Sunstone Hotel Investors : 2023 Annual Report Annual Report 2023

2023 Annual Report

SUNSTONE HOTEL INVESTORS, INC.

2023 ANNUAL REPORT

Property Locations and Room Counts

California	Florida
Four Seasons Resort Napa Valley, 85	Oceans Edge Resort & Marina, Key West, 175
Hilton San Diego Bayfront, 1,190	Renaissance Orlando at SeaWorld®, 781
Hyatt Regency San Francisco, 821	The Confidante Miami Beach, 339

Montage Healdsburg, 130	Massachusetts
Renaissance Long Beach, 374	Marriott Boston Long Wharf, 415
Washington DC
Oregon
The Westin Washington, DC Downtown, 807
The Bidwell Marriott Portland, 258
Hawaii
Wailea Beach Resort, Maui, 547
Louisiana
Hilton New Orleans St. Charles, 252
JW Marriott New Orleans, 501

TO THE STOCKHOLDERS OF

SUNSTONE HOTEL INVESTORS, INC.:

2023 was a pivotal year for Sunstone. Our balanced portfolio continued to benefit from improving industry fundamentals and the execution of our stated strategy - providing the Company with a foundation for sustained growth in earnings and net asset value ("NAV") per share. Here is a review of our strategy, recent events, and outlook.

Our Strategy

Our strategy is simple, focused, and designed to produce superior relative and absolute stockholder returns through the acquisition, optimization, and disposition of hotels and resorts that we believe will deliver risk-adjusted returns well in excess of our cost of capital. We believe that actively recycling capital, thoughtfully investing in our portfolio, and returning capital to stockholders will provide our owners with superior returns.

Capital Recycling

Hotel and resort ownership is a cyclical and capital- intensive business. While we believe the location and physical attributes of the real estate we own are paramount to a successful investment, the timing of our capital allocation is just as important. Our ownership horizon must adhere to the investment lifecycle that maximizes the return of each asset. Once we have executed our investment plan for each hotel and maximized the return on our invested capital, we will harvest that value and recycle those proceeds into higher growth opportunities.

Portfolio Investment

We deploy capital into our portfolio where we believe we can create value by investing in our real estate. Our ability to create value is how we generate returns for

our investors. We focus on the investment lifecycle of our assets to determine the appropriate time and amount to invest and when to optimally harvest gains. While this is easier said than done, we believe our disciplined approach and track record of portfolio investment has delivered significant value to our owners.

Return of Capital

In addition to capital recycling and investing in our portfolio, returning capital to our stockholders is the third lever we utilize to deliver superior stockholder returns. Traditionally, REITs have returned capital primarily through dividends, which are based on expectations of future earnings. We believe that our quarterly cash dividend, coupled with an additional year-end distribution, when necessary, to distribute any remaining taxable income, results in a more disciplined and beneficial distribution to our stockholders. We also return capital through strategic share repurchases, which we continued to do on an opportunistic basis in 2023.

Additionally, to enhance our ability to successfully allocate capital, we employ an appropriately levered balance sheet, which allows us to deploy capital during all phases of the operating cycle. We expect to continue utilizing our investment capacity and moderately increasing our leverage early in the operating cycle; particularly as we become more acquisitive. We anticipate that our leverage levels will decline later in the operating cycle as earnings grow and we build more financial capacity.

Lastly, we believe in and actively employ stockholder- friendly corporate governance, open communication, robust stakeholder disclosure, and compensation

2023 ANNUAL REPORT

practices that best align with stockholder interests. We know that stockholders not only own the Company but also have the final determination of the Company's future. As part of our corporate governance framework, we elect all directors annually, allow bylaws to be amended by stockholders, restrict the Board's ability to classify directors, allow proxy access, link a majority of our compensation to absolute and relative stockholder returns, employ a compensation clawback policy, and require executives and directors to hold a meaningful ownership interest in the Company.

A Review of Recent Events

In 2023, our portfolio performed well, with comparable hotel profitability exceeding that achieved in 2022, despite having two hotels under renovation. Our full-year Adjusted EBITDAre and Adjusted FFO per share both exceeded 2022 by 12.7% and 9.2%, respectively. Moreover, during 2023, we successfully executed on all aspects of our strategy: recycling capital, investing in our portfolio, and returning capital to stockholders, all of which have built a solid foundation to drive future growth in earnings and NAV per share.

Operations

The past year marked another year of improvement, especially at our convention and urban hotels as group and business transient demand continued to accelerate back to, or in excess of, pre-pandemic levels. Total revenues for the portfolio in 2023 increased to $986 million compared to $912 million in the prior year. Demand for leisure travel remained strong, and our resorts continued to perform well despite some market-specific challenges, most notably the tragic fires on Maui in August. In 2023, the comparable portfolio achieved meaningful year-over-year growth in revenue per available room and hotel profitability, increasing 5.6% and 3.2%, respectively.

In 2023, we achieved Net Income Attributable to Common Stockholders of $0.93 per share compared with $0.34 per share in 2022, and our Adjusted Funds from Operations was $0.95 per share compared with $0.87 per share in 2022.

Capital Recycling

Despite a depressed transaction environment in 2023, we sold the Boston Park Plaza for $370 million, in a

solid execution and one of the largest domestic transactions of the year. We acquired the hotel in 2013 and executed our business plan to renovate and transform the well-located, yet undercapitalized hotel; ultimately doubling its cash flow and generating over $200 million of EBITDA during our ownership. Consistent with our investment lifecycle approach, we harvested a $124 million gain on the sale, after realizing the benefits of our repositioning and avoiding significant future capital investment that we viewed as defensive and not likely to generate adequate economic return. While a portion of the sale proceeds were utilized for additional share repurchases in 2023, we maintain significant investment capacity that we are looking to redeploy into superior and more accretive growth opportunities than would have been achieved through the continued ownership of Boston Park Plaza.

Portfolio Investment

In 2023, we advanced our capital investment program, completing key projects and initiating work on several others that are expected to drive additional growth in 2024 and beyond. In October, we completed the comprehensive renovation and rebranding of the Renaissance Washington DC to The Westin Washington, DC Downtown. The fully redesigned and renovated flagship property is expected to increase cash flow over the coming quarters as we benefit from our investment and the stronger group and transient appeal of the Westin brand. Additionally, at the Wailea Beach Resort, we added a new oceanfront pool complex to enhance the guest experience and drive incremental revenue and we also installed a new solar array to expand our power generation capacity and reduce our carbon footprint. Finally, at the end of 2023, we began two important investments that will drive the next phase of earnings and NAV per share growth: the rebranding of the Renaissance Long Beach to the Marriott Long Beach Downtown and the complete reimagination of The Confidante Miami Beach to Andaz Miami Beach, a well-located, oceanfront resort. Both investments are expected to be completed in 2024 and provide the portfolio with the next layer of growth into 2025 and beyond.

Return of Capital

In 2023, we increased our quarterly common stock dividend by 40% to $0.07 per share, paid an additional $0.06 per share at year end to more fully distribute our

SUNSTONE HOTEL INVESTORS, INC.

taxable income, and also returned $56 million to stockholders through share repurchases at a meaningful discount to NAV. While our share repurchase activity remains opportunistic, our common dividend will continue to provide a more consistent return of capital. That said, since 2022, we have repurchased $165 million of our common stock, representing approximately 8% of the total shares outstanding.

Our Outlook

Looking forward to 2024, we are optimistic that our balanced portfolio will deliver additional same-store earnings growth from further recovery at our urban and convention assets and as we benefit from the recently completed investments in our portfolio. Additionally, the successful execution of our strategy in 2023 - capital recycling, portfolio investment, and returning capital to our stockholders, has provided the Company with a solid foundation that we are confident will provide sustained earnings and NAV per share growth in 2024 and beyond.

We believe our portfolio will continue to benefit from the ongoing industry recovery, and when combined with embedded earnings capacity that we have built, we should be well positioned to deliver sector-leading growth in the coming years. As always, we appreciate the continued support from our employees, our Board of Directors, our stockholders, and our partners as we continue to execute our strategy and work to deliver superior returns.

Sincerely,

Bryan A. Giglia

Chief Executive Off icer

Robert C. Springer

President and Chief Investment Off icer

Large accelerated filer  Non-acceleratedfiler 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

OR

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from	to
Commission file number 001-32319

Sunstone Hotel Investors, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland		20-1296886
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)
15 Enterprise, Suite 200
Aliso Viejo, California		92656
(Address of Principal Executive Offices)		(Zip Code)
Registrant's telephone number, including area code: [phone]
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	SHO	New York Stock Exchange
Series H Cumulative Redeemable Preferred Stock, $0.01 par value	SHO.PRH	New York Stock Exchange
Series I Cumulative Redeemable Preferred Stock, $0.01 par value	SHO.PRI	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Accelerated filer 

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit

report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No 

The aggregate market value of the voting stock held by non-affiliates of the registrant based upon the closing sale price of the registrant's common stock on June 30, 2023 as reported on the New York Stock Exchange was approximately $2.1 billion.

The number of shares of the registrant's common stock outstanding as of February 11, 2024 was 203,532,888.

Documents Incorporated by Reference

Part III of this Report incorporates by reference information from the definitive Proxy Statement for the registrant's 2024 Annual Meeting of Stockholders.

	SUNSTONE HOTEL INVESTORS, INC.
	ANNUAL REPORT ON
	FORM 10-K
	For the Year Ended December 31, 2023
	TABLE OF CONTENTS
		Page
PART I
Item 1	Business	3
Item 1A	Risk Factors	10
Item 1B	Unresolved Staff Comments	32
Item 1C	Cybersecurity	32
Item 2	Properties	33
Item 3	Legal Proceedings	33
Item 4	Mine Safety Disclosures	34
PART II
Item 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. . .	34
Item 6	Reserved	35
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	50
Item 8	Financial Statements and Supplementary Data	51
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	51
Item 9A	Controls and Procedures	51
Item 9B	Other Information	53
Item 9C	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	53
PART III
Item 10	Directors, Executive Officers and Corporate Governance	53
Item 11	Executive Compensation	53
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	53
Item 13	Certain Relationships and Related Transactions, and Director Independence	53
Item 14	Principal Accountant Fees and Services	54
PART IV
Item 15	Exhibit and Financial Statement Schedules	54
Item 16	Form 10-K Summary	58
SIGNATURES	59

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The "Company," "we," "our," and "us" refer to Sunstone Hotel Investors, Inc., a Maryland corporation, and one or more of our subsidiaries, including Sunstone Hotel Partnership, LLC, or the Operating Partnership, and Sunstone Hotel TRS Lessee, Inc., or the TRS Lessee, and, as the context may require, Sunstone Hotel Investors only or the Operating Partnership only.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report, together with other statements and information publicly disseminated by the Company, contains certain forward- looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. The Company intends such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and includes this statement for purposes of complying with these safe-harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words "anticipate," "believe," "estimate," "expect," "intend," "project" or similar expressions. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control, and which could materially affect actual results, performances or achievements. Factors that may cause actual events to differ materially from the expectations expressed or implied by any forward-looking statement include, but are not limited to the risk factors discussed in this Annual Report on Form 10-K. Accordingly, there is no assurance that the Company's expectations will be realized. Except as otherwise required by federal securities laws, the Company disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Item 1.

Business

Our Company

We were incorporated in Maryland on June 28, 2004. We are a real estate investment trust ("REIT"), under the Internal Revenue Code of 1986, as amended (the "Code"). As of December 31, 2023, we owned 14 hotels, comprised of 6,675 rooms, located in 6 states and in Washington, DC. Our portfolio consists of upper upscale and luxury hotels located in major convention, resort destination and urban markets. All of our hotels are operated under nationally recognized brands, except the Oceans Edge Resort & Marina, which has established itself in a resort destination market.

We own hotels in major convention, urban and resort destinations that benefit from significant barriers to entry by competitors and diverse economic drivers. Our mission is to be the premier stewards of capital in the lodging industry, providing superior returns to our stockholders by investing in hotels where we can add value through capital investment, hotel repositioning and asset management. In addition, we seek to capitalize on our portfolio's embedded value and balance sheet strength to actively recycle past investments into new growth and value creation opportunities in order to deliver strong stockholder returns and superior per share net asset value growth.

Our hotels are operated by third-party managers under long-term management agreements with the TRS Lessee or its subsidiaries. As of December 31, 2023, our third-party managers included: subsidiaries of Marriott International, Inc. or Marriott Hotel Services, Inc. (collectively, "Marriott"), managers of six of our hotels; Hyatt Hotels Corporation ("Hyatt"), manager of two of our hotels; and Four Seasons Hotels Limited ("Four Seasons"), Hilton Worldwide ("Hilton"), Interstate Hotels & Resorts, Inc. ("IHR") (aka Aimbridge Hospitality), Montage North America, LLC ("Montage"), Sage Hospitality Group ("Sage") and Singh Hospitality, LLC ("Singh") (aka EOS Hospitality), each a manager of one of the Company's hotels.

Competitive Strengths

We believe the following competitive strengths distinguish us from other owners of lodging properties:

• High Quality Portfolio of Hotels and Resorts.

Focus on Owning Well-Located Hotel and Resort Real Estate. We believe that we will create lasting stockholder value through the active ownership of well-locatedreal estate with a balance of convention, resort and urban assets that we believe possess unique attributes that are difficult to replicate, and most of all, whose locations are highly desirable and are relevant today and whose relevance will stand the test of time for generations to come. We believe that our portfolio provides superior long-termeconomics and reduces the risk of waning demand that often happens to undercapitalized and poorly located hotels and resorts.

Presence in Key Markets. We believe that our hotels are located in many of the most desirable U.S. markets with enduring demand generators and significant barriers to entry for new supply. Our hotels are located in key urban

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gateway and convention markets and unique resort destination locations such as Boston, Key West, Maui, Miami, the Northern California counties of Napa and Sonoma, New Orleans, Orlando, Portland, San Diego, San Francisco and Washington DC. Over time, we expect the revenues of hotels located in key urban gateway and convention markets and unique resort destination locations to generate superior long-term growth rates as compared to the average for U.S. hotels, as a result of stronger and more diverse economic drivers.

Nationally Recognized Brands and Established Independents. As noted above, all but one of our hotels are operated under nationally recognized brands. We believe that affiliations with strong brands and established independents improve the appeal of our hotels to a broad set of travelers and help to drive business to our hotels.

Well Maintained Portfolio. A primary component of our business is the renovation or repositioning of our hotels. We believe that our capital renovations and repositionings have improved the competitiveness of our hotels and have helped to position our portfolio for future growth.

• Significant Liquidity Position. As of December 31, 2023, we had total cash of $493.7 million, including $67.3 million of restricted cash, and access to our undrawn $500.0 million credit facility. Adjusting for the January 2024 dividend and distribution payments of $30.0 million, our total pro forma cash including restricted cash as of December 31, 2023 would be $463.7 million. We believe our current liquidity will enable us to fund our day-to-day business needs without needing to raise additional capital through equity or debt issuances.
• Flexible Capital Structure. We believe our capital structure provides us with financial flexibility to execute our strategy. As of December 31, 2023, the weighted average term to maturity of our debt was approximately three years, and we maintained a well-staggered and manageable debt maturity profile. We seek to employ a mix of fixed and variable rate debt to achieve a competitive blended cost of financing, and we utilize interest rate derivatives to help manage interest rate risk. As of December 31, 2023, 51.2% of our outstanding debt had fixed interest rates or had been swapped to fixed interest rates. Based on the variable rates at December 31, 2023 and including the effect of our interest rate swap derivatives, the weighted average interest rate on our total debt was 5.8%. As of December 31, 2023, we also have an undrawn $500.0 million credit facility. In addition to debt, we also selectively utilize preferred equity to finance our operations, which provides additional flexibility in our capital structure. For more information on our capital structure, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
• Appropriate Leverage. We maintain an appropriately levered balance sheet which provides for significant capital allocation flexibility. We believe that by maintaining appropriate debt levels, staggering maturity dates and maintaining a highly flexible structure, we will have lower capital costs than more highly leveraged companies, or companies with limited flexibility due to restrictive covenants. Our appropriate use of leverage in our capital structure not only minimizes the risk of potential value destructive consequences in periods of economic recession or global pandemics, but also provides us with significant optionality to create stockholder value through all phases of the operating cycle.
• Strong Access to Capital. As a publicly traded REIT, over the long-term, we may benefit from greater access to a variety of forms of capital as compared to non-public investment vehicles. In addition, over the long-term, we may benefit from a lower cost of capital as compared to non-public investment vehicles as a result of our investment liquidity, balance sheet optionality, professional management and portfolio diversification.
• Seasoned Management Team. Each of our core disciplines, including asset management, acquisitions, finance and legal, are overseen by industry leaders with demonstrated track records.

Asset Management. Our asset management team is responsible for maximizing the long-term value of our real estate investments by achieving above average revenue and profit performance through proactive oversight of hotel operations. Our asset management team works with our third-party managers to drive property-level innovation, benchmark best practices and aggressively oversee hotel management teams and property plans. We work with our operators to develop hotel-level business plans, which include positioning and capital investment plans. We believe that a proactive asset management program can help grow the revenues of our hotel portfolio and maximize operational and environmental efficiency by leveraging best practices and innovations across our hotels, and by initiating well-timed and focused capital improvements aimed at improving the appeal of our hotels.

Acquisitions. Our acquisitions team is responsible for enhancing our portfolio quality and scale by executing well- timed acquisitions and dispositions that generate attractive risk-adjusted returns on our investments. We believe that our significant acquisition and disposition experience will allow us to continue to execute our strategy to recycle and redeploy capital from slower growth assets to hotels and resorts with higher long-term growth rates. We also focus on disciplined capital recycling and may selectively sell hotels that we believe have reached the end of their

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investment lifecycle, no longer fit our stated strategy, are unlikely to offer long-term returns in excess of our cost of capital, will achieve a sale price in excess of our internal valuation, or that have high risk relative to their anticipated returns.

Finance. We have a highly experienced finance team focused on minimizing our cost of capital and maximizing our financial flexibility by proactively managing our capital structure and opportunistically sourcing appropriate capital for growth, while maintaining a robust investor relations program.

Legal. Our legal team is responsible for overseeing and supporting all Company-wide legal matters, including all legal matters related to corporate oversight and governance, investment, asset management, design and construction, finance initiatives and litigation. We believe active and direct oversight of legal matters allows the Company the flexibility to pursue opportunities while minimizing legal exposure, protecting corporate assets and ultimately maximizing stockholder returns.

Business Strategy

As demand for lodging generally fluctuates with the overall economy, we seek to own well-located hotel and resort real estate that will maintain a high appeal with lodging travelers over long periods of time and will generate superior economic earnings materially in excess of recurring capital requirements. We take a lifecycle approach to hotel investment that maximizes our ability to create value during our period of ownership and opportunistically dispose of the hotel to harvest gains, realize that value, and then seek to redeploy the proceeds into new growth opportunities. Our goal is to maintain appropriate leverage and financial flexibility to position the Company to create value throughout all phases of the operating and financial cycles.

Competition

The hotel industry is highly competitive. Our hotels compete with other hotels and alternative lodging options for guests in each of their markets. Competitive advantage is based on a number of factors, including location, price, physical attributes, service levels and reputation. Competition is often specific to the individual markets in which our hotels are located and includes competition from existing and new hotels operated under brands in the luxury, upper upscale and upscale segments and competition from timeshare, vacation rentals or sharing services. Increased competition could harm our occupancy or revenues or may lead our operators to increase service or amenity levels, which may reduce the profitability of our hotels.

We believe that competition for the acquisition of hotels is widespread. We face competition from institutional pension funds, private equity investors, high net worth individuals, other REITs and numerous local, regional, national and international owners. Some of these entities may have substantially greater financial resources than we do and may be able and willing to accept more risk than we believe we can prudently manage. During times when we seek to acquire hotels, competition among potential buyers may increase the bargaining power of potential sellers, which may reduce the number of suitable investment opportunities available to us or increase pricing. Similarly, during times when we seek to sell hotels, competition from other sellers may increase the bargaining power of the potential property buyers.

Seasonality and Volatility

As is typical of the lodging industry, we experience seasonality in our business. Demand at certain of our hotels is affected by seasonal business patterns that can cause quarterly fluctuations in our revenues. Revenue distribution in 2023 generally returned to pre-pandemic seasonality patterns with revenue per quarter at the same 13 hotels we owned in both 2023 and 2022 (the "Existing Portfolio") of 24.6%, 27.3%, 24.4% and 23.7% for the first, second, third and fourth quarters, respectively. Revenue in 2022 continued to be affected by the COVID-19 pandemic, with the Omicron variant impacting travel in the first quarter of 2022, resulting in hotel revenue per quarter at the Existing Portfolio of 19.8%, 27.9%, 26.2% and 26.1% for the first, second, third and fourth quarters, respectively.

Quarterly revenue also may be adversely affected by renovations and repositionings, our managers' effectiveness in generating business and by events beyond our control, such as economic and business conditions, including a U.S. recession or increased inflation, trade conflicts and tariffs, changes impacting global travel, regional or global economic slowdowns, any flu or disease- related pandemic that impacts travel or the ability to travel, weather patterns, the adverse effects of climate change, the threat of terrorism, terrorist events, civil unrest, government shutdowns, events that reduce the capacity or availability of air travel, increased competition from other hotels in our markets, new hotel supply or alternative lodging options and unexpected changes in business, commercial travel, leisure travel and tourism.

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