Apple Hospitality REIT, Inc.

APLE

US03784Y2000

Specialized REITs

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Apr. 22	BofA Securities Lowers Apple Hospitality REIT Price Objective to $17 from $18	MT
Apr. 18	Apple Hospitality REIT, Inc. Announces Monthly Cash Distribution, Payable on May 15, 2024	CI

APPLE HOSPITALITY REIT : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

February 23, 2021 at 04:23 pm EST

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, 2020, the Company owned 234 hotels with an aggregate of 29,937
rooms located in urban, high-end suburban and developing markets throughout 34
states, including one hotel with 118 rooms classified as held for sale, which is
expected to be sold to an unrelated party in the first quarter of 2021.
Substantially all of the Company's hotels operate under Marriott or Hilton
brands. The hotels are operated and managed under separate management agreements
with 17 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."

COVID-19 and the Company's Actions to Mitigate its Impact



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
leisure travel, which has had a significant adverse impact on, and management
expects will continue to significantly adversely impact and disrupt, the
Company's business, financial performance and condition, operating results and
cash flows. While the economy has shown signs of recovery as some of the initial
restrictions put into place during the first half of 2020 have eased, occupancy
and average daily rate are still significantly below 2019 levels. Additionally,
while vaccines have been developed and were put into distribution beginning in
December 2020, there can be no assurances of how quickly they will slow the
spread of the pandemic and allow the economy to recover. The Company expects
this significant decline in revenue associated with COVID-19 and the overall
decline in the U.S. economy to negatively impact the Company's revenue and
operating results for an extended period of time. The Company does not expect a
material improvement in results until business travel and general consumer
confidence related to the economy and risks associated with COVID-19 improve and
government restrictions impacting travel and business operations are broadly
lifted.

The following is a brief summary of certain measures the Company, its management companies and its brands have taken to minimize costs and cash outflow to maintain a sound liquidity position:

? Beginning in March 2020, the Company's brands and third-party management

companies implemented cost elimination and efficiency initiatives at each

of the Company's hotels by reducing labor costs, reducing or eliminating

certain amenities and reducing rates under various service contracts. As

of December 31, 2020, the Company continued to intentionally consolidate

operations at five hotels, down from 38 hotels as of May 2020, in certain

market clusters to maximize operational efficiencies. The cost structure

of the Company's primarily rooms-focused hotels allows them to operate

cost effectively even at very low occupancy levels.

? Together with its third-party management companies, the Company enhanced

its sales efforts by focusing on COVID-19-specific demand opportunities in

certain markets and strategically targeting and maximizing performance


        based on available demand, such as leisure, government, health care,
        construction, disaster recovery, insurance, athletics, education,
        manufacturing and maintenance-focused business.

? The Company postponed all non-essential capital improvement projects

planned for 2020, resulting in a reduction of approximately $50 million


        from originally planned capital improvements for the year.


    ?   The Company suspended its monthly distributions, with the last
        distribution paid March 16, 2020. The Company's Board of Directors, in

consultation with management, will continue to monitor hotel operations


        and intends to resume distributions at a time and level determined to be
        prudent in relation to the Company's other cash requirements and as
        allowed under the Company's amended unsecured credit facilities, as
        discussed below.

? The Company terminated its written trading plan under its Share Repurchase

Program in March 2020 and did not engage in any additional repurchases


        under its Share Repurchase Program for the balance of 2020.


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    ?   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, in each case for calendar year 2020.

? The Company entered into amendments to its unsecured credit facilities to

temporarily waive the financial covenant testing until June 30, 2021. See

further discussion in Note 4 titled "Debt" in the Company's Consolidated

Financial Statements and Notes thereto, appearing elsewhere in this Annual

Report on Form 10-K.




Despite the cost reduction initiatives discussed above, the Company does not
expect to be able to fully, or even materially, offset revenue losses from
COVID-19. The extent and duration of COVID-19 effects are not currently known
and these uncertainties continue to make it difficult to predict operating
results for the Company's hotels for the near future. Therefore, while the
ongoing vaccination efforts suggest that conditions may continue to gradually
improve during 2021, there can be no assurances that the Company will not
experience further declines in hotel revenues or earnings at its hotels or how
long the effects will continue to impact the Company's operating results.

Recent Hotel Portfolio Activities



The following discussion regarding the Company's approach to acquisitions and
dispositions reflects the Company's historical strategy. While the Company
anticipates it will continue to approach the acquisition and disposition of
hotels similarly over the long term, the detrimental impact of COVID-19 to the
Company and overall lodging industry has and may continue to limit the Company's
ability to effectively acquire or dispose of hotels until the industry recovers.

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 2018 the Company entered into contracts
to purchase a combined 224-room dual-branded Hampton Inn & Suites and Home2
Suites complex to be constructed in Cape Canaveral, Florida and a combined
259-room dual-branded Hyatt House and Hyatt Place complex to be constructed in
Tempe, Arizona. Construction of the hotels was completed in 2020 and the Company
acquired the hotels. The aggregate purchase price of these hotels was
approximately $111.3 million, funded by $25.0 million of available cash, $64.6
million of borrowings under the Company's revolving credit facility and a
one-year secured note for $21.7 million payable in May 2021, which principal
amount was reduced by $1.1 million in July 2020, representing a credit from the
developer for shared construction savings. Also, as of December 31, 2020, the
Company had an outstanding contract that was entered into prior to 2020 for the
potential purchase of a hotel under development for a total expected purchase
price of approximately $49.6 million, which was completed and opened for
business in February 2021, at which time the closing on this hotel occurred. The
Company utilized borrowings under its revolving credit facility for this
acquisition.



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 2020, the Company sold
three hotels for a total combined gross sales price of $55.3 million and
recognized a gain on sale of approximately $10.9 million. Additionally, as of
December 31, 2020, the Company had an outstanding contract to sell one of its
hotels for a gross sales price of approximately $10.3 million, which is expected
to be sold in the first quarter of 2021. Although the Company is working towards
the sale of the remaining hotel, there are many conditions to closing that have
not yet been satisfied and there can be no assurance that a closing on this
hotel will occur under the outstanding purchase and sale agreement. The Company
used the proceeds from the sales, and expects the net proceeds from the
remaining sale, to be used to pay down borrowings on the Company's revolving
credit facility, subject to certain restrictions during the Covenant Waiver
Period pursuant to the Company's amended unsecured credit facilities, as
discussed further 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.

See Note 2 titled "Investment in Real Estate" and Note 3 titled "Assets Held for
Sale and Dispositions" in the Company's Consolidated Financial Statements and
Notes thereto, appearing elsewhere in this Annual Report on Form 10-K, for
additional information concerning these transactions.



Effective January 20, 2020, the Company converted its New York, New York
Renaissance hotel to an independent boutique hotel. The Company incurred total
conversion costs of approximately $1.0 million to complete the transition, of
which approximately $0.1 million was incurred in 2019. The intent of the
conversion was to provide greater long-term flexibility with the operations of
the hotel. As anticipated, the operating results of the hotel declined in the
first quarter of 2020 (prior to COVID-19) as compared to the first quarter of
2019 as the management team worked to replace revenue that

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was historically generated from the Renaissance brand system and have
experienced further declines due to COVID-19. With the conversion of this hotel
and the October 2019 acquisition of the existing independent boutique hotel in
Richmond, Virginia, mentioned above, the Company has two independent boutique
hotels with a combined total of 263 rooms.

Hotel Operations



As of December 31, 2020, the Company owned 234 hotels with a total of 29,937
rooms as compared to 233 hotels with a total of 29,870 rooms as of December 31,
2019. Results of operations are included only for the period of ownership for
hotels acquired or disposed of during all periods presented. During 2020, the
Company acquired two newly constructed hotels on April 30, 2020 and two newly
constructed hotels on August 13, 2020, and sold one hotel each on January 16,
2020, February 27, 2020 and December 30, 2020. During 2019, the Company acquired
one newly developed hotel on March 19, 2019 and two existing hotels (one on
March 4, 2019 and one on October 9, 2019), and sold 11 hotels (nine on March 28,
2019, one on December 19, 2019 and one on December 30, 2019). As a result, in
addition to the impacts of COVID-19, the comparability of results for the years
ended December 31, 2020 and 2019 as discussed below is also impacted by these
transactions.

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

The following is a summary of the results from operations of the Company's hotels for their respective periods of ownership by the Company:





                                                                           Year Ended December 31,
                                              Percent                      Percent        Change                       Percent        Change
(in thousands, except                            of                           of         2019 to                          of         2018 to
statistical data)                 2020        Revenue         2019         Revenue         2020           2018         Revenue         2019
Total revenue                  $  601,879        100.0 %   $ 1,266,597

100.0 % -52.5 % $ 1,270,555 100.0 % -0.3 % Hotel operating expense

           402,278         66.8 %       724,416

57.2 % -44.5 % 715,934 56.3 % 1.2 % Property taxes, insurance and other


  expense                          76,729         12.7 %        75,840

6.0 % 1.2 % 74,640 5.9 % 1.6 % Operating ground lease expense(1)

                          1,509          0.3 %         1,658          0.1 %         -9.0 %        11,364          0.9 %        -85.4 %
General and administrative
expense                            29,374          4.9 %        36,210          2.9 %        -18.9 %        24,294          1.9 %         49.0 %

Loss on impairment of
depreciable
  real estate assets                5,097                        6,467                         n/a           3,135                         n/a
Depreciation and
amortization
  expense(1)                      199,786                      193,240                         3.4 %       183,482                         5.3 %
Gain on sale of real estate        10,854                        5,021                       116.2 %           152                         n/a
Interest and other expense,
net(1)                             70,835                       61,191                        15.8 %        51,185                        19.5 %
Income tax expense                    332                          679                       -51.1 %           587                        15.7 %

Net income (loss)                (173,207 )                    171,917                      -200.8 %       206,086                       -16.6 %
Adjusted hotel EBITDA (2)         121,985                      464,995                       -73.8 %       472,806                        -1.7 %

Number of hotels owned at
end
  of period                           234                          233                         0.4 %           241                        -3.3 %
ADR                            $   111.49                  $    137.30                       -18.8 %   $    136.04                         0.9 %
Occupancy                            46.1 %                       77.0 %                     -40.1 %          76.9 %                       0.1 %
RevPAR                         $    51.34                  $    105.72                       -51.4 %   $    104.66                         1.0 %

(1) Effective January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic

842), electing to recognize and measure its leases prospectively at the

beginning of the period of adoption through a cumulative-effect adjustment to

shareholders' equity without restating the presentation of periods prior to

the effective date. Under the new lease accounting standard, the Company

classified four ground leases as finance leases that were previously

classified as operating leases in accordance with the previous accounting

standard. In 2020 and 2019, the Company recognized approximately $6.4 million

and $4.5 million of amortization expense and approximately $11.4 million and

$8.2 million of interest expense, respectively, associated with these four

finance leases. Results prior to January 1, 2019 were not restated and

therefore, for the year ended December 31, 2018, the Company recognized

approximately $9.5 million of operating ground lease expense associated with

these four ground leases. See Note 10 titled "Lease Commitments" in Part II,

Item 8, of the Consolidated Financial Statements and Notes thereto, appearing

elsewhere in this Annual Report on Form 10-K for additional information on

the adoption of the new lease accounting standard.

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


    Financial Measures" below.




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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 2020 as compared to 2019 (in thousands except statistical data):



                 1st Quarter       2nd Quarter       3rd Quarter       4th Quarter      Full Year         1st Quarter       2nd Quarter       3rd Quarter       4th Quarter      Full Year
                    2020              2020              2020              2020             2020              2019              2019              2019              2019             2019
ADR             $      132.55     $      100.76     $      104.78     $       97.87     $   111.49       $      136.36     $      141.60     $      139.21     $      131.41     $   137.30
Occupancy                60.9 %            28.2 %            48.6 %            46.5 %         46.1 %              73.9 %            81.4 %            79.9 %            72.9 %         77.0 %
RevPAR          $       80.66     $       28.44     $       50.94     $       45.46     $    51.34       $      100.71     $      115.30     $      111.17     $       95.85     $   105.72
Net income
(loss)          $      (2,769 )   $     (78,243 )   $     (40,948 )   $     (51,247 )   $ (173,207 )     $      38,151     $      62,090     $      46,223     $      25,453     $  171,917
Adjusted
Hotel EBITDA
(1)             $      63,297     $         704     $      34,688     $      23,296     $  121,985       $     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.




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
duration of revenue declines for the industry and Company; however, the Company
currently expects the decline in revenue and operating results as compared to
2019 to continue throughout 2021 and potentially into future years. The Company
experienced its most significant decline in operating results during the second
quarter of 2020 as compared to the second quarter of 2019, with a 65% decrease
in occupancy and a 75% decrease in RevPAR. Occupancy and RevPAR improved in the
third and fourth quarters of 2020, with 39% and 36% decreases in occupancy and
54% and 53% decreases in RevPAR, as compared to the third and fourth quarters of
2019, respectively, led by leisure demand. Although the Company expects to
experience a gradual recovery as vaccines are distributed to the population,
future revenues and operating results could be negatively impacted if, among
other things, COVID-19 cases continue to increase, state and local governments
and businesses revert back to tighter mitigation restrictions or consumer
sentiment deteriorates.

Comparable Hotels Operating Results



The following table reflects certain operating statistics for the Company's 233
hotels owned and held for use as of December 31, 2020. The Company defines
metrics from Comparable Hotels as results generated by the 233 hotels owned and
held for use as of the end of the reporting period, and excludes the hotel held
for sale. 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 and assets held for sale, results
have been excluded for the Company's period of ownership.



                                                        Year Ended December 31,
                                                             Change 2019                  Change 2018
                                     2020         2019         to 2020         2018         to 2019
ADR                                $ 111.62     $ 138.09           -19.2 %   $ 137.85             0.2 %
Occupancy                              46.0 %       77.1 %         -40.3 %       77.2 %          -0.1 %
RevPAR                             $  51.33     $ 106.45           -51.8 %   $ 106.43               -




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Same Store Operating Results



The following table reflects certain operating statistics for the 221 hotels
owned and held for use by the Company as of January 1, 2018 and during the
entirety of the reporting periods being compared ("Same Store Hotels"). This
information has not been audited.



                                                        Year Ended December 31,
                                                             Change 2019                  Change 2018
                                     2020         2019         to 2020         2018         to 2019
ADR                                $ 111.46     $ 137.82           -19.1 %   $ 137.53             0.2 %
Occupancy                              46.4 %       77.2 %         -39.9 %       77.3 %          -0.1 %
RevPAR                             $  51.67     $ 106.46           -51.5 %   $ 106.35             0.1 %




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. As a
result of COVID-19, the Company's revenue and operating results declined during
the year ended December 31, 2020 compared to the year ended December 31, 2019,
which is consistent with the overall lodging industry. Compared to 2019, the
Company expects the declines in revenue and operating results to continue into
2021 and potentially into 2022, but the Company can give no assurances of the
amount or period of decline due to the uncertainty regarding the duration and
long-term impact of, and governmental and consumer response to, COVID-19.

Results of Operations



A discussion regarding the Company's results of operations for the year ended
December 31, 2020 compared to the year ended December 31, 2019 is presented
below. A discussion regarding the results of operations for the year ended
December 31, 2019 compared to the year ended December 31, 2018 can be found
under the section titled "Results of Operations for Years 2019 and 2018" in Part
II, Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations, of the Company's Annual Report on Form 10-K for the year
ended December 31, 2019, filed with the SEC on February 24, 2020, which is
incorporated herein by reference and which is available free of charge on the
SEC's website at www.sec.gov and in the Investor Information section of the
Company's website at www.applehospitalityreit.com.

Revenues



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,
2020 and 2019, the Company had total revenue of $0.6 billion and $1.3 billion,
respectively. For the years ended December 31, 2020 and 2019, respectively,
Comparable Hotels achieved combined average occupancy of 46.0% and 77.1%, ADR of
$111.62 and $138.09 and RevPAR of $51.33 and $106.45. ADR is calculated as room
revenue divided by the number of rooms sold, and RevPAR is calculated as
occupancy multiplied by ADR.

Compared to 2019, the Company experienced decreases in ADR and occupancy in
2020, resulting in a decrease of 51.8% in RevPAR, for Comparable Hotels. 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
declined to 17.7% in April before improving to 38.2% in June, 51.7% in September
and ending with approximately 46.4% in the fourth quarter of 2020 driven
predominately by increased leisure demand over the summer months as a result of
improved consumer confidence in travel and the lifting of some COVID-19
mitigation restrictions, but also from a wide variety of demand generators such
as government, healthcare, construction, disaster recovery, insurance,
athletics, education and local and regional business-related travel. The Company
expects this trend to gradually continue, however, future revenues could be
negatively impacted if COVID-19 cases continue to increase, state and local
governments tighten or implement new mitigation restrictions or consumer
sentiment deteriorates.

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 a low-occupancy environment 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 situation 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 additional measures as the situation evolves.

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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, 2020 and 2019, respectively, hotel operating expense totaled $402.3
million and $724.4 million or 66.8% and 57.2% of total revenue for each
respective year. Included in hotel operating expense for the year ended December
31, 2020 were approximately $2.5 million, net of employee retention credits, in
separation and furlough costs for hotel employees as a result of the occupancy
declines discussed above. The Company has worked and will continue to work with
its management companies to optimize staffing models, consolidate operations in
markets with multiple properties, and adjust food and beverage offerings and
other amenities, among other efficiency initiatives to mitigate the impact of
revenue declines on its results of operations. For example, in some markets the
Company is "clustering" hotels, whereby multiple properties in a market have
consolidated their operations to increase efficiency; the Company has negotiated
relaxation of certain brand standards; and the Company has 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 the supplying of personal protective equipment for
employees and guests as well as increased sanitation, social distancing and
other measures.

Property Taxes, Insurance and Other Expense



Property taxes, insurance and other expense for the years ended December 31,
2020 and 2019 totaled $76.7 million and $75.8 million, respectively, or 12.7%
and 6.0% of total revenue for each respective year, which is consistent with
Comparable Hotels expense as a percentage of revenue for the same period.
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 2021 as compared
to 2020.

Operating Ground Lease Expense



Operating ground lease expense for the years ended December 31, 2020 and 2019
was $1.5 million and $1.7 million, respectively. Operating ground lease expense
primarily represents the expense incurred by the Company to lease land for nine
of its hotel properties.

General and Administrative Expense



General and administrative expense for the years ended December 31, 2020 and
2019 was $29.4 million and $36.2 million, respectively, or 4.9% and 2.9% 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 decrease in general and
administrative expense in 2020 as compared to 2019 was primarily due to
voluntary reductions in compensation for the Company's Executive Chairman, Chief
Executive Officer and non-employee directors on the Board of Directors, as well
as decreased accruals for incentive plan payments associated with the impact on
the 2020 Incentive Plan resulting from the decline in operating results as
compared to 2019 (see Note 8 titled "Compensation Plans" in the Company's
Consolidated Financial Statements and Notes thereto, appearing elsewhere in this
Annual Report on Form 10-K for additional details). These decreases were
partially offset by approximately $2.5 million in 2020 for separation benefits
awarded in connection with the previously announced retirements of the Company's
former Chief Operating Officer and former Chief Financial Officer on March 31,
2020. General and administrative expense for 2019 included approximately $2.1
million related to separation agreements with two executive officers who
departed during the year.

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.

Loss on Impairment of Depreciable Real Estate Assets



Loss on impairment of depreciable real estate assets was approximately $5.1
million and $6.5 million for the years ended December 31, 2020 and 2019,
respectively, consisting of impairment losses totaling $5.1 million for the
Memphis, Tennessee Homewood Suites in 2020 and $6.5 million for the
Winston-Salem, North Carolina Courtyard in 2019. See Note 3 titled "Assets Held
for Sale and Dispositions" in Part II, Item 8, of the Consolidated Financial
Statements and Notes thereto, appearing elsewhere in this Annual Report on Form
10-K for additional information concerning these impairment losses.

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Depreciation and Amortization Expense



Depreciation and amortization expense for the years ended December 31, 2020 and
2019 was $199.8 million and $193.2 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 increase was
primarily due to the acquisition of four hotels in 2020 and three hotels in 2019
and renovations completed throughout 2020 and 2019, partially offset by the sale
of three hotels in 2020 and 11 hotels in 2019. Additionally, depreciation and
amortization expense for the years ended December 31, 2020 and 2019 includes
approximately $6.4 million and $4.5 million of expense associated with
amortization of the Company's finance ground leases.

Interest and Other Expense, net



Interest and other expense, net for the years ended December 31, 2020 and 2019
was $70.8 million and $61.2 million, respectively, and is net of approximately
$0.9 million and $1.3 million, respectively, of interest capitalized associated
with renovation projects. Additionally, interest and other expense, net for the
years ended December 31, 2020 and 2019 includes approximately $11.4 million and
$8.2 million of interest recorded on the Company's finance lease liabilities.

Interest expense related to the Company's debt instruments increased as a result
of increased average borrowings and increased interest rate margins on the
Company's unsecured term loans in 2020 as compared to 2019, partially offset by
a decrease in the interest rate indexes on which the Company's variable-rate
loans are based. However, the Company anticipates interest expense to be higher
in 2021 compared to 2020 due to increased average interest rates as compared to
2020. In March 2020, the Company drew the remaining availability under its
revolving credit facility as a precautionary measure in order to increase its
cash position and preserve financial flexibility in light of uncertainty in the
financial markets resulting from COVID-19. As of December 31, 2020, the Company
had repaid approximately $319.2 million in connection with the amendments of its
unsecured credit facilities (discussed below) and as a result of improved
operating cash flow in the second half of 2020. See Note 4 titled "Debt" in the
Company's Consolidated Financial Statements and Notes thereto, appearing
elsewhere in this Annual Report on Form 10-K, for additional discussion of the
Company's amended unsecured credit facilities. In addition to increases in
interest due to the Company's unsecured credit facilities, interest on the
Company's finance leases increased approximately $3.2 million during 2020 as
compared to 2019 due to a required increase under one of its leases.

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 FFO ("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.

                                       44

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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) to FFO and MFFO for the years ended December 31, 2020, 2019 and 2018 (in thousands).





                                                        Year Ended December 31,
                                                   2020           2019           2018
Net income (loss)                               $ (173,207 )   $  171,917     $  206,086
Depreciation of real estate owned                  192,346        187,729

182,527


Gain on sale of real estate                        (10,854 )       (5,021 )         (152 )
Loss on impairment of depreciable real estate
assets                                               5,097          6,467

3,135


Funds from operations                               13,382        361,092

391,596

Amortization of finance ground lease assets 6,433 4,517

            -
Amortization of favorable and unfavorable
operating
  leases, net                                          442            124

647


Non-cash straight-line operating ground lease
expense                                                180            188

3,542


Modified funds from operations                  $   20,437     $  365,921     $  395,785

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.

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.

                                       45

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The following table reconciles the Company's GAAP net income (loss) to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA for the years ended December 31, 2020, 2019 and 2018 (in thousands).





                                                        Year Ended December 31,
                                                   2020           2019         2018(1)
Net income (loss)                               $ (173,207 )   $  171,917     $  206,086
Depreciation and amortization                      199,786        193,240

183,482


Amortization of favorable and unfavorable
operating
  leases, net                                          442            124

647


Interest and other expense, net                     70,835         61,191         51,185
Income tax expense                                     332            679            587
EBITDA                                              98,188        427,151        441,987
Gain on sale of real estate                        (10,854 )       (5,021 )         (152 )
Loss on impairment of depreciable real estate
assets                                               5,097          6,467

3,135


EBITDAre                                            92,431        428,597

444,970


Non-cash straight-line operating ground lease
expense                                                180            188

3,542


Adjusted EBITDAre                                   92,611        428,785

448,512


General and administrative expense                  29,374         36,210         24,294
Adjusted Hotel EBITDA                           $  121,985     $  464,995     $  472,806

(1) EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA for the year

ended December 31, 2018 include approximately $5.7 million of lease

payments recorded to operating ground lease expense related to four of the

Company's ground leases that were classified as operating leases prior to

2019. Under the current lease accounting standard, effective January 1,

2019, these four ground leases are classified as finance leases, for which

the Company recognizes amortization expense and interest expense in the

Company's consolidated statements of operations (both of which are excluded


       from EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA
       calculations), instead of operating ground lease expense.




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, 2020 and 2019 (in thousands).



                                         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





                                       46


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                                         1st Quarter       2nd Quarter

3rd Quarter 4th Quarter


                                            2019              2019              2019              2019
Net income (loss)                       $      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



Hotels Owned



As of December 31, 2020, the Company owned 234 hotels with an aggregate of
29,937 rooms located in 34 states, including one hotel with 118 rooms classified
as held for sale, which is expected to be sold to an unrelated party in the
first quarter of 2021. 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 234 hotels the Company owned as of
December 31, 2020.

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" in Part II, Item 8, of the Consolidated Financial Statements and Notes
thereto, appearing elsewhere in this Annual Report on Form 10-K for additional
information concerning the Company's related party transactions.

Liquidity and Capital Resources

Contractual Commitments

The following is a summary of the Company's significant contractual obligations as of December 31, 2020 (in thousands):





                                                                Amount of

Commitments Expiring per Period


                                         Total          1 Year         2-3 Years      4-5 Years       Over 5 Years
Property Purchase Commitments         $    49,632     $    49,632      $        -     $        -     $            -
Debt (including interest of $247.9
million)                                1,736,451         129,133         606,731        633,273            367,314
Finance Leases                            506,819           9,618          19,883         22,851            454,467
Operating Leases                           36,019           1,108           1,699          1,541             31,671
                                      $ 2,328,921     $   189,491      $  628,313     $  657,665     $      853,452




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. Periodically, the Company may receive proceeds from
strategic additional secured and unsecured debt financing, dispositions of its
hotel properties (such as the sale of three hotels in 2020 for proceeds of
approximately $55 million discussed above in "2020 Hotel Portfolio Activities")
and offerings of the Company's common shares, including pursuant to the 2020 ATM
Program. As a result of declines in occupancy caused by

                                       47

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COVID-19, the Company anticipates significantly reduced cash from operations
until travel increases in the U.S. To increase readily available liquidity, in
March 2020, the Company drew the remaining availability under its $425 million
revolving credit facility. In connection with entering into amendments for each
of its unsecured credit facilities (discussed below) and as a result of improved
operating cash flows during the second half of 2020, the Company has repaid
approximately $319.2 million of borrowings under its revolving credit facility
as of December 31, 2020. In 2020, the Company took additional steps to preserve
capital and increase liquidity, including postponing approximately $50 million
of non-essential capital improvements, suspending its monthly distributions and
entering into contracts for potential dispositions. Additionally, as a result of
the effects of COVID-19 on the economic environment, for certain hotels, the
lenders for the associated mortgage loans granted the Company's request for
temporary deferrals of principal and interest payments, which have all resumed
as of December 31, 2020. The Company anticipates funding its near-term cash
needs with operating cash flows generated from the Company's properties and
availability under its revolving credit facility.

As of December 31, 2020, the Company had approximately $1.5 billion of total
outstanding debt consisting of $512.8 million of mortgage debt and $975.8
million outstanding under its credit facilities, excluding unamortized debt
issuance costs and fair value adjustments. As of December 31, 2020, the Company
had available corporate cash on hand of approximately $5.6 million. The
Company's unused borrowing capacity under its $425 million revolving credit
facility as of December 31, 2020 was $319.2 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, during April 2020, the Company anticipated that
it may not be able to maintain compliance with certain of these covenants in
future periods. As a result, on June 5, 2020, the Company entered into
amendments to each of the unsecured credit facilities. The amendments suspend
the testing of the Company's existing financial maintenance covenants under the
unsecured credit facilities until the date the compliance certificate is
required to be delivered for the fiscal quarter ending June 30, 2021 (unless the
Company elects an earlier date) (the "Covenant Waiver Period"), and provide for,
among other restrictions, the following during the Covenant Waiver Period:

? Mandatory prepayments of amounts outstanding under the Company's unsecured


        credit facilities, of net cash proceeds from certain debt and equity
        issuances, and asset dispositions, subject to various exceptions. A
        portion of the mandatory prepayments will be available for future
        borrowing under the revolving credit facility;


  ? A minimum liquidity covenant of $100 million;

? A requirement to pledge the equity interests of each direct or indirect

owner of certain unencumbered property in favor of the administrative

agents if average liquidity for any month is less than $275 million or the

total amount outstanding under the revolving credit facility exceeds $275


        million;


    ?   Restrictions on the Company's and its subsidiaries' ability to incur
        additional indebtedness or prepay certain existing indebtedness;

? Restrictions on the Company's ability to make cash distributions (except

to the extent required to maintain REIT status) and share repurchases;




  ? Maximum discretionary capital expenditures of $50 million;


  ? Limitations on additional investments; and


    ?   An increase in the applicable interest rate under the unsecured credit
        facilities until the end of the Covenant Waiver Period to a rate that
        corresponds to the highest leverage-based applicable interest rate margin
        with respect to the unsecured credit facilities.


The amendments also modify the calculation of the existing financial covenants
for the four quarters subsequent to the end of the Covenant Waiver Period to
annualize calculated amounts to the extent the most recently ended fiscal
quarter is not at least four fiscal quarters from the end of the Covenant Waiver
Period, and provide for an increase in the LIBOR floor under the credit
agreements from 0 to 25 basis points for Eurodollar Rate Loans and establish a
Base Rate floor of 1.25% on the revolving credit facility, and any term loans
under the credit agreements that are not hedged. Except as otherwise set forth
in the amendments, the terms of the credit agreements remain in effect.

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As of December 31, 2020, the Company was in compliance with the applicable
covenants of the credit agreements as amended. However, as a result of the
continued disruption from COVID-19 and the related uncertainty on the Company's
operating results, the Company anticipates that it could potentially not be in
compliance with certain of the covenants as amended in future periods if the
existing Covenant Waiver Period is not further extended. In January 2021, the
Company notified lenders under its credit facilities of the anticipated
potential non-compliance with certain covenants and anticipates entering into
amendments to each of the credit facilities to extend the waiver period for the
testing of all but two of its financial maintenance covenants through March 31,
2022. The waiver period for the testing of the ratio of Adjusted Consolidated
EBITDA to Consolidated Fixed Charges and the ratio of Unencumbered Adjusted NOI
to Consolidated Implied Interest Expense for Consolidated Unsecured Indebtedness
is anticipated to be extended through December 31, 2021. The Company anticipates
that the conditions to obtaining the waivers that currently apply during the
Covenant Waiver Period, as implemented in the June 2020 amendments, will
generally continue to apply during the extended covenant waiver period described
above, including restrictions on the amount of the Company's distributions,
capital expenditures, and share repurchases and acquisitions, but the Company
anticipates that the amendments will provide additional flexibility regarding
certain of the conditions relative to the current restrictions, including an
increased allowance for acquiring unencumbered assets through either proceeds
from unencumbered asset sales or equity issuances. The Company also anticipates
that the anticipated amendments will provide for less restrictive thresholds for
certain financial covenant ratios once covenant testing recommences at the end
of the extended covenant waiver period for a transitional period. As part of the
amendments, the interest rate under each of its credit facilities is expected to
increase 15 basis points during the extended covenant waiver period. Although
the Company is close to finalizing these amendments and anticipates completing
them in the near future, the amendments have not yet been finalized and the
final terms could change. Thus, no assurances can be given as to the final terms
of the amendments or that the Company will be able to complete the amendments.
If the contemplated amendments are not entered into, and the Company does not
meet its applicable covenant requirements in future periods, the Company will be
in default under each credit facility. Defaults may result in additional
interest expense and a potential acceleration of amounts due under each credit
facility, which would have a material adverse effect on the Company if it is
unable to obtain alternative sources of capital to repay such amounts. See Note
4 titled "Debt" in the Company's Consolidated Financial Statements and Notes
thereto, appearing elsewhere in this Annual Report on Form 10-K, for a
description of the Company's debt instruments as of December 31, 2020.

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, 2020, the Company has not sold any common shares under the ATM
Program. The Company plans to use the net proceeds from the sale of these shares
to pay down borrowings on its revolving credit facility and, under certain
circumstances, to repay proportionally amounts under each of the Company's
revolving credit facility, term loans and senior notes. 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, subject to certain restrictions during the Covenant Waiver Period
pursuant to the Company's amended unsecured credit facilities, as discussed
further 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 Company
may also use the net proceeds to acquire another REIT or other company that
invests in income producing properties.

During April and May 2020, the Company applied for and received approximately
$18 million in loans under the CARES Act Paycheck Protection Program. Due to
subsequent guidance issued by the Small Business Administration and the
Department of Treasury, related to the intended participants in this program,
the Company repaid all amounts received. The Company will continue to evaluate
relief initiatives and stimulus packages, including any accompanying
restrictions on its business that would be imposed by such packages, that may be
or become available to the Company under government stimulus programs.

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As discussed in Note 3, "Assets Held for Sale and Dispositions" of the
Consolidated Financial Statements and Notes thereto in Part II, Item 8, in this
Annual Report on Form 10-K, as of December 31, 2020, the Company had an
outstanding contract to sell one of its hotels for a gross sales price of
approximately $10.3 million. The Company expects to complete the sale of this
hotel in the first quarter of 2021. The net proceeds from the sale will be used
to pay down borrowings on the Company's revolving credit facility.

Capital Uses



Although there can be no assurances, the Company anticipates that available cash
and availability under its revolving credit facility as of December 31, 2020,
including increased availability from repayments with proceeds from sales of
properties, will be adequate to meet its near-term potential operating cash flow
deficits that may result from the effects of COVID-19, debt service, hotel
acquisitions and capital expenditures. Though not expected, if the Company is
unable to meet its near-term anticipated capital uses as currently planned, it
may raise capital through dispositions of assets, issuances of equity or debt,
which may be more costly to the Company in the current environment.

Distributions



To maintain its REIT status the Company is required to distribute at least 90%
of its ordinary income. Distributions paid for the years ended December 31,
2020, 2019 and 2018 were $0.30, $1.20 and $1.20 per common share, respectively
and were paid at a monthly rate of $0.10 per common share through March 2020 for
a total of approximately $67.4 million, $268.7 million and $275.9 million,
respectively. For the same periods, the Company's net cash generated from
operations was approximately $26.7 million, $381.7 million and $404.8 million,
respectively. The shortfall for 2020 includes a return of capital and was funded
primarily by borrowings on the Company's revolving credit facility. As a result
of COVID-19 and the impact on its business, the Company suspended its monthly
distributions in March 2020. The Company's Board of Directors, in consultation
with management, will continue to monitor hotel operations and intends to resume
distributions at a time and level determined to be prudent in relation to the
Company's other cash requirements or in order to maintain its REIT status for
federal income tax purposes, subject to any applicable distribution restrictions
under the Company's unsecured credit facilities. 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, distributions are currently subject
to certain restrictions that apply during the Covenant Waiver Period pursuant to
the terms of the June 2020 amendments to the Company's unsecured credit
facilities. The Company incurred a net loss for the year ended December 31, 2020
resulting in a net loss carryforward for federal income tax purposes of
approximately $67.0 million, which will be applied to future taxable earnings
subject to limitations imposed by the Code, as amended, which will likely delay
the need to make additional distributions to maintain the Company's REIT status.

Share Repurchases



In May 2020, 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 2021 if not
terminated earlier. During 2020, 2019 and 2018, the Company purchased, under its
Share Repurchase Program, approximately 1.5 million, 0.3 million and 6.6 million
of its common shares, respectively, at a weighted-average market purchase price
of approximately $9.42, $14.92 and $15.87 per common share, respectively, for an
aggregate purchase price, including commissions, of approximately $14.3 million,
$4.3 million and $104.3 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.
In March 2020 the Company terminated its written trading plan under the Share
Repurchase Program and did not engage in additional repurchases under the Share
Repurchase Program during the balance of 2020. 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 any applicable restrictions under the Company's unsecured
credit facilities. 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, share repurchases are currently subject to certain restrictions
that apply during the Covenant Waiver Period pursuant to the terms of the June
2020 amendments to the Company's unsecured credit facilities. 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

                                       50

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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, 2020, the Company
held approximately $25.3 million in reserve related to these properties. During
2020, the Company invested approximately $37.6 million in capital expenditures,
which was approximately $50 million less than originally planned as the Company
postponed all planned non-essential capital improvements after March 2020 in
order to maintain a sound liquidity position as a result of COVID-19. The
Company anticipates spending approximately $25 to $30 million during 2021, which
includes various renovation projects. The amended covenants on the Company's
unsecured debt contain restrictions on the amount and type of spending for
capital improvements during the Covenant Waiver Period, as discussed further in
"Capital Resources" above. The Company does not currently have any existing or
planned projects for new property development.

Hotel Purchase Contract Commitments



As of December 31, 2020, the Company had one outstanding contract, which was
entered into prior to 2020, for the potential purchase of a newly developed
hotel for a total expected purchase price of approximately $49.6 million. The
hotel was completed and opened for business in February 2021, at which time
closing on this hotel occurred. The Company utilized borrowings under its
revolving credit facility to purchase the hotel.

Lease Commitments



Under the terms of the Company's ground leases, certain minimum lease payments
are subject to change based on criteria specified in the lease. Minimum lease
payments may be estimated if the change date occurs and the new minimum lease
payments are not yet determinable. During 2019, the Company estimated a required
increase in lease payments under one of its finance ground leases, resulting in
an increase in the finance ground lease right-of-use ("ROU") asset and liability
at the anticipated date of the change. The amount of the increase and the
effective date of the change are subject to agreement with the lessor and could
increase in the future. As of December 31, 2020, the Company and the lessor had
not reached an agreement on the increase in future lease payments and, as a
result, the projected future lease payments and impact on the lease ROU asset
and liability is uncertain. See Note 10 titled "Lease Commitments" in Part II,
Item 8, of the Consolidated Financial Statements and Notes thereto, appearing
elsewhere in this Annual Report on Form 10-K, for additional information.

Cash Management Activities



As part of the cost sharing arrangements discussed in Note 6 titled "Related
Parties" in Part II, Item 8, of the Consolidated Financial Statements and Notes
thereto, appearing elsewhere 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 Agreements



Each of the Company's 234 hotels owned as of December 31, 2020 is operated and
managed under separate management agreements with 17 hotel management companies,
none of which are affiliated with the Company. Fifteen of the Company's hotels
are managed by affiliates of Marriott or Hilton. 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" in Part II, Item 8, of the
Consolidated Financial Statements and Notes thereto, appearing elsewhere 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.

Business 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.

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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 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 did not have as
significant of an impact on the overall fluctuations in occupancy rates and
hotel revenues in the first half of 2020, although the Company experienced some
seasonal decrease in demand in November and December. 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.

Critical Accounting Policies



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

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 Losses 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. The
analysis compares each property's net book value to each property's estimated
operating income using current operating results for each stabilized property
and projected stabilized operating results based on the property's market for
properties that recently opened, were recently renovated or experienced other
short-term business disruption. 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 one property recorded
in 2020, one property recorded in 2019 and three properties recorded in 2018
totaling approximately $5.1 million, $6.5 million and $3.1

                                       52

--------------------------------------------------------------------------------
million, respectively, as discussed herein in Note 3 titled "Assets Held for
Sale and Dispositions" in Part II, Item 8, of the Consolidated Financial
Statements and Notes thereto, appearing elsewhere in this Annual Report on Form
10-K.

New Accounting Standards

See Note 1 titled "Organization and Summary of Significant Accounting Policies"
in Part II, Item 8 of the Consolidated Financial Statements and Notes thereto,
appearing elsewhere in this Annual Report on Form 10-K, for information on the
adoption of the new fair value measurement accounting standard on January 1,
2020 and the guidance in the reference rate reform accounting standard effective
in March 2020.

Subsequent Events

On February 18, 2021, the Company closed on the purchase of the newly developed
176-room Hilton Garden Inn in Madison, Wisconsin, for a gross purchase price of
approximately $49.6 million, utilizing borrowings on the Company's revolving
credit facility.

                                       53

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Latest news about Apple Hospitality REIT, Inc.

BofA Securities Lowers Apple Hospitality REIT Price Objective to $17 from $18	Apr. 22	MT
Apple Hospitality REIT, Inc. Announces Monthly Cash Distribution, Payable on May 15, 2024	Apr. 18	CI
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Apple Hospitality REIT Acquires AC Hotel by Marriott Washington DC Convention Center for $116.8 Million	Mar. 27	MT
Apple Hospitality REIT, Inc. Announces Acquisition of 234-Room AC Hotel by Marriott Washington DC Convention Center	Mar. 27	CI
Apple Hospitality REIT, Inc. completed the acquisition of AC Hotel by Marriott Washington DC Convention Center for approximately $120 million.	Mar. 26	CI
Apple Hospitality REIT, Inc. Declares Regular Monthly Cash Distribution on Common Share, Payable on April 15, 2024	Mar. 18	CI
Transcript : Apple Hospitality REIT, Inc., Q4 2023 Earnings Call, Feb 23, 2024	Feb. 23
Apple Hospitality REIT Says About $335 Million Remaining Under Share Repurchase Program at Year-End 2023	Feb. 22	MT
Apple Hospitality REIT Modified FFO Declines Whle Revenue Increases	Feb. 22	MT
Earnings Flash (APLE) APPLE HOSPITALITY REIT Reports Q4 Revenue $312.5M	Feb. 22	MT
Tranche Update on Apple Hospitality REIT, Inc.'s Equity Buyback Plan announced on April 23, 2015.	Feb. 22	CI
Apple Hospitality REIT, Inc. Reports Earnings Results for the Full Year Ended December 31, 2023	Feb. 22	CI
Apple Hospitality REIT, Inc. Provides Earnings Guidance for the Year Ending December 31, 2024	Feb. 22	CI
Apple Hospitality REIT, Inc. Reports Earnings Results for the Fourth Quarter Ended December 31, 2023	Feb. 22	CI
Apple Hospitality REIT Maintains Monthly Distribution at $0.08 per Share, Payable March 15 to Shareholders of Record Feb. 29	Feb. 16	MT
Apple Hospitality REIT, Inc. Declares Regular Monthly Cash Distribution, Payable on March 15, 2024	Feb. 16	CI
Apple Hospitality REIT Maintains Monthly Dividend at $0.08 a Share, Payable Feb. 15 to Shareholders of Record on Jan. 31	Jan. 19	MT
Apple Hospitality REIT, Inc. Announces Monthly Distribution, Payable on February 15, 2024	Jan. 19	CI
North American Morning Briefing : Samsung Warning Knocks Tech Stocks	Jan. 09	DJ
BofA Securities Downgrades Apple Hospitality REIT to Neutral From Buy, Trims Price Target to $18 From $19	Jan. 08	MT
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Wells Fargo Adjusts Price Target on Apple Hospitality REIT to $18 From $17, Keeps Equalweight Rating	Dec. 22	MT

Chart Apple Hospitality REIT, Inc.

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Company Profile

Apple Hospitality REIT, Inc. is a real estate investment trust (REIT) that owns a diverse portfolio of upscale, room-focused hotels in the United States. The Company's portfolio consists of about 224 hotels with more than 29,886 guest rooms located in 87 markets throughout 37 states as well as one property leased to third parties. Its hotel portfolio consists of 100 Marriott-branded hotels, 118 Hilton-branded hotels and five Hyatt-branded hotels. Its hotels operate under Marriott or Hilton brands. The hotels are operated and managed under separate management agreements with 16 hotel management companies, consisting of Hilton Garden Inn, Hampton, Courtyard, Residence Inn, Homewood Suites, SpringHill Suites, Fairfield, Home2 Suites, TownePlace Suites, AC Hotels, Hyatt Place, Marriott, Embassy Suites, Aloft, and Hyatt House. Its hotels are located in various states, including Alaska, Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Kansas, Louisiana, Michigan, and others.

Sector

Specialized REITs

Calendar

2024-05-06 - Q1 2024 Earnings Release

Related indices

Russell 2000

More about the company

Income Statement Evolution

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Ratings for Apple Hospitality REIT, Inc.

Trading Rating

Investor Rating

ESG Refinitiv

B-

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Analysts' Consensus

Sell

Buy

Mean consensus

OUTPERFORM

Number of Analysts

Last Close Price

15 USD

Average target price

17.86 USD

Spread / Average Target

+19.05%

Consensus

EPS Revisions

Estimates Revisions

Quarterly earnings - Rate of surprise

Company calendar

Sector Hospitality REITs

	1st Jan change	Capi.
APPLE HOSPITALITY REIT, INC.	-9.69%	3.64B
VICI PROPERTIES, INC.	-10.70%	29.78B
HOST HOTELS & RESORTS, INC.	-3.13%	13.29B
GAMING AND LEISURE PROPERTIES, INC.	-13.96%	11.79B
RYMAN HOSPITALITY PROPERTIES, INC.	-2.73%	6.33B
PARK HOTELS & RESORTS INC.	+8.30%	3.44B
CAPITALAND ASCOTT TRUST	-9.09%	2.5B
JAPAN HOTEL REIT INVESTMENT CORPORATION	+19.51%	2.43B
COVIVIO HOTELS	-8.54%	2.37B
SUNSTONE HOTEL INVESTORS, INC.	-4.01%	2.1B

Hospitality REITs

Apple Hospitality REIT, Inc.

Equities

APLE

US03784Y2000

Specialized REITs

APPLE HOSPITALITY REIT : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

EPS Revisions