10,754                       5,097                       111.0 %         6,467                       -21.2 %
Depreciation and
amortization
  expense                       184,471                     199,786                        -7.7 %       193,240                         3.4 %
Gain on sale of real estate       3,596                      10,854                       -66.9 %         5,021                       116.2 %
Interest and other expense,
net                              67,748                      70,835                        -4.4 %        61,191                        15.8 %
Income tax expense                  468                         332                        41.0 %           679                       -51.1 %

Net income (loss)                18,828                    (173,207 )                       n/a         171,917                         n/a
Adjusted hotel EBITDA (1)       320,273                     121,985                       162.6 %       464,995                       -73.8 %

Number of hotels owned at
end
  of period                         219                         234                        -6.4 %           233                         0.4 %
ADR                           $  123.78                  $   111.49                        11.0 %   $    137.30                       -18.8 %
Occupancy                          66.3 %                      46.1 %                      43.8 %          77.0 %                     -40.1 %
RevPAR                        $   82.03                  $    51.34                        59.8 %   $    105.72                       -51.4 %


(1) See reconciliation of Adjusted Hotel EBITDA to net income (loss) in “Non-GAAP

Financial Measures” below.



The following table highlights the quarterly impact of COVID-19 on the Company's
ADR, Occupancy, RevPAR and adjusted hotel earnings before interest, income
taxes, depreciation and amortization for real estate ("Adjusted Hotel EBITDA")
during 2021 as compared to 2020 and 2019 (in thousands except statistical data):

                             1st Quarter       2nd Quarter       3rd Quarter       4th Quarter      Full Year
                                2021              2021              2021              2021             2021
ADR                         $       99.19     $      120.56     $      140.02     $      131.04     $   123.78
Occupancy                            55.5 %            70.7 %            71.5 %            67.5 %         66.3 %
RevPAR                      $       55.09     $       85.28     $      100.14     $       88.43     $    82.03
Net income (loss)           $     (46,435 )   $      20,283     $      31,759     $      13,221     $   18,828
Adjusted Hotel EBITDA (1)   $      35,427     $      94,814     $     105,423     $      84,609     $  320,273

                             1st Quarter       2nd Quarter       3rd Quarter       4th Quarter      Full Year
                                2020              2020              2020              2020             2020
ADR                         $      132.55     $      100.76     $      104.78     $       97.87     $   111.49
Occupancy                            60.9 %            28.2 %            48.6 %            46.5 %         46.1 %
RevPAR                      $       80.66     $       28.44     $       50.94     $       45.46     $    51.34
Net loss                    $      (2,769 )   $     (78,243 )   $     (40,948 )   $     (51,247 )   $ (173,207 )
Adjusted Hotel EBITDA (1)   $      63,297     $         704     $      34,688     $      23,296     $  121,985

                             1st Quarter       2nd Quarter       3rd Quarter       4th Quarter      Full Year
                                2019              2019              2019              2019             2019

ADR                         $      136.36     $      141.60     $      139.21     $      131.41     $   137.30
Occupancy                            73.9 %            81.4 %            79.9 %            72.9 %         77.0 %
RevPAR                      $      100.71     $      115.30     $      111.17     $       95.85     $   105.72
Net income                  $      38,151     $      62,090     $     

46,223 $25,453 $171,917
Adjusted Hotel EBITDA (1) $108,804 $134,759 $124,596 $96,836 $464,995

(1) See reconciliation of Adjusted Hotel EBITDA to net income (loss) in “Non-GAAP

Financial Measures” below.

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Beginning in March 2020, COVID-19 caused widespread cancellations of both
business and leisure travel throughout the U.S., resulting in significant
decreases in RevPAR throughout the Company's hotel portfolio and the hospitality
industry as a whole. With the overall uncertainty of the longevity of COVID-19
in the U.S. and the resulting economic decline, it is difficult to project the
depth and the duration of revenue declines for the industry and Company;
however, the Company currently expects declines in revenue and operating results
as compared to 2019 levels to continue into 2022. While the Company experienced
its most significant decline in operating results during the second quarter of
2020 as compared to previous quarters, occupancy and RevPAR have since shown
improvement. Although the Company expects continued recovery in rate and
occupancy, future revenues and operating results could be negatively impacted
by, among other things, historical seasonal trends, an increase in COVID-19
cases, new COVID-19 variants, state and local governments and businesses
reverting to tighter mitigation restrictions, deterioration of consumer
sentiment or significant labor, supply chain and inflationary pressures.

Operating Results of Comparable Hotels

The following table reflects certain operating statistics for the Company's 219
hotels owned as of December 31, 2021. The Company defines metrics from
Comparable Hotels as results generated by the 219 hotels owned as of the end of
the reporting period. For the hotels acquired during the reporting periods
shown, the Company has included, as applicable, results of those hotels for
periods prior to the Company's ownership using information provided by the
properties' prior owners at the time of acquisition and not adjusted by the
Company. This information has not been audited, either for the periods owned or
prior to ownership by the Company. For dispositions, results have been excluded
for the Company's period of ownership.

                                                        Year Ended December 31,
                                                             Change 2020                  Change 2019
                                     2021         2020         to 2021         2019         to 2020
ADR                                $ 125.43     $ 112.72            11.3 %   $ 141.04           -20.1 %
Occupancy                              66.3 %       45.9 %          44.4 %       77.2 %         -40.5 %
RevPAR                             $  83.14     $  51.69            60.8 %   $ 108.87           -52.5 %



Same Store Operating Results

The following table reflects certain operating statistics for the 204 hotels
owned and held for use by the Company as of January 1, 2019 and during the
entirety of the reporting periods being compared ("Same Store Hotels"). This
information has not been audited.

                                                        Year Ended December 31,
                                                             Change 2020                  Change 2019
                                     2021         2020         to 2021         2019         to 2020
ADR                                $ 124.27     $ 112.68            10.3 %   $ 140.04           -19.5 %
Occupancy                              66.8 %       46.1 %          44.9 %       77.3 %         -40.4 %
RevPAR                             $  83.04     $  51.99            59.7 %   $ 108.20           -52.0 %



As discussed above, hotel performance is impacted by many factors, including the
economic conditions in the U.S. as well as each individual locality. COVID-19
has been negatively affecting the U.S. hotel industry since March 2020. The
Company's revenue and operating results improved during the year ended
December 31, 2021 compared to the year ended December 31, 2020, which is
consistent with the overall lodging industry. However, as a result of COVID-19,
the Company's revenue and operating results generally remained below
corresponding 2019 levels and the Company expects these results to continue to
be below 2019 levels into 2022. The Company can give no assurances as to the
amount or period of decline due to the uncertainty regarding the duration and
long-term impact of, as well as governmental and consumer responses to,
COVID-19.

Operating results

A discussion regarding the Company’s results of operations for the year ended
December 31, 2021 compared to the year ended December 31, 2020 is presented below. A discussion regarding the results of operations for the year ended

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December 31, 2020 compared to the year ended December 31, 2019 can be found under the section titled “Results of Operations” in Part II, Item 7, MD&A and Discussion of Financial Condition and Results of Operations, of the Company’s Annual Report on Form 10-K for the financial year closed
December 31, 2020filed with the SECOND to February 23, 2021which is incorporated herein by reference and which is freely available on the
DRY website at www.sec.gov and in the Investor Information section of the Company’s website at www.applehospitalityreit.com.

Revenue

The Company's principal source of revenue is hotel revenue consisting of room,
food and beverage, and other related revenue. For the years ended December 31,
2021 and 2020, the Company had total revenue of $933.9 million and $601.9
million, respectively. For the years ended December 31, 2021 and 2020,
respectively, Comparable Hotels achieved combined average occupancy of 66.3% and
45.9%, ADR of $125.43 and $112.72 and RevPAR of $83.14 and $51.69. ADR is
calculated as room revenue divided by the number of rooms sold, and RevPAR is
calculated as occupancy multiplied by ADR.

Compared to 2020, the Company experienced increases in ADR and occupancy in
2021, resulting in an increase of 60.8% in RevPAR, for Comparable Hotels. As
compared to 2019 (pre-COVID-19), Comparable Hotels RevPAR for 2021 decreased by
23.6% as a result of a 14.1% reduction in occupancy and an 11.1% decrease in
ADR. During March 2020, the hotel industry and the Company began to see a
significant decrease in occupancy as both mandated and voluntary restrictions on
travel were implemented throughout the U.S. For Comparable Hotels, average
occupancy fell below 50% for most of 2020 before improving to 66.3% in 2021
driven predominately by increased leisure demand as a result of improved
consumer confidence in travel and the lifting of some COVID-19 mitigation
restrictions, but also by increased demand from a wide variety of demand
generators such as government, healthcare, automotive, construction, disaster
recovery, insurance, athletics, education and local and regional
business-related travel. Revenue recovery in 2021 was led by leisure transient
and group demand, with increased demand from small corporate and government
business. Suburban markets continued to see stronger demand than urban markets.
Throughout the hospitality industry, demand for upscale and upper midscale chain
scales have outperformed luxury and upper upscale chain scales and suburban
locations have outperformed urban locations. As noted above, the Company expects
this trend to gradually continue, however, future revenues could be negatively
impacted by, among other things, historical seasonal trends, an increase in
COVID-19 cases, new COVID-19 variants, state and local governments and
businesses reverting to tighter mitigation restrictions, or deterioration of
consumer sentiment.

Hotel Operating Expense

The Company, its management companies and the brands the Company's hotels are
franchised with have all aggressively worked to mitigate costs and uses of cash
associated with operating the hotels in the low-occupancy environment
experienced in 2020, have worked to maintain cost-reduction practices where
feasible as the economy recovers, and are thoughtfully working to position the
hotels to adapt to the changes that may occur to guest preferences in the
future. The impact of the pandemic has varied and will continue to vary by
market and hotel. With the support of its brands and third-party management
companies, the Company will continue to evaluate and implement adjustments to
the hotel operating model in response to continued changes in the operating
environment and guest preferences.

Hotel operating expense consists of direct room operating expense, hotel
administrative expense, sales and marketing expense, utilities expense, repair
and maintenance expense, franchise fees and management fees. For the years ended
December 31, 2021 and 2020, hotel operating expense totaled $542.2 million and
$402.3 million, respectively, or 58.1% and 66.8% of total revenue for each
respective year. Comparatively, prior to COVID-19, hotel operating expense was
57.2% of total revenue for the year ended December 31, 2019. The Company has
worked and will continue to work with its management companies to optimize
staffing models and adjust food and beverage offerings and other amenities,
among other efficiency initiatives, to mitigate the impact of revenue declines
and cost pressures on its results of operations. For example, the Company has
reduced service and amenity offerings as allowed by the relaxation of certain
brand standards and the Company also successfully reduced rates under various
service contracts. Although certain operating costs of a hotel are more fixed in
nature, such as base utility and maintenance costs, the Company has worked and
will continue to work to reduce all non-essential costs including service
contracts, utilities in areas not utilized and certain maintenance costs.
However, the Company may continue to see ongoing cost increases related to both
labor and supplies due to scarcity. As occupancy has increased throughout 2021,
increasing staffing to meet increased demand has been challenging, and while the
Company's hotels made progress in filling open positions during the second half
of 2021, they have often done so at higher wage rates. Likewise, supply chain
disruptions and broader inflationary pressures throughout the overall economy
have driven shortages and increases in the cost of materials and supplies such
as food and equipment.

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Property taxes, insurance and other expenses

Property taxes, insurance and other expense for the years ended December 31,
2021 and 2020 totaled $72.0 million and $78.2 million, respectively, or 7.7% and
13.0% of total revenue for each respective year, which is consistent with
Comparable Hotels expense as a percentage of revenue for the same period. Prior
to COVID-19, property taxes, insurance and other expense for the year ended
December 31, 2019 totaled $77.5 million or 6.1% of total revenue. The decrease
in expenses from 2019 and 2020 to 2021 was primarily due to decreases in
property taxes in certain localities as well as the reduction of the hotel
portfolio by 15 properties during 2021. Although the Company will continue to
aggressively appeal tax assessments in certain jurisdictions in an attempt to
minimize tax increases, as warranted, and will continue to monitor locality
guidance as a result of COVID-19, it does not currently anticipate significant
decreases in property taxes in 2022 as compared to 2021.

General and administrative costs

General and administrative expense for the years ended December 31, 2021 and
2020 was $41.0 million and $29.4 million, respectively, or 4.4% and 4.9% of
total revenue for each respective year. The principal components of general and
administrative expense are payroll and related benefit costs, legal fees,
accounting fees and reporting expenses. The increase in general and
administrative expense in 2021 as compared to 2020 was primarily due to
increased accruals of $12.4 million for executive incentive compensation related
to higher shareholder return and operating performance in 2021 as compared to
2020 (see Note 8 titled "Compensation Plans" of the Consolidated Financial
Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form
10-K, for additional details). Additionally, in order to minimize costs in 2020,
the Company's Executive Chairman voluntarily agreed to forego six months of
salary, the Chief Executive Officer volunteered to reduce his target
compensation by 60 percent and the non-employee directors on the Board of
Directors volunteered as a group to reduce their annual director fees by more
than 15 percent.

Impairment loss on depreciable real estate assets

Loss on impairment of depreciable real estate assets was $10.8 million for the
year ended December 31, 2021, consisting of impairment losses of $1.3 million
for the Overland Park, Kansas SpringHill Suites and $9.4 million for four hotel
properties identified by the Company in the first quarter of 2021 for potential
sale. Loss on impairment of depreciable real estate assets was $5.1 million for
the year ended December 31, 2020 for the Memphis, Tennessee Homewood Suites. See
Note 3, titled "Dispositions" of the Consolidated Financial Statements and Notes
thereto in Part II, Item 8, in this Annual Report on Form 10-K, for additional
information concerning these impairment losses.

Depreciation expense

Depreciation and amortization expense for the years ended December 31, 2021 and
2020 was $184.5 million and $199.8 million, respectively. Depreciation and
amortization expense primarily represents expense of the Company's hotel
buildings and related improvements, and associated personal property (furniture,
fixtures, and equipment) for their respective periods owned. The decrease was
primarily due to limited renovation activity and the sale of 23 hotels in 2021
and three hotels in 2020, partially offset by the acquisition of eight hotels in
2021 and four hotels in 2020. Additionally, depreciation and amortization
expense for the years ended December 31, 2021 and 2020 includes approximately
$5.2 million and $6.4 million, respectively, of expense associated with
amortization of the Company's finance ground leases.

Interest and other charges, net

Interest and other expense, net for the years ended December 31, 2021 and 2020
was $67.7 million and $70.8 million, respectively, and is net of approximately
$0.3 million and $0.9 million, respectively, of interest capitalized associated
with renovation projects. Additionally, interest and other expense, net for the
years ended December 31, 2021 and 2020 includes approximately $9.4 million and
$11.4 million, respectively, of interest recorded on the Company's finance lease
liabilities.

Interest expense related to the Company's debt instruments decreased as a result
of lower average borrowings under the Company's unsecured credit facilities with
similar average interest rates in 2021 as compared to 2020. See Note 4 titled
"Debt" of the Consolidated Financial Statements and Notes thereto in Part II,
Item 8, in this Annual Report on Form 10-K, for additional discussion of the
Company's amended unsecured credit facilities. In addition to decreases in
interest due to lower average borrowings under the Company's unsecured credit
facilities, interest on the Company's finance leases decreased approximately
$2.0 million during 2021 as compared to 2020 due to the August 16, 2021 purchase
of the fee interest in the land at the Company's Seattle, Washington Residence
Inn that was previously under a ground lease.

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Non-GAAP Financial Measures

The Company considers the following non-GAAP financial measures useful to
investors as key supplemental measures of its operating performance: Funds from
Operations ("FFO"), Modified Funds from Operations ("MFFO"), Earnings Before
Interest, Income Taxes, Depreciation and Amortization ("EBITDA"), Earnings
Before Interest, Income Taxes, Depreciation and Amortization for Real Estate
("EBITDAre"), Adjusted EBITDAre ("Adjusted EBITDAre") and Adjusted Hotel EBITDA.
These non-GAAP financial measures should be considered along with, but not as
alternatives to, net income (loss), cash flow from operations or any other
operating GAAP measure. FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and
Adjusted Hotel EBITDA are not necessarily indicative of funds available to fund
the Company's cash needs, including its ability to make cash distributions.
Although FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel
EBITDA, as calculated by the Company, may not be comparable to FFO, MFFO,
EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA, as reported by
other companies that do not define such terms exactly as the Company defines
such terms, the Company believes these supplemental measures are useful to
investors when comparing the Company's results between periods and with other
REITs.

FFO and MFFO

The Company calculates and presents FFO in accordance with standards established
by the National Association of Real Estate Investment Trusts ("Nareit"), which
defines FFO as net income (loss) (computed in accordance with GAAP), excluding
gains and losses from the sale of certain real estate assets (including gains
and losses from change in control), extraordinary items as defined by GAAP, and
the cumulative effect of changes in accounting principles, plus real estate
related depreciation, amortization and impairments, and adjustments for
unconsolidated affiliates. Historical cost accounting for real estate assets
implicitly assumes that the value of real estate assets diminishes predictably
over time. Since real estate values instead have historically risen or fallen
with market conditions, most real estate industry investors consider FFO to be
helpful in evaluating a real estate company's operations. The Company further
believes that by excluding the effects of these items, FFO is useful to
investors in comparing its operating performance between periods and between
REITs that report FFO using the Nareit definition. FFO as presented by the
Company is applicable only to its common shareholders, but does not represent an
amount that accrues directly to common shareholders.

The Company calculates MFFO by further adjusting FFO for the exclusion of
amortization of finance ground lease assets, amortization of favorable and
unfavorable operating leases, net and non-cash straight-line operating ground
lease expense, as these expenses do not reflect the underlying performance of
the related hotels. The Company presents MFFO when evaluating its performance
because it believes that it provides further useful supplemental information to
investors regarding its ongoing operating performance.

The following table reconciles the Company’s GAAP net income (loss) with FFO and MFFO for the years ended December 31, 20212020 and 2019 (in thousands).

                                                         Year Ended December 31,
                                                    2021           2020           2019
Net income (loss)                                $   18,828     $ (173,207 )   $  171,917
Depreciation of real estate owned                   179,275        192,346  

187,729

Gain on sale of real estate                          (3,596 )      (10,854 )       (5,021 )
Loss on impairment of depreciable real estate
assets                                               10,754          5,097  

6,467

Funds from operations                               205,261         13,382  

361,092

Amortization of finance ground lease assets           5,178          6,433  

4,517

Amortization of favorable and unfavorable
operating
  leases, net                                           393            442  

124

Non-cash straight-line operating ground lease
expense                                                 169            180  

188

Modified funds from operations                   $  211,001     $   20,437     $  365,921




                                       44
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EBITDA, EBITDAre, adjusted EBITDAre and Adjusted Hotel EBITDA

EBITDA is a commonly used measure of performance in many industries and is
defined as net income (loss) excluding interest, income taxes, depreciation and
amortization. The Company believes EBITDA is useful to investors because it
helps the Company and its investors evaluate the ongoing operating performance
of the Company by removing the impact of its capital structure (primarily
interest expense) and its asset base (primarily depreciation and amortization).
In addition, certain covenants included in the agreements governing the
Company's indebtedness use EBITDA, as defined in the specific credit agreement,
as a measure of financial compliance.

In addition to EBITDA, the Company also calculates and presents EBITDAre in
accordance with standards established by Nareit, which defines EBITDAre as
EBITDA, excluding gains and losses from the sale of certain real estate assets
(including gains and losses from change in control), plus real estate related
impairments, and adjustments to reflect the entity's share of EBITDAre of
unconsolidated affiliates. The Company presents EBITDAre because it believes
that it provides further useful information to investors in comparing its
operating performance between periods and between REITs that report EBITDAre
using the Nareit definition.

The Company also considers the exclusion of non-cash straight-line operating
ground lease expense from EBITDAre useful, as this expense does not reflect the
underlying performance of the related hotels (Adjusted EBITDAre).

The Company further excludes actual corporate-level general and administrative
expense for the Company from Adjusted EBITDAre (Adjusted Hotel EBITDA) to
isolate property-level operational performance over which the Company's hotel
operators have direct control. The Company believes Adjusted Hotel EBITDA
provides useful supplemental information to investors regarding operating
performance and is used by management to measure the performance of the
Company's hotels and effectiveness of the operators of the hotels.

The following table reconciles the Company’s GAAP net income (loss) with EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA for the years ended
December 31, 20212020 and 2019 (in thousands).

                                                         Year Ended December 31,
                                                    2021           2020           2019
Net income (loss)                                $   18,828     $ (173,207 )   $  171,917
Depreciation and amortization                       184,471        199,786  

193 240

Amortization of favorable and unfavorable
operating
  leases, net                                           393            442  

124

Interest and other expense, net                      67,748         70,835         61,191
Income tax expense                                      468            332            679
EBITDA                                              271,908         98,188        427,151
Gain on sale of real estate                          (3,596 )      (10,854 )       (5,021 )
Loss on impairment of depreciable real estate
assets                                               10,754          5,097  

6,467

EBITDAre                                            279,066         92,431  

428,597

Non-cash straight-line operating ground lease
expense                                                 169            180  

188

Adjusted EBITDAre                                   279,235         92,611  

428,785

General and administrative expense                   41,038         29,374         36,210
Adjusted Hotel EBITDA                            $  320,273     $  121,985     $  464,995





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The following tables reconcile the Company's GAAP net income (loss) to EBITDA,
EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA by quarter for the years
ended December 31, 2021, 2020 and 2019 (in thousands).

                                      1st Quarter       2nd Quarter       

3rd trimester 4th trimester

                                         2021              2021              2021              2021
Net income (loss)                    $     (46,435 )   $      20,283     $      31,759     $      13,221
Depreciation and amortization               48,710            46,386            44,217            45,158
Amortization of favorable and
unfavorable operating
  leases, net                                   98                98                98                99
Interest and other expense, net             18,513            18,618            15,977            14,640
Income tax expense                             108                87               114               159
EBITDA                                      20,994            85,472            92,165            73,277
(Gain) loss on sale of real estate          (4,484 )             864               (44 )              68
Loss on impairment of depreciable
real estate assets                          10,754                 -                 -                 -
EBITDAre                                    27,264            86,336            92,121            73,345
Non-cash straight-line operating
ground lease expense                            44                43                41                41
Adjusted EBITDAre                           27,308            86,379            92,162            73,386
General and administrative expense           8,119             8,435            13,261            11,223
Adjusted Hotel EBITDA                $      35,427     $      94,814     $     105,423     $      84,609



                                         1st Quarter       2nd Quarter       3rd Quarter       4th Quarter
                                            2020              2020              2020              2020
Net income (loss)                       $      (2,769 )   $     (78,243 )   $     (40,948 )   $     (51,247 )
Depreciation and amortization                  49,522            49,897            50,171            50,196
Amortization of favorable and
unfavorable operating
  leases, net                                     101               101               103               137
Interest and other expense, net                15,566            18,386            18,531            18,352
Income tax expense                                146                58                61                67
EBITDA                                         62,566            (9,801 )          27,918            17,505
(Gain) loss on sale of real estate             (8,839 )              54                 -            (2,069 )
Loss on impairment of depreciable real
estate assets                                       -             4,382                 -               715
EBITDAre                                       53,727            (5,365 )          27,918            16,151
Non-cash straight-line operating ground
lease expense                                      47                44                44                45
Adjusted EBITDAre                              53,774            (5,321 )          27,962            16,196
General and administrative expense              9,523             6,025             6,726             7,100
Adjusted Hotel EBITDA                   $      63,297     $         704     $      34,688     $      23,296



                                         1st Quarter       2nd Quarter     

3rd trimester 4th trimester

                                            2019              2019              2019              2019
Net income                              $      38,151     $      62,090     $      46,223     $      25,453
Depreciation and amortization                  47,950            48,109            47,887            49,294
Amortization of favorable and
unfavorable operating
  leases, net                                      31                31                31                31
Interest and other expense, net                15,494            15,857            14,759            15,081
Income tax expense                                206               156               143               174
EBITDA                                        101,832           126,243           109,043            90,033
(Gain) loss on sale of real estate             (1,213 )             161                 -            (3,969 )
Loss on impairment of depreciable real
estate assets                                       -                 -             6,467                 -
EBITDAre                                      100,619           126,404           115,510            86,064
Non-cash straight-line operating ground
lease expense                                      48                47                47                46
Adjusted EBITDAre                             100,667           126,451           115,557            86,110
General and administrative expense              8,137             8,308             9,039            10,726
Adjusted Hotel EBITDA                   $     108,804     $     134,759     $     124,596     $      96,836


                                       46
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Hotels owned

As of December 31, 2021, the Company owned 219 hotels with an aggregate of
28,747 rooms located in 36 states. See "Management and Franchise Agreements" in
Part I, Item 1, Business, appearing elsewhere in this Annual Report on Form
10-K, for a table summarizing the number of hotels and rooms by brand. Refer to
Part I, Item 2, of this Annual Report on Form 10-K for tables summarizing the
number of hotels and rooms by state, and summarizing the location, brand,
manager, date acquired or completed and number of rooms for each of the 219
hotels the Company owned as of December 31, 2021.

Related parties

The Company has, and is expected to continue to engage in, transactions with
related parties. These transactions cannot be construed to be at arm's length
and the results of the Company's operations may be different if these
transactions were conducted with non-related parties. See Note 6, titled
"Related Parties" of the Consolidated Financial Statements and Notes thereto in
Part II, Item 8, in this Annual Report on Form 10-K, for additional information
concerning the Company's related party transactions.

Cash and capital resources

Capital resources

The Company's principal short term sources of liquidity are the operating cash
flows generated from the Company's properties and availability under its
revolving credit facility. Over the long term, the Company may receive proceeds
from strategic additional secured and unsecured debt financing, dispositions of
its hotel properties (such as the sale of 23 hotels in 2021 for proceeds of
approximately $234.6 million discussed above in "Recent Hotel Portfolio
Activities") and offerings of the Company's common shares, including pursuant to
the ATM Program (as defined below).

As of December 31, 2021, the Company had approximately $1.4 billion of total
outstanding debt consisting of $498.0 million of mortgage debt and $946.0
million outstanding under its credit facilities, excluding unamortized debt
issuance costs and fair value adjustments. As of December 31, 2021, the Company
had available corporate cash on hand of approximately $3.3 million as well as
unused borrowing capacity under its $425 million revolving credit facility of
approximately $349.0 million. In the near term, the impact of COVID-19 on the
global economy, including any sustained decline in the Company's performance,
may make it more difficult or costly for the Company to raise debt or equity
capital to fund long-term liquidity requirements. The credit agreements
governing the unsecured credit facilities contain mandatory prepayment
requirements, customary affirmative and negative covenants and events of
default. The credit agreements require that the Company comply with various
covenants, which include, among others, a minimum tangible net worth, maximum
debt limits, minimum interest and fixed charge coverage ratios, and restrictions
on certain investments.

As a result of COVID-19 and the associated disruption to the Company's operating
results, the Company entered into amendments in June 2020 that suspended the
testing of the Company's existing financial maintenance covenants under the
unsecured credit facilities. These amendments imposed certain restrictions
regarding its investing and financing activities including, but not limited to,
limitations on the acquisition of property, payment of distributions to
shareholders (except to the extent required to maintain REIT status), capital
expenditures and use of proceeds from the sale of property or common shares of
the Company, that applied during such testing suspension period. On March 1,
2021, as a result of the continued disruption from COVID-19 and the related
uncertainty with respect to the Company's future operating results, the Company
entered into further amendments to each of the unsecured credit facilities to
extend the covenant waiver period for all but two of the Company's existing
financial maintenance covenants until the date that the compliance certificate
was required to be delivered for the fiscal quarter ending June 30, 2022 (unless
the Company elected an earlier date) (the "Extended Covenant Waiver Period").
The testing for the Minimum Fixed Charge Coverage Ratio and the Minimum
Unsecured Interest Coverage Ratio was suspended until the compliance certificate
was required to be delivered for the fiscal quarter ending March 31, 2022
(unless the Company elected an earlier date). The amendment provided for
continued restrictions on the Company's ability to make cash distributions,
except for the payment of cash dividends of $0.01 per common share per quarter
or to the extent required to maintain REIT status.

Additionally, these amendments modified the calculation of the existing
financial covenants for the first three quarterly calculations subsequent to the
end of the Extended Covenant Waiver Period to annualize calculated amounts based
on the period beginning with the first fiscal quarter upon exiting the Extended
Covenant Waiver Period through the most recently ended fiscal quarter. The March
2021 amendments also modified certain of the existing financial maintenance
covenants to

                                       47

————————————————– ——————————

less restrictive levels at the end of the extended waiver period as follows (the capitalized terms are defined in the credit agreements):

? Maximum consolidated leverage ratio of 8.50 to 1.00 for the first two

fiscal quarters, 8.00 to 1.00 for two fiscal quarters, 7.50 to 1.00 for

one fiscal quarter, then a ratio of 6.50 to 1.00 thereafter;

? Minimum fixed charge coverage ratio of 1.05 to 1.00 for the first financial year

quarter, 1.25 to 1.00 for a fiscal quarter, then a ratio of 1.50 to

1.00 thereafter;

? Minimum unsecured interest coverage ratio of at least 1.25 to 1.00 for

a fiscal quarter, 1.50 to 1.00 for a fiscal quarter, 1.75 to 1.00 for

one fiscal quarter and a ratio of 2.00 to 1.00 thereafter; and

? Unsecured maximum leverage ratio of 65% for two fiscal quarters and 60%

after.

Unless otherwise specified in the Amendments, the terms of the Credit Agreements remain in effect.

In July 2021, the Company notified its lenders under its unsecured credit
facilities that it had elected to exit the Extended Covenant Waiver Period
effective on July 29, 2021. Upon exiting the Extended Covenant Waiver Period,
the Company is no longer subject to the restrictions described above regarding
its investing and financing activities that were applicable during the Extended
Covenant Waiver Period, including, but not limited to, limitations on the
acquisition of property, payment of distributions to shareholders, capital
expenditures and use of proceeds from the sale of property or common shares of
the Company. Those restrictions, including the restriction on payment of
distributions to shareholders, were still in place throughout the second quarter
of 2021.

The Company's annualized results for the nine months ended December 31, 2021 met
the financial maintenance covenants based on the thresholds stipulated for the
third fiscal quarter tested upon exiting the Extended Covenant Waiver Period as
described in Note 4 titled "Debt" of the Consolidated Financial Statements and
Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K. The
unsecured credit facilities do not provide the Company the ability to re-enter
the Extended Covenant Waiver Period once it has elected to exit.

See Note 4 titled “Debt” to the Consolidated Financial Statements and the accompanying notes in Part II, Item 8 of this Annual Report on Form 10-K, for a description of the Company’s debt instruments as at December 31, 2021.

The Company has a universal shelf registration statement on Form S-3 (No.
333-231021) that was automatically effective upon filing on April 25, 2019. The
Company may offer an indeterminate number or amount, as the case may be, of (1)
common shares, no par value per share; (2) preferred shares, no par value per
share; (3) depository shares representing the Company's preferred shares; (4)
warrants exercisable for the Company's common shares, preferred shares or
depository shares representing preferred shares; (5) rights to purchase common
shares; and (6) unsecured senior or subordinate debt securities, all of which
may be issued from time to time on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act. Future offerings will depend on a variety of
factors to be determined by the Company, including market conditions, the
trading price of the Company's common shares and opportunities for uses of any
proceeds.

In connection with the shelf registration statement, on August 12, 2020, the
Company entered into an equity distribution agreement pursuant to which the
Company may sell, from time to time, up to an aggregate of $300 million of its
common shares under an at-the-market offering program (the "ATM Program"). As of
December 31, 2021, the Company had sold approximately 4.7 million common shares
under its ATM Program at a weighted-average market sales price of approximately
$16.26 per common share and received aggregate gross proceeds of approximately
$76.0 million and proceeds net of offering costs, which included $0.9 million of
commissions, of approximately $75.1 million. The Company used the net proceeds
from the sale of these shares primarily to pay down borrowings under its
revolving credit facility and used the corresponding increased availability
under the revolving credit facility for general corporate purposes, including
acquisitions of hotel properties. As of December 31, 2021, approximately $224.0
million remained available for issuance under the ATM Program. The Company plans
to use future net proceeds from the sale of these shares to continue to pay down
borrowings under its revolving credit facility (if any). The Company plans to
use the corresponding increased availability under the revolving credit facility
for general corporate purposes which may include, among other things,
acquisitions of additional properties, the repayment of other outstanding
indebtedness, capital expenditures, improvement of properties in its portfolio
and working capital. The Company may also use the net proceeds to acquire
another REIT or other company that invests in income producing properties.

                                       48

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Uses of fixed assets

The Company anticipates that cash flow from operations, availability under its
credit facilities, additional borrowings and proceeds from hotel dispositions
and equity offerings will be adequate to meet its anticipated liquidity
requirements, including debt service, hotel acquisitions, hotel renovations,
share repurchases, and required distributions to shareholders.

Distributions

The Company generally must distribute annually at least 90% of its REIT taxable
income, subject to certain adjustments and excluding any net capital gain, in
order to maintain its REIT status. Subsequent to the distribution paid in March
2020, the Company announced the suspension of its monthly distributions due to
the impact of COVID-19 on its operating cash flows. As discussed in Note 4
titled "Debt" of the Consolidated Financial Statements and Notes thereto in Part
II, Item 8, in this Annual Report on Form 10-K, during the Extended Covenant
Waiver Period, as a requirement under the amendments to its unsecured credit
facilities, the Company was restricted in its ability to make distributions
except for the payment of cash distributions of $0.01 per common share per
quarter or to the extent required to maintain REIT status. Beginning in March
2021, the Board of Directors declared distributions of $0.01 per common share in
the last month of each quarter and the distributions were paid out each
following month. In July 2021, the Company notified its lenders under its
unsecured credit facilities that it had elected to exit the Extended Covenant
Waiver Period effective on July 29, 2021. As a result, upon exiting the Extended
Covenant Waiver Period, the Company is no longer subject to the restrictions on
distributions that were applicable during the Extended Covenant Waiver Period.
Distributions paid for the years ended December 31, 2021, 2020 and 2019 were
$0.03, $0.30 and $1.20 per common share, respectively, for a total of
approximately $6.8 million, $67.4 million and $268.7 million, respectively. The
quarterly distribution declared in December 2021 totaled $2.3 million and was
paid on January 18, 2022.

On February 22, 2022, the Company announced that its Board of Directors has
reinstated its policy of distributions on a monthly basis and declared a monthly
cash distribution of $0.05 per common share for the month of March, payable on
March 15, 2022. While the Company currently expects monthly distributions to
continue, each distribution is subject to approval by the Board of Directors.
The Company's Board of Directors, in consultation with management, will continue
to monitor hotel operations as well as the timing and level of distributions in
relation to the Company's other cash requirements or in order to maintain its
REIT status for federal income tax purposes. As of December 31, 2021, the
Company had a net loss carryforward for federal income tax purposes of
approximately $35.8 million which may be applied to future taxable earnings
subject to limitations imposed by the Code, which will reduce the amount of
distributions necessary to maintain the Company's REIT status.

Share buybacks

In May 2021, the Company's Board of Directors approved an extension of its
existing Share Repurchase Program, authorizing share repurchases up to an
aggregate of $345 million. The Share Repurchase Program may be suspended or
terminated at any time by the Company and will end in July 2022 if not
terminated earlier or extended. No common shares were repurchased in 2021.
During 2020 and 2019, the Company purchased, under its Share Repurchase Program,
approximately 1.5 million and 0.3 million of its common shares, respectively, at
a weighted-average market purchase price of approximately $9.42 and $14.92 per
common share, respectively, for an aggregate purchase price, including
commissions, of approximately $14.3 million and $4.3 million, respectively. The
shares were repurchased under a written trading plan that provided for share
repurchases in open market transactions and was intended to comply with Rule
10b5-1 under the Exchange Act. Past repurchases under the Share Repurchase
Program have been funded, and the Company intends to fund future repurchases,
with cash on hand or availability under its unsecured credit facilities, subject
to applicable restrictions under the Company's unsecured credit facilities (if
any). The timing of share repurchases and the number of common shares to be
repurchased under the Share Repurchase Program will also depend upon prevailing
market conditions, regulatory requirements and other factors.

Capital improvements

Management routinely monitors the condition and operations of its hotels and
plans renovations and other improvements as it deems prudent. The Company has
ongoing capital commitments to fund its capital improvements. To maintain and
enhance each property's competitive position in its market, the Company has
invested in and plans to continue to reinvest in its hotels. Under certain loan
and management agreements, the Company is required to place in escrow funds for
the repair, replacement and refurbishing of furniture, fixtures, and equipment,
based on a percentage of gross revenues, provided that such amount may be used
for the Company's capital expenditures with respect to the hotels. As of
December 31, 2021, the Company held approximately $29.3 million in reserve
related to these properties. During 2021, the Company invested approximately
$25.8 million in capital expenditures and anticipates spending approximately $55
to $65

                                       49

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million in 2022, which includes various renovation projects for approximately 20 to 25 properties. The Company currently has no existing or planned projects for the development of new properties.

Upcoming debt maturities and debt service payments

The Company has approximately $287.1 million of principal and interest payments
due on its debt over the next 12 months. Included in this total is $76.0 million
due on the Company's revolving credit facility, which matures on July 27, 2022,
but the facility can be extended up to one year, subject to certain conditions
including covenant compliance and additional fees. The Company presently has the
intent and ability to exercise this extension. Also included is approximately
$155.7 million of mortgage loans maturing in the second half of 2022, which the
Company plans to pay off using borrowings under its revolving credit facility
and/or new financing. See Note 4 titled "Debt" of the Consolidated Financial
Statements and Notes thereto in Part II, Item 8, in this Annual Report on Form
10-K, for more detail regarding future maturities of the Company's debt
instruments as of December 31, 2021.

Hotel Purchase Agreement Commitments

As of December 31, 2021, the Company had one outstanding contract, which was
entered into during 2021, for the potential purchase of a hotel currently under
development for a total expected purchase price of approximately $78.6 million.
The hotel is expected to be completed as a 260-room Embassy Suites and opened
for business in early 2024, at which time the Company expects to complete the
purchase of this hotel. Although the Company is working towards acquiring this
hotel, there are many conditions to closing that have not yet been satisfied and
there can be no assurance that closing on this hotel will occur under the
outstanding purchase contract. The Company plans to utilize its available cash
or borrowings under its unsecured credit facilities available at closing to
purchase the hotel.

Rental commitments

The Company is the lessee on certain ground leases, hotel equipment leases and
office space leases. As of December 31, 2021, the Company had 14 hotels subject
to ground leases and three parking lot ground leases with remaining terms
ranging from approximately two to 97 years, excluding renewal options. Certain
of its ground leases have options to extend beyond the initial lease term by
periods ranging from five to 120 years. As of December 31, 2021, the Company has
total remaining minimum lease payments of $296.8 million, including $6.7 million
due in the next year. Refer to Note 10, titled "Lease Commitments" of the
Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this
Annual Report on Form 10-K for additional details.

Cash management activities

As part of the cost sharing arrangements discussed in Note 6, titled "Related
Parties" of the Consolidated Financial Statements and Notes thereto in Part II,
Item 8, in this Annual Report on Form 10-K, certain day-to-day transactions may
result in amounts due to or from the Company and ARG. To efficiently manage cash
disbursements, the Company or ARG may make payments for the other company. Under
the cash management process, each company may advance or defer up to $1 million
at any time. Each quarter, any outstanding amounts are settled between the
companies. This process allows each company to minimize its cash on hand and
reduces the cost for each company. The amounts outstanding at any point in time
are not significant to either of the companies.

Management and franchise contracts

Each of the Company's 219 hotels owned as of December 31, 2021 is operated and
managed under separate management agreements with 16 hotel management companies,
none of which are affiliated with the Company. Thirteen of the Company's hotels
are managed by affiliates of Marriott. The remainder of the Company's hotels are
managed by companies that are not affiliated with either Marriott, Hilton or
Hyatt, and as a result, the branded hotels they manage were required to obtain
separate franchise agreements with the applicable franchisor. See Note 9, titled
"Management and Franchise Agreements" of the Consolidated Financial Statements
and Notes thereto in Part II, Item 8, in this Annual Report on Form 10-K, for
additional information pertaining to the management and franchise agreements,
including a listing of the Company's hotel management companies.

Work interruption

Being in the real estate industry, the Company is exposed to natural disasters
on both a local and national scale. Although management believes it has adequate
insurance to cover this exposure, there can be no assurance that such events
will not have a material adverse effect on the Company's financial position or
results of operations.

                                       50

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Seasonality

The hotel industry has been historically seasonal in nature. Seasonal variations
in occupancy at the Company's hotels may cause quarterly fluctuations in its
revenues. Generally, occupancy rates and hotel revenues for the Company's hotels
are greater in the second and third quarters than in the first and fourth
quarters. However, due to the effects of COVID-19, these typical seasonal
patterns were disrupted in 2020 and 2021, although the Company experienced some
seasonal decrease in demand in the first and fourth quarter of each year. To the
extent that cash flow from operations is insufficient during any quarter, due to
temporary or seasonal fluctuations in revenue, the Company expects to utilize
cash on hand or available financing sources to meet cash requirements.

Significant Accounting Policies and Estimates

The following contains a discussion of what the Company believes to be its
critical accounting policies and estimates. These items should be read to gain a
further understanding of the principles and estimates used to prepare the
Company's financial statements. These principles and estimates include
application of judgment; therefore, changes in judgments may have a material
impact on the Company's reported results of operations and financial condition.

Investment policy

Upon acquisition of real estate properties, the Company estimates the fair value
of acquired tangible assets (consisting of land, buildings and improvements, and
furniture, fixtures and equipment) and identified intangible assets and
liabilities, including in-place leases, and assumed debt based on the evaluation
of information and estimates available at that date. Fair values for these
assets are not directly observable and estimates are based on comparables and
other information which is subjective in nature, including comparable land sales
as well as industry and Company data regarding building and furniture, fixture
and equipment costs, including adjustments for estimated depreciation based on
the age of the property acquired and time since its most recent renovation. The
Company has not assigned any value to management contracts and franchise
agreements as such contracts are generally at current market rates based on the
remaining terms of the contracts and any other value attributable to these
contracts is not considered material. Acquisitions of hotel properties are
generally accounted for as acquisitions of a group of assets, with costs
incurred to effect an acquisition, including title, legal, accounting, brokerage
commissions and other related costs, being capitalized as part of the cost of
the assets acquired, instead of accounted for separately as expenses in the
period that they are incurred. The underlying assumptions are subject to
uncertainty and thus any changes to the allocation of fair value to each of the
various line items within the Company's consolidated balance sheets could have
an impact on the Company's financial condition as well as results of operations
due to resulting changes in depreciation and amortization as a result of the
fair value allocation. The acquisitions of real estate subject to this estimate
totaled eight properties for a combined purchase price of $361.5 million for the
year ended December 31, 2021 and four properties for a combined purchase price
of $111.3 million for the year ended December 31, 2020.

Capitalization policy

The Company considers expenditures to be capital in nature based on the
following criteria: (1) for a single asset, the cost must be at least $500,
including all normal and necessary costs to place the asset in service, and the
useful life must be at least one year; (2) for group purchases of 10 or more
identical assets, the unit cost for each asset must be at least $50, including
all normal and necessary costs to place the asset in service, and the useful
life must be at least one year; and (3) for major repairs to a single asset, the
repair must be at least $2,500 and the useful life of the asset must be
substantially extended.

Impairment policy

The Company records impairment losses on hotel properties used in operations if
indicators of impairment are present, and the sum of the undiscounted cash flows
estimated to be generated by the respective properties over their estimated
remaining useful life, based on historical and industry data, is less than the
properties' carrying amount. Indicators of impairment include a property with
current or potential losses from operations, when it becomes more likely than
not that a property will be sold before the end of its previously estimated
useful life or when events, trends, contingencies or changes in circumstances
indicate that a triggering event has occurred and an asset's carrying value may
not be recoverable. The Company monitors its properties on an ongoing basis by
analytically reviewing financial performance and considers each property
individually for purposes of reviewing for indicators of impairment. As many
indicators of impairment are subjective, such as general economic and market
declines, the Company also prepares an annual recoverability analysis for each
of its properties to assist with its evaluation of impairment indicators. Given
the disruption in 2020 and 2021 caused by COVID-19, the Company has performed
over the last two years an annual recoverability analysis by comparing each
property's net book value to its estimated operating income based on assumptions
and estimates about the property's future

                                       51
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revenues, expenses and capital expenditures after recovery from disruption
resulting from COVID-19 and other disruptive events such as renovations or newly
opened hotels in the same market. The Company's planned initial hold period for
each property is generally 39 years. If events or circumstances change, such as
the Company's intended hold period for a property or if the operating
performance of a property declines substantially for an extended period of time,
the Company's carrying value for a particular property may not be recoverable,
and an impairment loss will be recorded. Impairment losses are measured as the
difference between the asset's fair value and its carrying value. The Company's
ongoing analyses and annual recoverability analyses have not identified any
impairment losses other than the losses on impairment of five properties
recorded in 2021, one property recorded in 2020 and one property recorded in
2019 totaling approximately $10.8 million, $5.1 million and $6.5 million,
respectively, as discussed herein in Note 3, titled "Dispositions" of the
Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this
Annual Report on Form 10-K.

New Accounting Standards

See Note 1, titled "Organization and Summary of Significant Accounting Policies"
of the Consolidated Financial Statements and Notes thereto in Part II, Item 8,
in this Annual Report on Form 10-K, for information on the anticipated adoption
of recently issued accounting standards.

Subsequent events

At January 18, 2022the Company paid approximately $2.3 millionWhere $0.01 per outstanding common share, in distributions to its common stockholders.

On February 22, 2022, the Company declared a monthly cash distribution of $0.05
per common share for the month of March 2022. The distribution is payable on
March 15, 2022, to shareholders of record as of March 4, 2022.



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