DIAMONDROCK HOSPITALITY CO Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

The following discussion should be read in conjunction with the consolidated
financial statements and related notes thereto included elsewhere in this
report. This discussion contains forward-looking statements about our business.
These statements are based on current expectations and assumptions that are
subject to risks and uncertainties. Actual results could differ materially
because of factors discussed in "Special Note About Forward-Looking Statements"
and "Risk Factors" contained in this Annual Report on Form 10-K and in our other
reports that we file from time to time with the SEC.

Overview

DiamondRock Hospitality Company is a lodging-focused real estate company
operating as a REIT for federal income tax purposes that owns a portfolio of
premium hotels and resorts. As of December 31, 2021, we owned a portfolio of 32
premium hotels and resorts that contain 9,349 guest rooms located in 22
different markets in North America. On January 6, 2022, we acquired the
Tranquility Bay Beachfront Resort in Marathon, Florida.

As an owner, rather than an operator, of lodging properties, we receive all of
the operating profits or losses generated by our hotels after the payment of
fees due to hotel managers and hotel brands, which are calculated based on the
revenues and profitability of each hotel.

Key financial position and operational performance indicators

We use a variety of operating and other information to evaluate the financial
condition and operating performance of our business. These key indicators
include financial information that is prepared in accordance with U.S. Generally
Accepted Accounting Principles ("U.S. GAAP"), as well as other financial
information that is not prepared in accordance with U.S. GAAP. In addition, we
use other information that may not be financial in nature, including statistical
information and comparative data. We use this information to measure the
performance of individual hotels, groups of hotels and/or our business as a
whole. We periodically compare historical information to our internal budgets as
well as industry-wide information. These key indicators include:

•Percentage of occupancy;

•Average daily rate (or ADR);

• Room turnover per Room available (or RevPAR);

•Earnings Before Interest, Income Taxes, Depreciation and Amortization (or
EBITDA), Earnings Before Interest, Income Taxes, Depreciation and Amortization
for real estate (or EBITDAre), and Adjusted EBITDA; and

•Funds From Operations (or FFO) and Adjusted FFO.

Occupancy, ADR and RevPAR are commonly used measures within the hotel industry
to evaluate operating performance. RevPAR, which is calculated as the product of
ADR and occupancy percentage, is an important statistic for monitoring operating
performance at the individual hotel level and across our business as a whole. We
evaluate individual hotel RevPAR performance on an absolute basis with
comparisons to budget and prior periods, as well as on a company-wide and
regional basis. ADR and RevPAR include only room revenue. Room revenue comprised
approximately 70% of our total revenues for the year ended December 31, 2021 and
is dictated by demand, as measured by occupancy percentage, pricing, as measured
by ADR, and our available supply of hotel rooms.

Our ADR, occupancy percentage and RevPAR performance may be impacted by
macroeconomic factors such as U.S. economic conditions generally, regional and
local employment growth, personal income and corporate earnings, office vacancy
rates and business relocation decisions, airport and other business and leisure
travel, increased use of lodging alternatives, new hotel construction and the
pricing strategies of competitors. In addition, our ADR, occupancy percentage
and RevPAR performance is dependent on the continued success of our hotels'
global brands.

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We also use EBITDA, EBITDAre, Adjusted EBITDA, FFO and Adjusted FFO as measures
of the financial performance of our business. See "Non-GAAP Financial Measures."

Covid-19 pandemic

COVID-19 has had and continues to have a significant effect on our industry and
our business. The demand for lodging materially decreased beginning in March
2020 and, as a result of pandemic-induced government mandates and health
official recommendations, twenty of our hotels suspended operations for a period
of time in 2020. Four of our hotels suspended operations for a period of time in
2021. As of December 31, 2021, all of our hotels were open.

The COVID-19 pandemic showed signs of moderating in the first half of 2021;
however, case counts increased in the second half of 2021 with the emergence of
the Delta and Omicron variants. Whereas demand at our leisure-focused hotels
improved in 2021, demand at our other hotels remains at historically low levels.
Therefore, we expect the COVID-19 pandemic will continue to have a material
adverse impact on our results of operations, financial position and cash flow in
2022.

The efficacy and wide distribution of COVID-19 vaccines have generally reduced the spread and severity of COVID-19 infections. We believe that better global distribution of the vaccine will likely have a positive impact on the timing, pace and magnitude of a recovery in housing demand. The emergence of new variant strains of COVID-19, however, has the potential to slow or reverse these positive trends expected in 2022 and beyond.

See also “Risk factors” in Part I, point 1A of this report.

Preview of 2021

Key highlights for 2021 include:

Hotel Dispositions. On April 30, 2021, we sold a wholly owned subsidiary of the
Company that owned Frenchman's Reef for $35.0 million in cash upon closing, as
well as a participation right in the future profits of the hotel once certain
return metrics are achieved. On June 30, 2021, we sold The Lexington Hotel for
$185.3 million.

Hotel Acquisitions. On July 29, 2021, we acquired the Bourbon Orleans Hotel
located in New Orleans, Louisiana, for net consideration of $90.1 million,
including prorations and transaction costs. On July 30, 2021, we acquired the
Henderson Park Inn located in Destin, Florida, for net consideration of $26.4
million, including prorations and transaction costs. On December 23, 2021, we
acquired the Henderson Beach Resort located in Destin, Florida, for net
consideration of $110.1 million, including prorations and transaction costs.

Financing Activity. On December 27, 2021, we extended the mortgage loan secured
by the Salt Lake City Marriott Downtown at City Creek. The loan now matures in
January 2023.

Outlook for 2022

The U.S. economy continues to recover from a severe global pandemic that
disproportionately impacted hospitality industries. Broad economic measures such
as Gross Domestic Product (GDP) and corporate profits have surpassed their
pre-pandemic levels and the unemployment rate is again approaching a 50-year
low. Travel demand, however, has yet to reattain pre-pandemic levels of activity
but continues to show steady improvement. We expect the U.S. will experience
RevPAR growth in 2022 from 2021 due to continued strength in leisure travel and
an emerging recovery in corporate travel facilitated by COVID-19 protocols and
widespread vaccination of eligible individuals.

Our portfolio is composed primarily of luxury and upper-upscale resorts and
hotels located in popular leisure destinations and major urban markets. We
expect our destination hotels will continue to outperform the broader U.S.
market for the foreseeable future. The strong consumer preference for drive-to
leisure destinations is expected to persist into 2022. Longer term, we believe
robust secular demand for experiential leisure travel, low growth in directly
competitive supply, and targeted investments to renovate and reposition
destination hotels can extend and intensify our growth. We believe urban hotels
should also experience strong growth in 2022 and could outpace the U.S. overall
as employers encourage return-to-office and business travel for their employees.
Business travel activity increased slowly, but steadily, from depressed levels
throughout 2021, and early indications suggest growth will accelerate in
mid-2022. Group room nights on the books at the beginning of 2022 is nearly 40%
above group room nights realized in 2021, which is approximately 75% of our
average bookings in a typical, pre-pandemic year. We anticipate industry
profitability will be challenged by a short booking window and guest mix that
makes it
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challenging to maximize room rates as well as pressure on labor costs due to
labor scarcity. We continue to work closely with our hotel managers to maximize
revenue and identify operating efficiencies.

We expect the resumption of corporate travel will enable the industry to
materially improve profitability in 2022 and we enter the year with several
favorable factors, including the following: (1) ownership of a high-quality
portfolio, with a meaningful concentration in destination resort locations, (2)
internal growth from five recent or pending hotel upbrandings, (3) internal
growth from the continuation of our asset management initiatives and ROI
projects, (4) expense savings from the conversion of six formerly
Marriott-managed contracts to Marriott franchises, (5) conservative debt capital
structure with limited near-term debt maturities, and (6) liquidity of $441.3
million as of December 31, 2021.

Operating results

The following table sets forth certain operating information for the year ended
December 31, 2021 for each of the hotels we owned during 2021. The table
indicates the operating status of each hotel and the occupancy percentage, ADR
and RevPAR for each hotel for the portion of the year ended December 31, 2021
that the hotel was open and owned by the Company.

Hotels open all year ended December 31, 2021

                                                                                                                                                                                                               % Change
                                                                                                                           Number of                                                                          from 2020
Property                                             Location                                                                Rooms             Occupancy (%)             ADR ($)           RevPAR($)            RevPAR
Westin Boston Seaport
District (1)                              Boston, Massachusetts                                                              793                         44.6  %         196.14               87.51              152.0  %
Salt Lake City Marriott
Downtown at City Creek                    Salt Lake City, Utah                                                               510                         43.3  %       $ 145.42          $    63.04               89.1  %
Worthington Renaissance
Fort Worth Hotel                          Fort Worth, Texas                                                                  504                         53.6  %         155.68               83.37               65.7  %
Westin San Diego Downtown                 San Diego, California                                                              436                         52.5  %         159.11               83.49               39.1  %
Westin Fort Lauderdale
Beach Resort                              Fort Lauderdale, Florida                                                           433                         60.3  %         242.16              146.01               64.1  %
Westin Washington D.C.
City Center                               Washington, D.C.                                                                   410                         29.5  %         150.37               44.34               28.0  %
Hilton Boston
Downtown/Faneuil Hall (1)                 Boston, Massachusetts                                                              403                         60.2  %         204.39              122.97              201.2  %
The Hythe Vail, a Luxury
Collection Resort
(formerly the Vail
Marriott Mountain Resort )
(1)                                       Vail, Colorado                                                                     344                         45.2  %         356.33              161.20               34.9  %
Courtyard New York
Manhattan/Midtown East                    New York, New York                                                                 321                         76.9  %         201.68              155.12               91.6  %
Atlanta Marriott
Alpharetta                                Atlanta, Georgia                                                                   318                         44.9  %         113.77               51.14               63.7  %
The Gwen Hotel (1)                        Chicago, Illinois                                                                  311                         54.3  %         251.51              136.68              183.0  %
Bethesda Marriott Suites                  Bethesda, Maryland                                                                 272                         34.6  %         113.93               39.37               26.0  %
Hilton Burlington Lake
Champlain (1)                             Burlington, Vermont                                                                258                         60.8  %         236.55              143.78              327.3  %
Hotel Palomar Phoenix (1)                 Phoenix, Arizona                                                                   242                         58.8  %         169.73               99.73               58.4  %
Bourbon Orleans Hotel (2)                 New Orleans, Louisiana                                                             218                         55.3  %         219.19              121.25                   N/A
Henderson Beach Resort (3)                Destin, Florida                                                                    216                         55.9  %         437.94              244.88              264.3  %
JW Marriott Denver Cherry
Creek (1)                                 Denver, Colorado                                                                   199                         63.9  %         261.17              166.79              126.5  %
Margaritaville Beach House
Key West (formerly the
Barbary Beach House Key
West ) (1)                                Key West, Florida                                                                  186                         84.6  %         384.58              325.51              173.8  %
The Lodge at Sonoma Resort
(1)                                       Sonoma, California                                                                 182                         59.2  %         360.12              213.28              204.9  %
Courtyard Denver Downtown
(1)                                       Denver, Colorado                                                                   177                         60.0  %         156.54               93.99              163.0  %
Renaissance Charleston
Historic District Hotel                   Charleston, South Carolina                                                         167                         81.5  %         308.52              251.36              159.7  %
Kimpton Shorebreak Resort                 Huntington Beach, California                                                       157                         66.9  %         311.01              208.15               69.0  %
Cavallo Point, The Lodge
at the Golden Gate (1)                    Sausalito, California                                                              142                         45.5  %         652.13              296.95              144.9  %
Havana Cabana Key West (1)                Key West, Florida                                                                  106                         90.2  %         285.74              257.78              104.2  %
Hotel Emblem San Francisco
(1)                                       San Francisco, California                                                           96                         44.5  %         158.29               70.38               34.3  %
L'Auberge de Sedona                       Sedona, Arizona                                                                     88                         80.0  %         920.04              736.34               70.3  %


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The Landing Lake Tahoe Resort       South Lake Tahoe,
& Spa (1)                           California                                                                            82                  45.0  %         484.40               217.76                    13.9    %
Orchards Inn Sedona (1)             Sedona, Arizona                                                                       70                  71.8  %         304.71               218.91                    87.3    %
Henderson Park Inn (4)              Destin, Florida                                                                       37                  82.8  %         575.63               476.67                    16.2    %
TOTAL/WEIGHTED AVERAGE FOR
OPEN HOTELS                                                                                                            7,678                  54.3  %       $ 242.87          $    131.80                    98.8    %

Hotels closed for part of the year ended December 31, 2021

                                                                                                                    Number of                                                                           % Change
Property                                  Location              Date of Closure         Date of Reopening             Rooms            Occupancy (%)          ADR ($)           RevPAR ($)          from 2020 RevPAR
Chicago Marriott Downtown                                          4/10/2020                 9/1/2020
Magnificent Mile (1)                Chicago, Illinois              1/3/2021                 4/15/2021                  1,200                  31.2  %       $ 197.29          $     61.53                   199.0    %
The Lexington Hotel (1) (5)         New York, New York             3/29/2020                    -                        725                     -  %              -                    -                  (100.0)   %
Hilton Garden Inn New
York/Times Square Central (1)       New York, New York             3/29/2020                 5/3/2021                    282                  57.0  %         204.33               116.51                   294.5    %
Courtyard New York
Manhattan/Fifth Avenue (1)          New York, New York             3/27/2020                 6/1/2021                    189                  54.3  %         211.93               115.08                   264.5    %
TOTAL/WEIGHTED AVERAGE FOR
CLOSED HOTELS                                                                                                          2,396                  33.0  %         201.42                66.40                   116.7    %

TOTAL/WEIGHTED AVERAGE                                                                                                10,074                  49.8  %       $ 237.13          $    118.15                   100.8    %


________________
(1)Operations were suspended for a portion of the year ended December 31, 2020.
(2)The operating statistics reflect our ownership period from July 29, 2021 to
December 31, 2021. The hotel was closed during the comparable period in 2020.
(3)The operating statistics reflect our ownership period from December 23, 2021
to December 31, 2021.
(4)The operating statistics reflect our ownership period from July 30, 2021 to
December 31, 2021.
(5)The hotel was sold on June 30, 2021. The operating statistics reflect the
period from January 1, 2021 to June 30, 2021.


Comparison of the year ended December 31, 2021 to the year ended December 31, 2020

Our results of operations for the year ended December 31, 2021 improved relative
to the year ended December 31, 2020 as all but four of our hotels were open for
the entire year and the U.S. economy recovered from the impacts of COVID-19,
government mandates eased, vaccines were distributed, and travel increased.

Income. Revenue primarily consists of rooms, food and beverage and other operating revenue from our hotels, as follows (in millions):

                                        Year Ended December 31,

                                           2021                2020        % Change
             Rooms                $      399.1               $ 196.7        102.8  %
             Food and beverage           117.7                  68.6         71.7
             Other                        50.3                  34.2         47.1
             Total revenues       $      567.1               $ 299.5         89.3  %


Our total revenues have increased $267.6 million from $299.5 million for the year ended December 31, 2020 for $567.1 million for the year ended December 31, 2021.

The following are key hotel operating statistics for the years ended
December 31, 2021 and 2020. The 2020 amounts reflect the period in 2020
comparable to our ownership period in 2021 for our dispositions of Frenchman's
Reef and The Lexington Hotel and the acquisitions of the Bourbon Orleans Hotel,
Henderson Park Inn, and Henderson Beach Resort.
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                     Year Ended December 31,
                    2021                  2020         % Change
Occupancy %           49.8   %             28.1  %       21.7  %
ADR            $    237.13             $ 209.10          13.4  %
RevPAR         $    118.15             $  58.83         100.8  %


Food and beverage revenues increased $49.1 million of the year ended
December 31, 2020mainly due to an increase in point-of-sale revenue.

Other revenues, which primarily represent spa, parking, resort fees and
attrition and cancellation fees, increased $16.1 million from the year ended
December 31, 2020, primarily due to an increase in resort fees and parking.
Hotel operating expenses. The operating expenses consisted of the following (in
millions):

                                                          Year Ended December 31,

                                                          2021                 2020                % Change
Rooms departmental expenses                         $       102.2          $     68.6                   49.0  %
Food and beverage departmental expenses                      89.8                58.4                   53.8
Other departmental expenses                                  12.3                 8.3                   48.2
General and administrative                                   58.9                45.0                   30.9
Utilities                                                    18.3                16.0                   14.4
Repairs and maintenance                                      30.7                24.1                   27.4
Sales and marketing                                          37.7                28.7                   31.4
Franchise fees                                               18.7                10.1                   85.1
Base management fees                                          9.7                 3.6                  169.4
Incentive management fees                                     0.5                   -                  100.0
Property taxes                                               50.5                54.5                   (7.3)
Other fixed charges                                          19.4                17.0                   14.1
Severance costs                                              (0.1)                7.6                 (101.3)

Professional fees and pre-opening costs related to Frenchman’s Reef

                                              1.4                 1.0                   40.0
Lease expense (cash and non-cash)                            11.7                11.4                    2.6
Total hotel operating expenses                      $       461.7          $    354.3                   30.3  %



Our hotel operating expenses increased $107.4 million from $354.3 million for
the year ended December 31, 2020 to $461.7 million for the year ended
December 31, 2021. For the year ended December 31, 2020, we recognized $7.6
million of severance costs at our properties in connection with the COVID-19
pandemic.

Depreciation and amortization. Our depreciation and amortization expense
decreased $11.8 million from the year ended December 31, 2020. This is primarily
due to the timing of fully depreciated capital expenditures and the sale of The
Lexington Hotel on June 30, 2021.

Impairment losses. During the year ended December 31, 2021, we recorded
impairment losses of $11.5 million related to Frenchman's Reef, which was sold
on April 30, 2021, and $115.2 million related to The Lexington Hotel, which was
sold on June 30, 2021. During the year ended December 31, 2020, we recorded an
impairment loss of $174.1 million related to Frenchman's Reef.

Corporate expenses. Corporate expenses principally consist of employee-related
costs, including base payroll, bonus and restricted stock. Corporate expenses
also include corporate operating costs, professional fees and directors' fees.
Our corporate expenses increased $5.2 million, from $27.4 million for the year
ended December 31, 2020 to $32.6 million for the year ended December 31, 2021.
The increase is primarily due to an increase in employee-related compensation
and other employee-related expenses.

Business interruption insurance income. For the year ended December 31, 2021, we
recognized $0.7 million of business interruption insurance income related to the
Caldor wildfires at The Landing Lake Tahoe Resort & Spa, which caused the hotel
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to be closed for 21 days. For the year ended December 31, 2020, we recognized
$2.2 million of business interruption insurance income related to lost revenue
at the Westin Boston Seaport District due to the COVID-19 pandemic.

Interest expense. Our interest expense was $37.0 million and $54.0 million for
the years ended December 31, 2021 and December 31, 2020, respectively, and is
comprised of the following (in millions):

                                                             Year Ended December 31,
                                                                 2021               2020
Mortgage debt interest                                  $       24.9              $ 26.2
Term loan interest                                              14.8                13.4
Credit facility interest and unused fees                         2.4        

4.5

Amortization of debt issuance costs and debt premium             2.6        

2.0

Capitalized interest                                               -        

(2.1)

Interest rate swap mark-to-market                               (7.7)               10.0
                                                        $       37.0              $ 54.0



The decrease in interest expense is primarily related to the mark-to-market of
our interest rate swaps and lower average outstanding borrowings on our credit
facility in 2021, partially offset by the cessation of interest capitalization
due to ceasing reconstruction of Frenchman's Reef.

Income taxes. We recorded income tax expense of $3.3 million in 2021 and income
tax benefit of $26.5 million in 2020. The 2021 income tax expense was incurred
on the $39.5 million pre-tax income of our TRSs. The 2021 income tax provision
includes a valuation allowance of $1.4 million. The 2020 income tax benefit is
net of a valuation allowance of $24.9 million. These valuation allowances were
recognized based on assessments of our ability to utilize our net operating loss
carryforwards in future years.

Comparison of the year ended December 31, 2020 to the year ended December 31, 2019

In response to the COVID-19 pandemic, we suspended operations at 20 of our 30
previously operating hotels for a portion of the year ended December 31, 2020.
Seventeen of these hotels reopened by December 31, 2020. Three of our previously
operating hotels were closed as of December 31, 2020.

Income. Revenue primarily consists of rooms, food and beverage and other operating revenue from our hotels, as follows (in millions):

                                        Year Ended December 31,

                                           2020                2019        % Change
             Rooms                $      196.7               $ 661.2        (70.2) %
             Food and beverage            68.6                 215.3        (68.1)
             Other                        34.2                  61.6        (44.5)
             Total revenues       $      299.5               $ 938.1        (68.1) %


Our total revenues have decreased $638.6 million from $938.1 million for the year ended December 31, 2019 for $299.5 million for the year ended December 31, 2020.

The following are key hotel operating statistics for the years ended December
31, 2020 and 2019.

                                     Year Ended December 31,
                                    2020                  2019         % Change
                Occupancy %           27.0   %             79.1  %      (52.1) %
                ADR            $    207.68             $ 238.63         (13.0) %
                RevPAR         $     55.99             $ 188.75         (70.3) %


Food and beverage revenues declined $146.7 million of the year ended December 31, 2019.

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Other revenues, which primarily represent spa, parking, resort fees and
attrition and cancellation fees, decreased $27.4 million from the year ended
December 31, 2019.
Hotel operating expenses. The operating expenses consisted of the following (in
millions):

                                                          Year Ended December 31,

                                                          2020                 2019                % Change
Rooms departmental expenses                         $        68.6          $    166.9                  (58.9) %
Food and beverage departmental expenses                      58.4               137.9                  (57.7)
Other departmental expenses                                   8.3                15.7                  (47.1)
General and administrative                                   45.0                83.3                  (46.0)
Utilities                                                    16.0                20.6                  (22.3)
Repairs and maintenance                                      24.1                35.3                  (31.7)
Sales and marketing                                          28.7                66.9                  (57.1)
Franchise fees                                               10.1                26.9                  (62.5)
Base management fees                                          3.6                19.8                  (81.8)
Incentive management fees                                       -                 5.7                 (100.0)
Property taxes                                               54.5                57.6                   (5.4)
Other fixed charges                                          17.0                23.7                  (28.3)
Severance costs                                               7.6                   -                  100.0

Professional fees and pre-opening costs related to Frenchman’s Reef

                                              1.0                17.8                  (94.4)
Lease expense (cash and non-cash)                            11.4                12.7                  (10.2)
Total hotel operating expenses                      $       354.3          $    690.8                  (48.7) %



Our hotel operating expenses decreased $336.5 million from $690.8 million for
the year ended December 31, 2019 to $354.3 million for the year ended December
31, 2020. For the year ended December 31, 2020, we recognized $7.6 million of
severance costs at our properties in connection with the COVID-19 pandemic.
Additionally, in connection with the change in hotel manager of the Renaissance
Charleston Historic District Hotel, we recognized $1.4 million of accelerated
amortization of the unfavorable management agreement liability during the year
ended December 31, 2020, which reduced base management fees.

Depreciation and amortization. Our depreciation charges have decreased $3.4 million of the year ended December 31, 2019. This is primarily due to the timing of fully amortized capital expenditures.

Impairment losses. During the year ended December 31, 2020we recorded an impairment loss of $174.1 million linked to Frenchman’s Reef. No impairment was recognized during the year ended December 31, 2019.

Corporate expenses. Corporate expenses principally consist of employee-related
costs, including base payroll, bonus and restricted stock. Corporate expenses
also include corporate operating costs, professional fees and directors' fees.
Our corporate expenses decreased $0.8 million, from $28.2 million for the year
ended December 31, 2019 to $27.4 million for the year ended December 31, 2020.
The decrease is primarily due to a decrease in employee compensation, travel
costs, and certain professional fees, partially offset by an increase in legal
fees.

Business interruption insurance income. For the year ended December 31, 2020, we
recognized $2.2 million of business interruption insurance income related to
lost revenue at the Westin Boston Waterfront due to the COVID-19 pandemic. In
September 2017, Hurricane Irma caused significant damage to Frenchman's Reef and
resulted in lost revenue and additional expenses covered under our insurance
policy. For the year ended December 31, 2019, we recognized $8.8 million of
business interruption insurance income related to the Frenchman's Reef insurance
claim.

Gain on home insurance settlement. In December 2019, we have settled our insurance claim for property damage related to Frenchman’s Reef. We recorded a gain on insurance settlement of $144.2 millionwhich represents the net proceeds received in excess of the book value of the damaged property written off.

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Interest expense. Our interest expense was $54.0 million and $46.6 million for
the years ended December 31, 2020 and December 31, 2019, respectively, and is
comprised of the following (in millions):

                                                             Year Ended December 31,
                                                                 2020               2019
Mortgage debt interest                                  $       26.2              $ 26.5
Term loan interest                                              13.4                13.7
Credit facility interest and unused fees                         4.5        

3.7

Amortization of debt issuance costs and debt premium             2.0        

2.1

Capitalized interest                                            (2.1)       

(1.9)

Interest rate swap mark-to-market                               10.0                 2.5
                                                        $       54.0              $ 46.6


The increase in interest expense is primarily related to the mark-to-market of our interest rate swaps.

Loss on early extinguishment of debt. On July 25, 2019, we refinanced our senior
unsecured credit facility and unsecured term loans. In connection with the
refinancing we repaid our previously existing $100 million and $200 million term
loans and recognized a $2.4 million loss on early extinguishment of debt related
to the write-off of certain unamortized debt issuance costs.

Income taxes. We recorded income tax benefit of $26.5 million in 2020 and income
tax expense of $22.0 million in 2019. The 2020 income tax benefit is net of a
valuation allowance of $24.9 million, which was recognized based on an
assessment of our ability to utilize our net operating loss carryforwards in
future years. The 2019 income tax expense includes $1.2 million of income tax
expense incurred on the $5.7 million pre-tax income of our domestic TRSs,
foreign income tax expense of $20.8 million incurred on the $132.6 million
pre-tax income of the TRS that owns Frenchman's Reef.

Cash and capital resources

Our short-term liquidity requirements consist primarily of funds necessary to
pay our scheduled debt service, operating expenses, ground lease payments (see
Note 4 to the accompanying consolidated financial statements), capital
expenditures directly associated with our hotels and distributions to our
preferred stockholders. We have suspended our quarterly common dividend. We
currently expect that our existing cash balances and available capacity on our
senior unsecured credit facility will be sufficient to meet our short-term
liquidity requirements.

Our mortgage debt agreements contain "cash trap" provisions that are triggered
when the hotel's operating results fall below a certain debt service coverage
ratio. When these provisions are triggered, all of the excess cash flow
generated by the hotel is deposited directly into cash management accounts for
the benefit of our lenders until a specified debt service coverage ratio is
reached and maintained for a certain period of time. Such provisions do not
allow the lender the right to accelerate repayment of the underlying debt. As of
December 31, 2021, the debt service coverage ratios or debt yields for all of
our mortgage loans, except for the mortgage loan secured by the Salt Lake
Marriott Downtown at City Creek, were below the minimum thresholds such that the
cash trap provision of each respective loan was triggered. We do not expect that
such cash traps will affect our ability to satisfy our short-term liquidity
requirements.

Our long-term liquidity requirements consist primarily of funds necessary to pay
for the costs of acquiring additional hotels, renovations, and other capital
expenditures that need to be made periodically to our hotels, scheduled debt
payments, debt maturities, redemption of limited operating partnership units
("common OP units"), ground lease payments, and making distributions to our
common and preferred stockholders. We expect to meet our long-term liquidity
requirements through various sources of capital, including cash provided by
operations, borrowings, issuances of additional equity, including common OP
units, and/or debt securities and proceeds from property dispositions. Our
ability to incur additional debt is dependent upon a number of factors,
including the state of the credit markets, our degree of leverage, the value of
our unencumbered assets and borrowing restrictions imposed by existing lenders.
Our ability to raise capital through the issuance of additional equity and/or
debt securities is also dependent on a number of factors including the current
state of the capital markets, investor sentiment and intended use of proceeds.
We may need to raise additional capital if we identify acquisition opportunities
that meet our investment objectives and require liquidity in excess of existing
cash balances. Our ability to raise funds through the issuance of equity
securities depends on, among other things, general market conditions for hotel
companies and REITs and market perceptions about us.
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On April 30, 2021, we sold a wholly owned subsidiary of the Company that owns
Frenchman's Reef to an unaffiliated third party pursuant to a share purchase
agreement for $35.0 million in cash upon closing, as well as a participation
right in the future profits of the hotel once certain return metrics are
achieved. On June 30, 2021, we sold The Lexington Hotel for $185.3 million.

On July 29, 2021, we acquired the 218-room Bourbon Orleans Hotel located in New
Orleans, Louisiana, for net consideration of $90.1 million, including
prorations. On July 30, 2021, we acquired the 37-room Henderson Park Inn located
in Destin, Florida, for net consideration of $26.4 million, including prorations
and transaction costs. On December 23, 2021, we acquired the 170-room Henderson
Beach Resort located in Destin, Florida, for net consideration of $110.1
million, including prorations and transaction costs.

On January 6, 2022, we acquired the 103-room Tranquility Bay Beachfront Resort
located in Marathon, Florida, for net consideration of $62.3 million, including
prorations and transaction costs.

Our funding strategy

Since our formation in 2004, we have been committed to a conservative capital
structure with prudent leverage. Our outstanding debt consists of fixed interest
rate mortgage debt, unsecured term loans and borrowings on our senior unsecured
credit facility. We have a preference to maintain a significant portion of our
portfolio as unencumbered assets in order to provide balance sheet flexibility.
We expect that our strategy will enable us to maintain a balance sheet with an
appropriate amount of debt throughout all phases of the lodging cycle. We
believe that it is prudent to reduce the inherent risk of highly cyclical
lodging fundamentals through a low leverage capital structure.

We prefer a relatively simple but efficient capital structure. We generally
structure our hotel acquisitions to be straightforward and to fit within our
capital structure; however, we will consider a more complex transaction, such as
the issuance of common OP units in connection with the acquisition of Cavallo
Point, The Lodge at the Golden Gate, if we believe that the projected returns to
our stockholders will significantly exceed the returns that would otherwise be
available.

We believe that we maintain a reasonable amount of debt. As of December 31,
2021, we had $1.1 billion of debt outstanding with a weighted average interest
rate of 3.88% and a weighted average maturity date of approximately 2.5 years.
We have limited near-term mortgage debt maturities and 24 of our 32 hotels are
unencumbered by mortgage debt. We remain committed to our core strategy of
prudent leverage.

The following table sets forth the timing and extent of our debt principal maturities and estimated interest payments for our mortgage debt and unsecured term loans at December 31, 2021 (in thousands).

                       Principal      Interest (1)       Total Principal and Interest
         2022         $  15,896      $      39,618      $                      55,514
         2023           236,420             32,213                            268,633
         2024           432,381             21,642                            454,023
         2025           295,807              8,406                            304,213
         2026                 -                  -                                  -
         Thereafter           -                  -                                  -
                      $ 980,504      $     101,879      $                   1,082,383


________________
(1)The interest expense for our variable rate mortgage and unsecured term loans
is calculated based on the rate as of December 31, 2021. Excludes interest
expense on the outstanding borrowings on our senior unsecured credit facility of
$90.0 million as of December 31, 2021.

Information on our financing activities is available in note 8 of the accompanying consolidated financial statements.

ATM program

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In August 2021, we implemented an "at-the-market" equity offering program (the
"Current ATM Program"), pursuant to which we may issue and sell shares of our
common stock from time to time, having an aggregate offering price of up to
$200.0 million. We have not sold any shares under the Current ATM Program. Prior
to the implementation of the Current ATM Program, we had a $200.0 million ATM
program (the "Prior ATM Program"), which is no longer active. No shares under
the Prior ATM Program were sold during the year ended December 31, 2021.

Short-term loans

Other than borrowings under our senior unsecured credit facility, we do not use short-term borrowings to meet our liquidity needs.

Senior unsecured credit facility and unsecured term loans

We are party to a $400 million senior unsecured credit facility expiring in July
2023, a $350 million unsecured term loan maturing in July 2024 and a $50 million
unsecured term loan maturing in October 2023. The maturity date for the senior
unsecured credit facility may be extended for an additional year upon the
payment of applicable fees and the satisfaction of certain customary conditions.
As of December 31, 2021, we had $90.0 million of borrowings outstanding under
our senior unsecured credit facility. Subsequent to December 31, 2021, we drew
an additional $70.0 million on our senior unsecured credit facility. On each of
June 9, 2020, August 14, 2020, January 20, 2021 and February 4, 2022, we
executed amendments to the credit agreements for our corporate credit facility
and term loans. These amendments provided for a waiver of the quarterly tested
financial covenants beginning with the second quarter of 2020 through the first
quarter of 2022 and allow for certain other modifications to the covenants
thereafter through the second quarter of 2023. We expect to comply with the
quarterly tested financial covenants beginning with the first testing period
following the end of the covenant waiver period. The third amendment to the
credit agreements for our corporate credit facility and term loans also permits
us to pay dividends on our Series A Preferred Stock in an amount up to $25.0
million annually.

Additional information about the credit agreements, including the restrictions
imposed by the amendments and their impacts on our liquidity, sources of
capital, and ability to incur additional debt, can be found in Note 8 to the
accompanying consolidated financial statements.

Sources and uses of species

Our principal sources of cash are net cash flow from hotel operations, sales of
common and preferred stock, debt financings and proceeds from hotel
dispositions. Our principal uses of cash are acquisitions of hotel properties,
debt service and maturities, share repurchases, capital expenditures, operating
costs, ground lease payments, corporate expenses, and distributions to holders
of common stock, common units and preferred stock. As of December 31, 2021, we
had $38.6 million of unrestricted corporate cash and $36.9 million of restricted
cash, and $90.0 million of outstanding borrowings on our senior unsecured credit
facility.

Our net cash used in operations was $2.3 million for the year ended December 31,
2021. Our cash from operations generally consists of the net cash flow from
hotel operations, offset by cash paid for corporate expenses and other working
capital changes.

Our net cash used in investing activities was $62.2 million for the year ended
December 31, 2021, which consisted of $213.8 million of net proceeds from the
sale of Frenchman's Reef and The Lexington Hotel and $0.5 million receipt of
deferred key money received for the Westin Washington, D.C. City Center, offset
by $226.6 million paid for the acquisitions of the Bourbon Orleans Hotel,
Henderson Park Inn, and Henderson Beach Resort, $44.5 million of capital
expenditures at our operating hotels, $2.7 million of capital expenditures for
the rebuild of Frenchman's Reef, and $2.8 million paid to extend the Salt Lake
City Marriott Downtown at City Center ground lease.

Our net cash provided by financing activities was $5.2 million for the year
ended December 31, 2021, which consisted of net draws of $35.0 million on our
senior unsecured credit facility, offset by $15.3 million of scheduled mortgage
debt principal payments, $1.9 million of mortgage debt principal repaid in
connection with the extension of the Salt Lake City Marriott Downtown at City
Center mortgage loan, $1.2 million of financing costs related to the amendment
and restatement of our credit agreements and the extension of the Salt Lake City
Marriott Downtown at City Center mortgage loan, $1.5 million paid to repurchase
shares upon the vesting of restricted stock for the payment of tax withholdings
obligations, and $9.8 million of distributions paid to holders of preferred
stock.

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We currently anticipate our significant sources of cash for the year ending
December 31, 2022 will be the net cash flow from hotel operations as the lodging
disruptions from COVID-19 continue to subside and draws on our senior unsecured
credit facility. We expect our estimated uses of cash for the year ending
December 31, 2022 will be scheduled debt service payments, payments of
outstanding borrowings on our unsecured credit facility, capital expenditures,
potential funding of hotel working capital requirements, distributions to
preferred stockholders, corporate expenses, the acquisition of the Tranquility
Bay Beachfront Resort in Marathon, Florida on January 6, 2022 and other
potential hotel acquisitions.

Dividend policy

We intend to distribute to our stockholders dividends at least equal to our REIT
taxable income to avoid paying corporate income tax and excise tax on our
earnings (other than the earnings of our TRS, which are all subject to tax at
regular corporate rates) and to qualify for the tax benefits afforded to REITs
under the Code. In order to qualify as a REIT under the Code, we generally must
make distributions to our stockholders each year in an amount equal to at least:

• 90% of our REIT’s taxable income determined without regard to the deduction of dividends paid and excluding net capital gains, plus

• 90% of the excess of our net income from seized property over the tax imposed on that income by the Code, less

•any excess non-monetary income.

The timing and frequency of distributions will be authorized by our board of
directors and declared by us based upon a variety of factors, including our
financial performance, restrictions under applicable law and our current and
future loan agreements, our debt service requirements, our capital expenditure
requirements, the requirements for qualification as a REIT under the Code and
other factors that our board of directors may deem relevant from time to time.

Our board of directors suspended the quarterly common dividend commencing with
the first quarter dividend that would have been paid in April 2020. The payment
of future dividends, including a quarterly common dividend, will be determined
by our board of directors after considering our projected taxable income,
obligations under our financing agreements, expected capital requirements, and
risks affecting our business.

We have paid the following dividends to holders of our Series A Preferred Shares in 2020 and 2021, and up to the date of this report:

                                                                   Dividend
                 Payment Date                Record Date          per Share
                 September 30, 2020       September 20, 2020     $    0.178
                 December 31, 2020        December 18, 2020      $    0.516
                 March 31, 2021             March 18, 2021       $    0.516
                 June 30, 2021              June 18, 2021        $    0.516
                 September 30, 2021       September 17, 2021     $    0.516
                 December 31, 2021        December 20, 2021      $    0.516


Capital expenditure

The management and franchise agreements for each of our hotels provide for the
establishment of separate property improvement reserves to cover, among other
things, the cost of replacing and repairing furniture, fixtures and equipment at
our hotels and other routine capital expenditures. Contributions to the property
improvement fund are calculated as a percentage of hotel revenues. In addition,
we may be required to pay for the cost of certain additional improvements that
are not permitted to be funded from the property improvement reserves under the
applicable management or franchise agreement. As of December 31, 2021, we have
set aside $24.5 million for capital projects in property improvement funds,
which are included in restricted cash.

We spent approximately $44.5 million on capital improvements at our operating
hotels and approximately $2.7 million on the rebuild of Frenchman's Reef during
the year ended December 31, 2021. Due to the COVID-19 pandemic, we canceled or
deferred a significant portion of the planned capital improvements at our
operating hotels and paused the rebuild of Frenchman's Reef prior to its sale.
Significant projects in 2021 were as follows:
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•The Lodge at Sonoma: We completed a renovation to reposition and rebrand the
hotel to an Autograph Collection Hotel in July 2021. The renovation includes a
new restaurant by celebrity chef Michael Mina.
•The Hythe Vail, a Luxury Collection Resort: We completed the final phase of a
multi-year renovation to rebrand the Vail Marriott Mountain Resort as The Hythe
Vail, a Luxury Collection Resort, in the fourth quarter of 2021.
•Margaritaville Beach House Key West: We converted the Barbary Beach House Key
West to the Margaritaville Beach Resort Key West in the fourth quarter of 2021.

In 2022, we expect to spend approximately $100 million on necessary capital improvements and a few selected transformation projects with attractive returns on investment. Significant projects in 2022 should include the following:

•JW Marriott Denver Cherry Creek: We plan to complete the renovations in the
first quarter of 2022 to rebrand the hotel as Hotel Clio, a Luxury Collection
Hotel.
•Hilton Boston Downtown/Faneuil Hall: We expect to commence a comprehensive
renovation and repositioning of the hotel commencing in the fourth quarter of
2022.
•Orchards Inn Sedona: We expect to commence the first phase of the upgrade
renovation of the resort in mid-2022.
•Hilton Burlington Lake Champlain: We expect to complete a renovation of the
hotel to rebrand it as a Curio Collection Hotel in late 2022. The renovation is
expected to include a new restaurant concept by a local renowned chef.

The United States is experiencing both supply chain disruptions and significant
price increases for certain construction materials. The supply chain disruptions
are the result of, in part, substantial backlogs of container ships seeking to
unload cargo at major ports, with delays caused or exacerbated by port and
trucking labor shortages, railway logistics issues and a shortage of warehouse
space in close proximity to the affected ports. We have not been significantly
impacted by these backlogs to date; however, if not resolved, these backlogs and
related logistics issues could result in material delays and increased costs for
our planned capital improvements.

Non-GAAP Financial Measures

We use the following non-GAAP financial measures that we believe are useful to
investors as key measures of our operating performance: EBITDA, EBITDAre,
Adjusted EBITDA, FFO and Adjusted FFO. These measures should not be considered
in isolation or as a substitute for measures of performance in accordance with
U.S. GAAP. EBITDA, EBITDAre, Adjusted EBITDA, FFO and Adjusted FFO, as
calculated by us, may not be comparable to other companies that do not define
such terms exactly as the Company.

Use and Limitations of Non-GAAP Financial Measures

Our management and Board of Directors use EBITDA, EBITDAre, Adjusted EBITDA, FFO
and Adjusted FFO to evaluate the performance of our hotels and to facilitate
comparisons between us and other lodging REITs, hotel owners who are not REITs
and other capital intensive companies. The use of these non-GAAP financial
measures has certain limitations. These non-GAAP financial measures as presented
by us, may not be comparable to non-GAAP financial measures as calculated by
other real estate companies. These measures do not reflect certain expenses or
expenditures that we incurred and will incur, such as depreciation, interest and
capital expenditures. We compensate for these limitations by separately
considering the impact of these excluded items to the extent they are material
to operating decisions or assessments of our operating performance. Our
reconciliations to the most comparable U.S. GAAP financial measures, and our
consolidated statements of operations and cash flows, include interest expense,
capital expenditures, and other excluded items, all of which should be
considered when evaluating our performance, as well as the usefulness of our
non-GAAP financial measures.

These non-GAAP financial measures are used in addition to and in conjunction
with results presented in accordance with U.S. GAAP. They should not be
considered as alternatives to operating profit, cash flow from operations, or
any other operating performance measure prescribed by U.S. GAAP. These non-GAAP
financial measures reflect additional ways of viewing our operations that we
believe, when viewed with our U.S. GAAP results and the reconciliations to the
corresponding U.S. GAAP financial measures, provide a more complete
understanding of factors and trends affecting our business than could be
obtained absent this disclosure. We strongly encourage investors to review our
financial information in its entirety and not to rely on a single financial
measure.

EBITDA, EBITDAre and FFO

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EBITDA represents net income (calculated in accordance with U.S. GAAP)
excluding: (1) interest expense; (2) provision for income taxes, including
income taxes applicable to sale of assets; and (3) depreciation and
amortization. The Company computes EBITDAre in accordance with the National
Association of Real Estate Investment Trusts ("Nareit") guidelines, as defined
in its September 2017 white paper "Earnings Before Interest, Taxes, Depreciation
and Amortization for Real Estate." EBITDAre represents net income (calculated in
accordance with U.S. GAAP) adjusted for: (1) interest expense; (2) provision for
income taxes, including income taxes applicable to sale of assets;
(3) depreciation and amortization; (4) gains or losses on the disposition of
depreciated property, including gains or losses on change of control; (5)
impairment write-downs of depreciated property and of investments in
unconsolidated affiliates caused by a decrease in value of depreciated property
in the affiliate; and (6) adjustments to reflect the entity's share of EBITDAre
of unconsolidated affiliates.

We believe EBITDA and EBITDAre are useful to an investor in evaluating our
operating performance because they help investors evaluate and compare the
results of our operations from period to period by removing the impact of our
capital structure (primarily interest expense) and our asset base (primarily
depreciation and amortization, and in the case of EBITDAre, impairment and gains
or losses on dispositions of depreciated property) from our operating results.
In addition, covenants included in our debt agreements use EBITDA as a measure
of financial compliance. We also use EBITDA and EBITDAre as measures in
determining the value of hotel acquisitions and dispositions.

The Company computes FFO in accordance with standards established by the Nareit,
which defines FFO as net income determined in accordance with U.S. GAAP,
excluding gains or losses from sales of properties and impairment losses, plus
real estate related depreciation and amortization. The Company believes that the
presentation of FFO provides useful information to investors regarding its
operating performance because it is a measure of the Company's operations
without regard to specified non-cash items, such as real estate related
depreciation and amortization and gains or losses on the sale of assets. The
Company also uses FFO as one measure in assessing its operating results.

EBITDAre and FFO adjustments

We adjust EBITDAre and FFO when evaluating our performance because we believe
that the exclusion of certain additional items described below provides useful
supplemental information to investors regarding our ongoing operating
performance and that the presentation of Adjusted EBITDA and Adjusted FFO, when
combined with U.S. GAAP net income, EBITDAre and FFO, is beneficial to an
investor's complete understanding of our consolidated operating performance. We
adjust EBITDAre and FFO for the following items:

•Non-Cash Lease Expense and Other Amortization: We exclude the non-cash expense
incurred from the straight line recognition of expense from our ground leases
and other contractual obligations and the non-cash amortization of our favorable
and unfavorable contracts, originally recorded in conjunction with certain hotel
acquisitions. We exclude these non-cash items because they do not reflect the
actual cash amounts due to the respective lessors in the current period and they
are of lesser significance in evaluating our actual performance for that period.

•Cumulative Effect of a Change in Accounting Principle: The Financial Accounting
Standards Board promulgates new accounting standards that require or permit the
consolidated statement of operations to reflect the cumulative effect of a
change in accounting principle. We exclude the effect of these adjustments,
which include the accounting impact from prior periods, because they do not
reflect the Company's actual underlying performance for the current period.

•Gains or Losses from Early Extinguishment of Debt: We exclude the effect of
gains or losses recorded on the early extinguishment of debt because these gains
or losses result from transaction activity related to the Company's capital
structure that we believe are not indicative of the ongoing operating
performance of the Company or our hotels.

• Hotel acquisition costs: We exclude hotel acquisition costs expensed during the period as we believe these transaction costs do not reflect the continued performance of the Company or our hotels.

•Severance Costs: We exclude corporate severance costs, or reversals thereof,
incurred with the termination of corporate-level employees and severance costs
incurred at our hotels related to lease terminations or structured severance
programs because we believe these costs do not reflect the ongoing performance
of the Company or our hotels.

• Hotel Manager Transition Items: We exclude transition items associated with a change of Hotel Manager, as we believe these items do not reflect the continued performance of the company or our hotels.

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•Other Items: From time to time we incur costs or realize gains that we consider
outside the ordinary course of business and that we do not believe reflect the
ongoing performance of the Company or our hotels. Such items may include, but
are not limited to the following: pre-opening costs incurred with newly
developed hotels; lease preparation costs incurred to prepare vacant space for
marketing; management or franchise contract termination fees; gains or losses
from legal settlements; costs incurred related to natural disasters; and gains
on property insurance claim settlements, other than income related to business
interruption insurance.

In addition, to derive adjusted FFOs, we exclude any unrealized fair value adjustments to interest rate swaps. We exclude these non-cash amounts as they do not reflect the underlying performance of the Company.

The following table is a reconciliation of our we GAAP net income on EBITDA, EBITDAre and adjusted EBITDA (in thousands):

                                                                  Year Ended December 31,
                                                            2021            2020           2019
                                                                      (in thousands)
Net (loss) income                                       $ (195,405)     $ (396,027)     $ 184,211
Interest expense                                            37,043          53,995         46,584
Income tax expense (benefit)                                 3,267         (26,452)        22,028
Real estate related depreciation and amortization          102,963         114,716        118,110
EBITDA                                                     (52,132)       (253,768)       370,933
Impairment losses                                          126,697         174,120              -

EBITDAre                                                    74,565         (79,648)       370,933
Non-cash lease expense and other amortization                6,673          

6,910 7,013 Fees and pre-opening costs related to Frenchman’s Reef (1)

                                         1,388           1,012         20,524
Uninsured costs related to natural disasters (2)               298               -              -
Loss on early extinguishment of debt                             -          

– 2,373

Hotel manager transition items (3)                             651            (434)         3,758
Severance costs (4)                                            (37)          7,648              -
Gain on property insurance settlement                            -               -       (144,192)
Adjusted EBITDA                                         $   83,538      $  (64,512)     $ 260,409


_______________

(1) Represents pre-opening costs and professional fees related to the reopening of

Frenchman’s Reef, as well as legal fees and other costs incurred at Frenchman’s Reef

following Hurricane Irma that are not covered by insurance.

(2) Represents costs incurred during Hotel Bourbon Orleans after the hurricane

Ida which have not been or should not be recovered by insurance.

(3) Amount for the year ended December 31, 2021 mainly concerns the manager

transition to Westin Washington DC Downtown. Amount for the year ended

December 31, 2020 is offset by a downward adjustment of $0.6 million to the

cancellation fees for the Sheraton Suites Key West (now known as Margaritaville

Key West Beach House) franchise agreement and $1.4 million of accelerated

amortization of unfavorable management agreement liability related to the

transition from manager to Renaissance Charleston Historic District Hotel.

Amount for the year ended December 31, 2019 include $2.5 million in connection with

termination of the Sheraton Suites franchise agreement Key West.

(4) For the fiscal year ended December 31, 2020consists of severance pay incurred with

the elimination of positions in our hotels, which are classified in the other

hotel expenses in the consolidated statement of income.



The following table is a reconciliation of our U.S. GAAP net income to FFO, FFO
available to common stock and unit holders, and Adjusted FFO available to common
stock and unit holders (in thousands):
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                                                                  Year Ended December 31,
                                                            2021            2020           2019
                                                                      (in thousands)
Net (loss) income                                       $ (195,405)     $ (396,027)     $ 184,211
Real estate related depreciation and amortization          102,963         114,716        118,110
Impairment losses, net of tax                              127,282         174,120              -

FFO                                                         34,840        (107,191)       302,321
Distributions to preferred stockholders                     (9,817)         (3,300)             -
FFO available to common stock and unit holders              25,023        (110,491)       302,321
Non-cash lease expense and other amortization                6,673          

6,910 7,013 Fees and pre-opening costs related to Frenchman’s Reef (1)

                                         1,388           1,012         20,524
Uninsured costs related to natural disasters (2)               298               -              -
Loss on early extinguishment of debt                             -          

– 2,373

Hotel manager transition items (3)                             651          

(434) 3,758 Gain on property insurance settlement, net of income tax

                                                              -               -       (121,525)
Severance costs (4)                                            (37)          7,648              -
Fair value adjustments to interest rate swaps               (7,690)         10,072          2,545
Adjusted FFO available to common stock and unit
holders                                                 $   26,306      $  (85,283)     $ 217,009


_______________

(1) Represents pre-opening costs and professional fees related to the reopening of

Frenchman’s Reef, as well as legal fees and other costs incurred at Frenchman’s Reef

following Hurricane Irma that are not covered by insurance.

(2) Represents costs incurred during Hotel Bourbon Orleans after the hurricane

Ida which have not been or should not be recovered by insurance.

(3) Amount for the year ended December 31, 2021 mainly concerns the manager

transition to Westin Washington DC Downtown. Amount for the year ended

December 31, 2020 is offset by a downward adjustment of $0.6 million to the

cancellation fees for the Sheraton Suites Key West (now known as Margaritaville

Key West Beach House) franchise agreement and $1.4 million of accelerated

amortization of unfavorable management agreement liability related to the

transition from manager to Renaissance Charleston Historic District Hotel.

Amount for the year ended December 31, 2019 include $2.5 million in connection with

termination of the Sheraton Suites franchise agreement Key West.

(4) For the fiscal year ended December 31, 2020consists of severance pay incurred with

the elimination of positions in our hotels, which are classified in the other

hotel expenses in the consolidated statement of income.

Critical accounting estimates and policies

Our consolidated financial statements include the accounts of DiamondRock
Hospitality Company and all consolidated subsidiaries. The preparation of
financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities at the date of our financial statements and the reported amounts of
revenues and expenses during the reporting period. While we do not believe the
reported amounts would be materially different, application of these policies
involves the exercise of judgment and the use of assumptions as to future
uncertainties and, as a result, actual results could differ materially from
these estimates. We evaluate our estimates and judgments, including those
related to the impairment of long-lived assets, on an ongoing basis. We base our
estimates on experience and on various assumptions that are believed to be
reasonable under the circumstances. All of our significant accounting policies
are disclosed in the notes to our consolidated financial statements. The
following represent certain critical accounting policies that require us to
exercise our business judgment or make significant estimates:

Investment in hotels

Investment purchases of hotel properties, land, land improvements, building and
furniture, fixtures and equipment and identifiable intangible assets that are
not businesses are accounted for as asset acquisitions and recorded at relative
fair value based upon total accumulated cost of the acquisition. Property and
equipment purchased after the hotel acquisition date is recorded at cost.

Identifiable intangible assets are typically related to contracts, including
ground lease agreements and hotel management agreements, which are recorded at
fair value. Above-market and below-market contract values are based on the
present value of the difference between contractual amounts to be paid pursuant
to the contracts acquired and our estimate of the fair market contract rates for
corresponding contracts. Contracts acquired that are at market do not have
significant value. We enter into a
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hotel management agreement at the time of acquisition and such agreements are
generally based on market terms. Intangible assets are amortized using the
straight-line method over the remaining non-cancelable term of the related
agreements. In making estimates of fair values for purposes of allocating
purchase price, we may utilize a number of sources that may be obtained in
connection with the acquisition or financing of a property and other market
data. Management also considers information obtained about each property as a
result of its pre-acquisition due diligence in estimating the fair value of the
tangible and intangible assets acquired.

We review our investments in hotels for impairment whenever events or changes in
circumstances indicate that the carrying value of the hotel properties may not
be recoverable. Events or circumstances that may cause us to perform a review
include, but are not limited to, adverse changes in the demand for lodging at
our properties, current or projected losses from operations, and an expectation
that the property is more likely than not to be sold significantly before the
end of its previously estimated useful life. If such events or circumstances are
identified, management performs an analysis to compare the estimated
undiscounted future cash flows from operations and the net proceeds from the
ultimate disposition of a hotel to the carrying amount of the asset. If the
estimated undiscounted future cash flows are less than the carrying amount of
the asset, an adjustment to reduce the carrying amount to the related hotels'
estimated fair value is recorded and an impairment loss is recognized. The fair
value is determined through various valuation techniques, including discounted
cash flow models with estimated discount and terminal capitalization rates,
comparable market transactions, third-party appraisals, the net sales proceeds
from pending offers, or from transactions that closed subsequent to the end of
the reporting period.

Seasonality

The periods during which our hotels experience higher revenues vary from
property to property, depending principally upon location and the customer base
served. Accordingly, we expect some seasonality in our business. Volatility in
our financial performance from the seasonality of the lodging industry could
adversely affect our financial condition and results of operations.

New accounting pronouncements not yet implemented

See Note 2 to the accompanying consolidated financial statements for additional information regarding recently issued accounting pronouncements.

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