| Segment Information |
12. Segment Information The Company considers each of its hotels to be an operating segment and allocates resources and assesses the operating performance for each hotel individually. The Company has aggregated its hotels into a single reportable segment, Hotel Ownership, based on the following aggregation criteria: | ● | All of the Company’s hotels offer similar products and services to their customers in the form of hotel rooms, food and beverage, and ancillary services; |
| ● | The Company utilizes third-party hotel management companies to deliver its products and services to its customers across all of its hotels; |
| ● | The Company’s hotels are designed and operated to appeal to similar individuals, groups, leisure, and business customers that travel to its hotels; and |
| ● | The Company’s third-party hotel managers utilize the same methods (direct hotel sales and various online booking portals) to distribute the Company’s products and services across all of its hotels. |
The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer. The CODM reviews and makes decisions on all facets of the Company’s business using all available financial and non-financial data for each hotel individually. Capital allocation decisions to acquire, sell, enhance, redevelop, or perform renewal and replacement expenditures are determined on a hotel-by-hotel basis. Specifically, the CODM reviews the results of each hotel to assess the hotel’s profitability. The CODM does not use aggregated data by brand, property type, or geography to formulate the Company’s operating and investment strategy, to manage its business, or to make decisions about resource allocation. The key measure the CODM uses to allocate resources and assess performance is individual hotel net income (loss) before interest expense, income taxes, depreciation, and amortization for REITs, adjusted to exclude the following items that are not reflective of its ongoing operating performance or incurred in the normal course of business (“Hotel Adjusted EBITDAre”): | ● | Business interruption insurance proceeds; |
| ● | Property-level hurricane-related restoration expenses and legal fees; |
| ● | Pre-opening costs associated with extensive renovation projects; |
| ● | Property-level legal settlements, restructuring, severance, and management transition costs; |
| ● | Taxes assessed on commercial rents; and |
| ● | Other nonrecurring identified adjustments. |
The following tables include revenues, significant hotel operating expenses, and Hotel Adjusted EBITDAre for the Company’s hotels, reconciled to the consolidated amounts included in the Company’s consolidated statements of operations, which the CODM uses to manage its business, such as how to allocate capital to its hotels and how to determine the Company’s acquisition and disposition strategies (in thousands): | | | | | | | | | Three Months Ended March 31, | | | 2025 | | 2024 | Revenues | | | | | | | Total revenues | | $ | 234,065 | | $ | 217,166 | | | | | | | | Operating Expenses | | | | | | | Room | | | 38,266 | | | 35,551 | Food and beverage | | | 47,891 | | | 44,315 | Other operating | | | 5,771 | | | 5,944 | Advertising and promotion | | | 12,501 | | | 12,132 | Repairs and maintenance | | | 9,537 | | | 8,710 | Utilities | | | 6,741 | | | 5,944 | Franchise costs | | | 4,459 | | | 4,205 | Property tax, ground lease and insurance | | | 19,029 | | | 19,104 | Other property-level expenses (1) | | | 29,098 | | | 28,966 | | | | 173,293 | | | 164,871 | | | | | | | | Hotel Adjusted EBITDAre | | $ | 60,772 | | $ | 52,295 |
| | | | | | | | | Three Months Ended March 31, | | | 2025 | | 2024 | Reconciliation of Hotel Adjusted EBITDAre to Net Income | | | | | | | Hotel Adjusted EBITDAre | | $ | 60,772 | | $ | 52,295 | Non-hotel operating expenses, net (2) | | | 7 | | | (10) | Pre-opening expenses (3) | | | (3,253) | | | — | Property-level COVID-19 relief grant (3) | | | — | | | 1,343 | Taxes assessed on commercial rents (3) | | | (163) | | | (99) | Amortization of right-of use assets and obligations | | | 288 | | | 288 | Corporate overhead | | | (8,905) | | | (7,518) | Depreciation and amortization | | | (32,275) | | | (29,040) | Interest and other income | | | 1,564 | | | 5,453 | Interest expense | | | (12,682) | | | (11,010) | Gain on sale of assets, net | | | — | | | 457 | Gain on extinguishment of debt | | | — | | | 21 | Income tax (provision) benefit, net | | | (98) | | | 855 | Net income | | $ | 5,255 | | $ | 13,035 |
| (1) | Other property-level expenses include property-level general and administrative expenses, such as payroll, benefits, and other employee-related expenses, contract and professional fees, credit and collection expenses, employee recruitment, relocation and training expenses, labor dispute expenses, consulting fees, management fees, and other expenses. |
| (2) | Non-hotel operating expenses, net are included in property tax, ground lease and insurance on the Company’s consolidated statements of operations for the three months ended March 31, 2025 and 2024, and include corporate-level current year property taxes and insurance, as well as any prior year property taxes assessed on sold hotels, net of any refunds received. |
| (3) | When assessing a hotel’s operating performance, the CODM excludes certain items that are not indicative of the ongoing operating performance of the Company’s hotels, such as pre-opening expenses associated with extensive renovation projects such as the work being performed at Andaz Miami Beach, property-level grants, and taxes assessed on commercial rents. |
The CODM does not receive asset information by segment. Assets reported to the CODM are consistent with those included on the Company’s consolidated balance sheets, with particular emphasis on the Company’s cash and cash equivalents, restricted cash, and debt.
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