Xenia Hotels & Resorts, Inc. - Annual Report: 2019 (Form 10-K)

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•	business, financial and operating risks inherent to real estate investments and the lodging industry;

•	seasonal and cyclical volatility in the lodging industry;

•	adverse changes in specialized industries, such as the energy, technology and/or tourism industries, that result in a sustained downturn of related businesses and corporate spending that may negatively impact our revenues and results of operations;

•	macroeconomic and other factors beyond our control that can adversely affect and reduce demand for hotel rooms, food and beverage services, and/or meeting facilities;

•	contraction in the U.S. or global economy or low levels of economic growth;

•	levels of spending in business and leisure segments as well as consumer confidence;

•	declines in occupancy ("OCC") and average daily rate ("ADR");

•	fluctuations in the supply, due to hotel construction and/or renovation and expansion of existing hotels, and demand for hotel rooms;

•	changes in the competitive environment in the lodging industry, including due to consolidation of management companies, franchisors, and online travel agencies, and changes in the markets where we own hotels;

•	events beyond our control, such as war, terrorist or cyber-attacks, mass casualty events, government shutdowns and closures, travel-related health concerns, and natural disasters;

•	cyber incidents and information technology failures, including unauthorized access to our computer systems and/or our vendors' computer systems, or our third-party management companies' or franchisors' computer systems and/or their vendors' computer systems;

•	our inability to directly operate our properties and reliance on third-party hotel management companies to operate and manage our hotels;

•	our ability to maintain good relationships with our third-party hotel management companies and franchisors;

•	our failure to maintain brand operating standards;

•	our ability to maintain our brand licenses at our hotels;

•	relationships with labor unions and changes in labor laws;

•	loss of our senior management team or key personnel;

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•	our ability to identify and consummate additional acquisitions and dispositions of hotels;

•	our ability to integrate and successfully operate hotel properties that we acquire and the risks associated with these hotel properties;

•	the impact of hotel renovations, repositionings, redevelopments and re-branding activities;

•	our ability to access capital for renovations and acquisitions on terms and at times that are acceptable to us;

•	the fixed cost nature of hotel ownership;

•	our ability to service, restructure or refinance our debt;

•	changes in interest rates and operating costs, including labor and service related costs;

•	compliance with regulatory regimes and local laws;

•	uninsured or underinsured losses, including those relating to natural disasters, terrorism or cyber-attacks;

•	changes in distribution channels, such as through internet travel intermediaries or websites that facilitate the short-term rental of homes and apartments from owners;

•	the amount of debt that we currently have or may incur in the future;

•	provisions in our debt agreements that may restrict the operation of our business;

•	our organizational and governance structure;

•	our status as a real estate investment trust ("REIT");

•	our taxable REIT subsidiary ("TRS") lessee structure;

•	the cost of compliance with and liabilities under environmental, health and safety laws;

•	adverse litigation judgments or settlements;

•	changes in real estate and zoning laws and increases in real property tax valuations or rates;

•	changes in federal, state or local tax law, including legislative, administrative, regulatory or other actions affecting REITs;

•	changes in governmental regulations or interpretations thereof; and

•	estimates relating to our ability to make distributions to our stockholders in the future.

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•	"ADR" or "average daily rate" means hotel rooms revenue divided by total number of rooms sold in a given period;

•	"occupancy" means the total number of rooms sold in a given period divided by the total number of rooms available at a hotel or group of hotels;

•	"RevPAR" or "revenue per available room" means hotel rooms revenue divided by room nights available to guests for a given period, and does not include non-room revenues such as food and beverage revenue or other operating revenues;

•	"Top 25 U.S. lodging markets" refers to the top 25 U.S. lodging markets as defined by STR;

•	an "upper upscale" hotel refers to an upper upscale hotel as defined by STR;

•	a "luxury" hotel refers to a luxury hotel as defined by STR;

•	an "independent" hotel refers to an independent hotel as defined by STR;

•	"Fairmont," "Hilton," "Hyatt," "Kimpton," "Loews," and "Marriott," mean Fairmont Hotels & Resorts, Hilton Worldwide Inc., Hyatt Corporation, Kimpton Hotel & Restaurant Group, LLC, Loews Hotels, Inc. and Marriott International, Inc., respectively, as well as their respective parents, subsidiaries or affiliates.

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(1)	Ownership percentages include vested and unvested LTIP partnership units, which may or may not vest based on the passage of time and meeting certain market-based performance objectives.

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Follow a Differentiated Investment Strategy Across Targeted Markets. We use our management team’s network of relationships in the lodging industry, real estate brokers and our relationships with multiple hotel brands and management companies, among others, to source acquisition opportunities. When evaluating opportunities, we use a multi-pronged approach to investing that we believe provides us the flexibility to pursue attractive opportunities in a variety of markets across any point in the cycle. We consider the following characteristics when making investment decisions:

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Market Characteristics. We seek opportunities across a range of urban and dense suburban areas, primarily in the Top 25 U.S. lodging markets as well as key leisure destinations in the United States. We believe that this strategy provides us with a broader range of opportunities and allows us to target markets and sub-markets with particular positive characteristics, such as multiple demand generators, favorable supply and demand dynamics, and attractive long-term projected RevPAR growth. We believe assets in the Top 25 U.S. lodging markets and key U.S. leisure destinations present attractive investment opportunities considering the favorable supply and demand dynamics, RevPAR growth trends, attractive valuations and better opportunities for diversification.

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Asset Characteristics. We generally pursue uniquely positioned hotels in the upper upscale and luxury segments that are affiliated with leading brands, as we believe these segments yield attractive risk-adjusted returns. Within these segments, we seek hotels that will provide guests with a distinctive lodging experience, often tailored to reflect local market environments, which draws demand from both business and leisure transient and group business segments. We seek properties with desirable locations within their markets, exceptional facilities, and other competitive advantages that are hard to replicate. We also favor properties that can be purchased below estimated replacement cost. We believe our focus on uniquely positioned luxury and upper upscale hotel assets, allows us to seek appropriate investments that are well suited for specific markets.

-	Operational and Structural Characteristics. We pursue both new or recently constructed assets that require limited capital investment, as well as more mature and complex properties with opportunities for our

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Drive Growth Through Aggressive Asset Management, In-House Project Management and Strategic Capital Investment. We believe that investing in our properties and employing a proactive asset management approach designed to identify investment strategies will optimize internal growth opportunities. Our management team’s extensive industry experience across multiple brands and management companies coupled with our integrated asset management and project management teams enable us to identify and implement value-add strategies, and to prudently invest capital in our assets to optimize operating results and while leveraging best practices across our portfolio.

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Aggressive Asset Management. Our experienced asset management team focuses on driving property performance through revenue enhancement and cost containment efforts. Our ability to work with a wide variety of management and franchise companies provides us with the opportunity to benchmark performance across our portfolio in order to share best practices. While we do not operate our hotel properties directly, and under the terms of our hotel management agreements our ability to participate in operating decisions regarding our hotels is limited, we conduct regular revenue, sales, and financial performance reviews and also perform in-depth on-site reviews focused on ongoing operating margin improvement initiatives. We interact frequently with our management companies and on-site management personnel, including conducting regular meetings with key executives of our management companies and brands. We work to maximize the value of our assets through all aspects of the hotel operation and ancillary real estate opportunities.

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In-House Project Management. By maintaining a dedicated in-house capital planning and project management team, we believe we are able to develop our capital plans and execute each renovation project at a lower cost and in a timelier manner than if we outsourced these services. In addition, our project management team has extensive experience in the development and renovation of hotel properties, providing both in-depth knowledge of building construction, as well as the opportunity for us to evaluate potential development opportunities. We view this as a significant competitive strength relative to many of our peers.

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Strategic Capital Investment to Enhance Portfolio Performance. As part of our ongoing asset management activities, we continuously review opportunities to reinvest in our hotels to maintain quality, increase long-term value and generate attractive returns on invested capital. We may also opportunistically dispose of hotels to take advantage of market conditions or in situations where the hotels no longer fit within our strategic objectives. We believe our breadth of experience and integrated in-house asset management and project management teams are instrumental in our ability to acquire and operate assets and to capitalize on redevelopment opportunities.

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•	changes in general economic conditions, including the severity and duration of any downturn in the U.S. or global economy and financial markets;

•	war, political conditions or civil unrest, terrorist activities or threats, mass casualty events and heightened travel security measures instituted in response to these events;

•	outbreaks of pandemic or contagious diseases, such as norovirus, avian flu, severe acute respiratory syndrome (SARS), H1N1 (swine flu), Ebola, Zika virus, and COVID-19 virus;

•	natural or man-made disasters, such as earthquakes, tsunamis, tornadoes, hurricanes, typhoons, floods, wildfires, oil spills, and nuclear incidents;

•	delayed delivery or any material reduction or prolonged interruption of public utilities and services, including water and electric power;

•	decreased corporate or government travel-related budgets and spending and cancellations and/or government shutdowns or closures, deferrals or renegotiations of group business due to adverse changes in general economic conditions and/or changes in laws and regulations;

•	decreased need for business-related travel due to innovations in business-related technology;

•	low consumer confidence, high levels of unemployment or depressed real estate prices;

•	supply competition from other hotels and alternative accommodations in the markets in which we operate;

•	overbuilding of hotels in the markets in which we operate, which results in increased supply and will adversely affect occupancy and revenues at our hotels;

•	requirements for periodic capital reinvestment to repair and upgrade hotels;

•	increases in operating costs due to inflation and other factors, including wages and benefits, that may not be offset by increased room rates;

•	change in interest rates and the availability, cost and terms of financing;

•	the financial condition and general business condition of the airline, automotive and other transportation-related industries and its impact on travel;

•	decreased airline capacities and routes and reductions in in-bound foreign travel;

•	oil prices and travel costs;

•	increases in the cost of imported goods and materials, including those used for hotel renovations and other projects, due to changes in international tariffs and/or supply chain shortages due to reductions in international imports;

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•	statements, actions or interventions by governmental officials related to travel and corporate travel-related activities and the resulting negative public perception of such travel and activities; and

•	risks generally associated with the ownership of hotels and real estate, as we discuss in detail below.

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•	risks associated with the possibility that cost increases for labor and other operating costs will outpace revenue increases and that in the event of an economic slowdown, the high proportion of fixed costs will make it difficult to reduce costs to the extent required to offset declining revenues;

•	changes in tax laws and property taxes, or an increase in the assessed valuation of a property for real estate tax purposes;

•	adverse changes in the federal, state or local laws and regulations applicable to us, including those affecting zoning, fuel and energy consumption, water and environmental restrictions, and the related costs of compliance;

•	changing market demographics;

•	an inability to acquire and finance real estate assets on favorable terms, if at all;

•	the ongoing need for owner funded capital improvements and expenditures to maintain or upgrade hotels;

•	fluctuations in real estate values or potential impairments in the value of our assets;

•	acts of God, such as earthquakes, floods, hurricanes, wildfires or other uninsured losses;

•	war, political conditions or civil unrest, terrorist activities or threats, mass casualty events and heightened travel security measures instituted in response to these events; and

•	changes in interest rates and availability, cost and terms of financing.

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•	we may abandon such activities and may be unable to recover expenses already incurred in connection with exploring such opportunities;

•	acquired, redeveloped, repositioned, renovated or re-branded hotels may not initially be accretive to our results, and we and the hotel management companies may not successfully manage newly acquired, renovated, redeveloped, repositioned or re-branded hotels to meet our expectations;

•	we may be unable to quickly, effectively and efficiently integrate new acquisitions, particularly acquisitions of portfolios of hotels, into our existing operations;

•	our redevelopment, repositioning, renovation or re-branding activities may not be completed on schedule, which could result in increased debt service and other costs and lower revenues; and

•	management attention may be diverted by our acquisition, redevelopment, repositioning or re-branding activities, which in some cases may turn out to be less compatible with our growth strategy than originally anticipated.

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•	credit spreads for major sources of capital may widen if stockholders demand higher risk premiums or interest rates could increase, due to inflationary expectations, resulting in an increased cost for debt financing;

•	our ability to borrow on terms and conditions that we find acceptable may be limited, which could result in our hotels generating lower overall economic returns and a reduced level of cash flow from what was anticipated at the time we acquired the asset, which could potentially impact our ability to make distributions to our stockholders, or pursue acquisition opportunities, among other things;

•	the amount of capital that is available to finance hotels could diminish, which, in turn, could lead to a decline in hotel values generally, slow hotel transaction activity, and reduce the loan to value ratio upon which lenders are willing to lend;

•	the value of certain of our hotels may decrease below the amounts we paid for them, which would limit our ability to dispose of hotels at attractive prices or to obtain debt financing secured by these hotels and could reduce our ability to finance our business;

•	the value and liquidity of short-term investments, if any, could be reduced as a result of the dislocation of the markets for our short-term investments and increased volatility in market rates for these investments or other factors; and

•	one or more counterparties to derivative financial instruments that we may enter into could default on their obligations to us, or could fail, increasing the risk that we may not realize the benefits of these instruments.

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•	our cash flows from operations may be insufficient to make required payments of principal and interest;

•	our debt and resulting maturities may increase our vulnerability to adverse economic and industry conditions;

•	we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing cash available for distribution to our stockholders, funds available for operations and capital expenditures, future business opportunities or other purposes;

•	the terms of any refinancing may not be in the same amount or on terms as favorable as the terms of the existing debt being refinanced;

•	we may be obligated to repay the debt pursuant to guarantee obligations; and

•	the use of leverage could adversely affect our ability to raise capital from other sources or to make distributions to our stockholders and could adversely affect the market price of our common stock.

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•	our cash flow from operations will be insufficient to make required payments of principal and interest;

•	our debt may increase our vulnerability to adverse economic and industry conditions;

•	we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing cash available for distribution to our stockholders, funds available for operations and capital expenditures, future business opportunities or other purposes;

•	the terms of any refinancing may not be as favorable as the terms of the debt being refinanced; and

•	the terms of our debt may limit our ability to make distributions to our stockholders and therefore adversely affect the market price of our stock.

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•	we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;

•	we could be subject to the U.S. federal alternative minimum tax for taxable years prior to 2018 and possibly increased state and local taxes; and

•	unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status for the four taxable years following the year in which we failed to qualify as a REIT.

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•	actual or anticipated differences in our operating results, liquidity, or financial condition;

•	changes in our revenues, Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), EBITDA real estate ("EBITDAre"), Adjusted EBITDAre ("Adjusted EBITDAre"), Funds From Operations ("FFO"), Adjusted FFO ("Adjusted FFO"), or earnings estimates;

•	publication of research reports about us, our hotels, or the lodging or overall real estate industry;

•	failure to meet earnings guidance that we provide periodically or analysts’ revenue or earnings estimates;

•	the extent of institutional investor interest in us;

•	the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in comparison to other equity securities, including securities issued by other real estate companies, and fixed income securities;

•	additions and departures of key personnel;

•	the performance and market valuations of other similar companies;

•	strategic actions by us or our competitors, such as mergers, acquisitions or restructurings;

•	fluctuations in the stock price and operating results of our competitors;

•	the passage of legislation or other regulatory developments that adversely affect us or our industry;

•	the realization of any of the other risk factors presented in this Annual Report;

•	speculation in the press or investment community;

•	changes in accounting principles;

•	events beyond our control, such as wars, terrorist or cyber-attacks, travel-related health concerns, government shutdowns and closures, and natural disasters; and

•	general market and economic conditions, including factors unrelated to our operating performance.

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•	actual receipt of an improper benefit or profit in money, property or services; or

•	active and deliberate dishonesty by the director or officer that was established by a final judgment as being material to the cause of action adjudicated.

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"business combination" provisions that, subject to limitations, prohibit certain business combinations between us and an "interested stockholder" (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding voting stock at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose fair price and/or super majority stockholder voting requirements on these combinations; and

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"control share" provisions that provide that "control shares" of our company (defined as voting shares that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of issued and outstanding control shares) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

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(1)	Includes only the hotels in our portfolio as of December 31, 2019. See "Basis of Presentation."

(2)

"Accor" refers to Accor Management U.S. Inc.; "Hyatt" refers to Hyatt Corporation; "Kessler" refers to Kessler Collection Management, LLC; "Kimpton" refers to Kimpton Hotel & Restaurant Group, LLC; "Loews" refers to Loews New Orleans Hotel Corp.; "Marriott" refers to Marriott Hotel Services, Inc.; "Renaissance" refers to Renaissance Hotel Operating Company; "Residence Inn" refers to Residence Inn by Marriott, LLC.; "Sage" refers to affiliates of Sage Hospitality Resources, LLC; "Waldorf Astoria" refers to Waldorf Astoria Management, LLC; and "Westin" refers to Westin Operator, LLC.

(3)	"L" refers to Luxury; "UU" refers to Upper Upscale; "U" refers to Upscale; "I" refers to Independent.

(4)	This property is subject to mortgage debt as of December 31, 2019.

(5)	This hotel is subject to a ground lease that covers all or part of the land underlying the hotel. See "Part I-Item 2. Properties - Our Principal Agreements- Ground Leases" for more information.

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(1)

In addition to minimum rent, the Company may owe percentage rent. In particular, Hyatt Regency Santa Clara incurs percentage rent based on a percentage of rooms revenue and ballroom receipts, which has exceeded the minimum base rent for the years ended December 31, 2019, 2018 and 2017. Marriott Charleston Town Center, per an amendment signed in December 2017, incurs supplemental rent equal to the greater of (i) 0.5% of annual gross revenues or (ii) $85 thousand. The Ritz-Carlton, Pentagon City incurs the greater of (i) minimum base rent or (ii) five percent (5%) of guest room revenues, which has exceeded minimum base rent for the years ended December 31, 2019 and 2018.

(2)	The Company has a right of first refusal to purchase all or a portion of certain areas covered by the two separate leases.

(3)	If the hotel is increased from 356 to 500 rooms, the new annual base rent will increase to $85 thousand.

(4)	The Company has a right of first refusal to purchase the property, which must be exercised within 60 days of receiving the third party’s terms from the landlord.

(5)	The base rent for each year is adjusted based on a calculation tied to the Consumer Price Index. The monthly minimum or base rent in this chart is for the period from January 1, 2019 through December 31, 2019.

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i.	90% of our REIT taxable income, determined before the deduction for dividends paid and excluding any net capital gain (which does not necessarily equal net income as calculated in accordance with Generally Accepted Accounting Principles ("GAAP")); plus

ii.	90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Code; less

iii.	any excess non-cash income (as determined under the Code).

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(1)	For income tax purposes, dividends paid per share on our common stock in 2019 were 100% taxable as ordinary income.

(2)	For income tax purposes, dividends paid per share on our common stock in 2018 were 100% taxable as ordinary income.

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(1)	As of December 31, 2017, excludes the assets held for sale related to the Aston Waikiki Beach Hotel, which was sold in March 2018. As December 31, 2016 and 2015, these assets were included in net investment properties.

(2)	As of December 31, 2015, excludes the assets held for sale and the liabilities associated with assets held for sale for the nine hotels sold during the year ended December 31, 2016.

(3)

See "Non-GAAP Financial Measures" below in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a detailed description and reconciliation of Adjusted EBITDAre and Adjusted FFO attributable to common stock and unit holders and a description of how these performance measures are useful to investors as key supplemental measures of our operating performance.

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•	In February 2019, the Company completed the delayed draw of $85 million on its unsecured term loan maturing August 2023, bringing the outstanding balance on the loan to the full $150 million capacity.

•	In March 2019, the Company paid off the $90 million mortgage loan collateralized by Hyatt Regency Santa Clara.

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During the first quarter of 2019, the Company repriced its $125 million unsecured term loan maturing in September 2024 to reduce the leverage-based pricing grid. The term loan now bears an interest rate based on a pricing grid with a range of 135 to 200 basis points over LIBOR as determined by the Company's leverage ratio, a reduction of 35 to 55 basis points from the previous leverage-based grid. The Company previously fixed LIBOR on the loan through September 2022 at 1.92%, resulting in a current annual interest rate of 3.37%.

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During the second quarter of 2019, the Company recorded a non-cash impairment charge of $14.8 million on the Marriott Chicago at Medical District/UIC. The impairment of the long-lived assets were the result of a projected future decline in operating profits attributed to demand trends and changes in the hotel's expense profile. Then in December, the Company completed the disposition of the hotel for a sale price of $10.0 million and recognized a loss on sale of approximately $0.5 million, which was attributed to closing costs.

•	In December 2019, the Company completed the disposition of the 409-room Marriott Griffin Gate Resort & Spa for a sale price of $51.5 million. The Company recognized a loss on sale of approximately $0.5 million, which was attributed to closing costs.

•	In December 2019, the Company acquired the newly constructed 600-room Hyatt Regency Portland at the Oregon Convention Center in Portland, Oregon for a purchase price of $190 million, which was funded with cash on hand and from proceeds drawn on our senior unsecured revolving credit facility.

•	In December 2019, the Company paid off the approximately $15 million mortgage loan collateralized by Marriott Charleston Town Center.

•	During the fourth quarter of 2019, the Company recorded a non-cash goodwill impairment charge of $9.4 million related to Bohemian Hotel Savannah Riverfront, Autograph Collection, which was attributed to changes in the supply and demand dynamics in the Savannah, Georgia market since the hotel was acquired in 2012.

•	In addition to changes in our portfolio composition and financing transactions during 2019, we invested approximately $93 million in portfolio improvements, which we believe will drive positive performance at these properties in the future.

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•	Rooms revenues - Represents the sale of rooms at our hotel properties and accounts for a substantial majority of our total revenue. Occupancy and ADR are the major drivers of room revenue. The business mix and distribution channel mix of the hotels are significant determinants of ADR.

•	Food and beverage revenues - Occupancy and the type of customer staying at the hotel are the major drivers of food and beverage revenue (i.e., group business typically generates more food and beverage business through catering functions when compared to transient business, which may or may not utilize the hotel’s food and beverage outlets).

•	Other revenues - Represents ancillary revenue such as parking, resort fees, golf, spa services, telephone and other guest services and tenant leases. Occupancy and the nature of amenities at the property are the main drivers of other revenue.

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Rooms expenses - These costs include housekeeping wages and payroll taxes, room supplies, laundry services and front desk costs. Similar to rooms revenue, occupancy is the major driver of rooms expense and as a result, rooms expense has a significant correlation to rooms revenue. These costs as a percentage of revenue can increase based on increases in salaries, wages and benefits, as well as on the level of service and amenities that are provided.

•	Food and beverage expenses - These expenses primarily include food, beverage and associated labor costs. Occupancy and the type of customer staying at the hotel are major drivers of food and beverage expense (i.e., catered functions generally are more profitable than on-property food and beverage outlet sales), which correlates closely with food and beverage revenue.

•	Other direct expenses - These expenses primarily include labor and other costs associated with other revenues, such as parking and other guest services.

•	Other indirect expenses - These expenses primarily include hotel costs associated with general and administrative, state sales and excise taxes, sales and marketing, information technology and telecommunications, repairs and maintenance and utility costs.

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Management fees - Base management fees are computed as a percentage of gross revenue. The management fees also include incentive management fees, which are typically a percentage of net operating income (or similar measurement of hotel profitability) above an annual threshold based on our total capital investment in the hotel. Franchise fees are computed as a percentage of rooms revenue. See "Part I-Item 2. Our Principal Agreements" for a summary of key terms related to our management and franchise agreements.

•	Depreciation and amortization expense - These are non-cash expenses that primarily consist of depreciation of fixed assets such as buildings, furniture, fixtures and equipment at our hotels, as well as certain corporate assets. Amortization expense primarily consists of amortization of acquired advance bookings and acquired leases, which are amortized over the life of the related term or lease.

•	Real estate taxes, personal property taxes and insurance - Real estate taxes, personal property taxes and insurance includes the payments due in the respective jurisdictions where our hotels are located, partially offset by refunds from prior year real estate tax appeals, and payments due under insurance policies for our hotel portfolio.

•	Ground lease expense - Ground lease expense represents the rent associated with land underlying our hotels and/or meeting facilities that we lease from third parties. It also includes the non-cash ground rent determined as part of the initial purchase price allocation at acquisition.

•	General and administrative expenses - General and administrative expenses primarily consist of compensation expense for our corporate staff and personnel supporting our business, office administrative and related expenses, legal and professional fees, and other corporate costs.

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•	Gain on business interruption insurance - Gain on business interruption insurance consists of insurance settlements for lost income that was covered per the terms of our respective insurance policies, which was in excess of insurance deductibles.

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Acquisition, terminated transaction and pre-opening expenses - Acquisition and terminated transaction costs typically consist of legal fees, other professional fees, transfer taxes and other direct costs associated with our pursuit and acquisitions of hotel investments. Prior to January 1, 2018, we accounted for the acquisition of hotels as business combinations and therefore expensed all the related transaction costs. Beginning January 1, 2018, upon adoption of Financial Accounting Standards Board ("FASB") Accounting Standard Update ("ASU") 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, we evaluated each acquisition to determine if it was an asset acquisition or acquired business. During the years ended December 31, 2018 and 2019, we accounted for all acquisitions as asset acquisitions and therefore capitalized the related transaction costs. As a result, these costs will vary depending on the timing, volume and nature of acquisition activity. Pre-opening expenses represent costs incurred as part of rebranding and management transition efforts, which were not eligible to be capitalized. In December 2018, the Company acquired the Mandarin Oriental, Atlanta, which was rebranded as Waldorf Astoria Atlanta Buckhead immediately upon closing of the acquisition.

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Impairment and other losses - Our real estate, intangible assets, goodwill and other long-lived assets are generally held for the long-term. We evaluate these assets for impairment as discussed in "Critical Accounting Policies and Estimates." These evaluations have resulted in impairment losses for certain of these assets, including goodwill, based on the specific facts and circumstances surrounding these assets, and our estimates of the fair value of these assets, including goodwill. Based on economic conditions or other factors applicable to a specific property, we may be required to take additional impairment losses to reflect further declines in our asset and/or investment values. Additionally, from time to time we may record other losses related to property damage resulting from natural disasters and/or other disaster remediation costs.

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Demand and economic conditions - Consumer demand for lodging, especially business travel, is closely linked to the performance of the overall economy and is sensitive to business and personal discretionary spending levels. Declines in consumer demand due to adverse general economic conditions, risks affecting or reducing travel patterns, lower consumer confidence and adverse political conditions can lower the revenues and profitability of our hotel operations. As a result, changes in consumer demand and general business cycles can subject and have subjected our revenues to significant volatility. See "Part I-Item 1A. Risk Factors - Risks Relating to Our Business and Industry."

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Supply - New hotel room supply is an important factor that can affect the lodging industry’s performance. Room rates and occupancy, and thus RevPAR, tend to increase when demand growth exceeds supply growth. The addition of new competitive hotels affects the ability of existing hotels to drive growth in RevPAR, and thus profits. New development is driven largely by construction costs, the availability of financing and expected performance of existing hotels.

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Third-party hotel managers - We depend on the performance of third-party hotel management companies that manage the operations of each of our hotels under long-term agreements. Our operating results could be materially and adversely affected if any of our third-party managers fail to provide quality services and amenities, or otherwise fail to manage our hotels in our best interest. We believe we have good relationships with our third-party managers and are committed to the continued growth and development of these relationships.

•	Fixed nature of expenses - Many of the expenses associated with operating our hotels are relatively fixed. These expenses include certain personnel costs, rent, property taxes, insurance and utilities, as well as sales and marketing expenses. If we are unable to decrease these costs significantly or rapidly when demand for our hotels decreases,

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Seasonality - The lodging industry is seasonal in nature, which can be expected to cause fluctuations in our hotel rooms revenues, occupancy levels, room rates, operating expenses and cash flows. The periods during which our hotels experience higher or lower levels of demand vary from property to property and depend upon location, type of property and competitive mix within the specific location. Based on historical results for our current portfolio, our revenues and operating income are highest during the second quarter followed in order of significance by the first, third and fourth quarters assuming a stable macroeconomic environment, which we expect to be consistent from year to year for our current portfolio.

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Competition - The lodging industry is highly competitive. Our hotels compete with other hotels and alternative accommodations for guests in each of their markets based on a number of factors, including, among others, room rates, quality of accommodations, service levels and amenities, location, brand affiliation, reputation, and reservation systems. Competition is often specific to the individual markets in which our hotels are located and includes competition from existing and new hotels. We believe that hotels, such as those in our portfolio, will enjoy the competitive advantages associated with operating under nationally recognized brands.

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(1)	The hotels were sold as part of a portfolio sales agreement.

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(1)	The hotel was formerly the Mandarin Oriental, Atlanta. The hotel was rebranded as Waldorf Astoria Atlanta Buckhead immediately upon completion of this acquisition. As part of the acquisition of the hotel, the Company also acquired a free-standing restaurant unit that is part of the same mixed-use development. The restaurant is currently leased and operated as Del Frisco's Grille.

(2)	The hotel was acquired as part of a portfolio acquisition.

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(1)	During the year ended December 31, 2019, we acquired the 600-room Hyatt Regency Portland at the Oregon Convention Center and created two additional rooms at Marriott Woodlands Waterway Hotel & Convention Center.

(2)	During the year ended December 31, 2019, the Company disposed of two hotels with 522 rooms. During the year ended December 31, 2018, the Company disposed of three hotels with 1,173 rooms and at the Hyatt Regency Grand Cypress we converted 72 guestrooms into 36 newly created suites, which resulted in a reduction in our total room count.

(3)	For hotels acquired during the applicable period, only includes operating statistics since the date of acquisition. For hotels disposed of during the period, operating results and statistics are only included through the date of the respective disposition.

(4)	Hotel operating income represents the difference between total revenues and total hotel operating expenses.

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•

$52.0 million increase was primarily contributed by the four hotels acquired during 2018, which included The Ritz-Carlton, Denver in August 2018, Fairmont Pittsburgh in September 2018, Park Hyatt Aviara Resort, Golf Club & Spa in November 2018, and Waldorf Astoria Atlanta Buckhead in December 2018 (collectively, the "four 2018 acquisitions") with limited contributions from Hyatt Regency Portland at the Oregon Convention Center acquired in December 2019; and

•

$38.8 million decrease was primarily attributed to the disposition of three hotels during 2018, which included the Aston Waikiki Beach Hotel in March 2018, Hilton Garden Inn Washington D.C. Downtown in November 2018, and Residence Inn Denver City Center in December 2018 (collectively, the "three hotels sold during 2018") with limited decreases attributed to Marriott Chicago at Medical District/UIC and Marriott Griffin Gate Resorts & Spa that were sold in December 2019 (collectively, "the two hotels sold in December 2019").

•	$44.4 million increase was primarily attributed to the four 2018 acquisitions with limited contributions from Hyatt Regency Portland at the Oregon Convention Center; and

•	$1.5 million decrease was primarily attributed to the three hotels sold during 2018 with limited decreases from the two hotels sold in December 2019.

•	$17.7 million increase contributed by the four 2018 acquisitions; and

•	$3.5 million decrease attributed to the three hotels sold during 2018.

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•	$92.4 million increase primarily contributed by the four 2018 acquisitions with limited contributions from Hyatt Regency Portland at the Oregon Convention Center acquired in December 2019; and

•	$20.7 million decrease attributed to the three hotels sold during 2018 with limited decreases attributed to the two hotels sold in December 2019.

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(1)

During the year ended December 31, 2019, the Company recognized a long-lived asset impairment charge of $14.8 million attributed to Marriott Chicago at Medical District/UIC and a goodwill impairment charge of $9.4 million attributed to Bohemian Hotel Savannah Riverfront, Autograph Collection. For the year ended December 31, 2017, Hurricanes Harvey and Irma impacted several of the Company's hotels. The Company recorded a loss of $950 thousand, which represents damage sustained during the storms, net of estimated insurance recoveries, and expensed $1.3 million of hurricane-related repairs and cleanup costs. These amounts are included in impairment and other losses on the consolidated statement of operations and comprehensive income for the year ended December 31, 2017.

(2)	Includes acquisition, terminated transaction costs, pre-opening and hotel rebranding expenses. Hotel rebranding expenses represent costs incurred for the rebranding of Mandarin Oriental, Atlanta to the Waldorf Astoria Atlanta Buckhead and the transition of management of the property, which the Company acquired in December 2018.

(3)

Net debt to Adjusted EBITDA is defined as (i) the total principal balance of debt as of December 31, 2019, which is $1.3 billion per Note 7 of the consolidated financial statements included in "Part IV - Item 15. Exhibits and Financial Statements," (ii) less, cash and cash equivalents of $110.8 million as of December 31, 2019, (iii) divided by Adjusted EBITDAre attributable to common stock and unit holders of $302.1 million for the year ended December 31, 2019, which equals 3.9x.

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(1)

During the year ended December 31, 2019, the Company recognized a long-lived asset impairment charge of $14.8 million attributed to Marriott Chicago at Medical District/UIC and a goodwill impairment charge of $9.4 million attributed to Bohemian Hotel Savannah Riverfront, Autograph Collection. For the year ended December 31, 2017, Hurricanes Harvey and Irma impacted several of the Company's hotels. The Company recorded a loss of $950 thousand, which represents damage sustained during the storms, net of estimated insurance recoveries, and expensed $1.3 million of hurricane-related repairs and cleanup costs. These amounts are included in impairment and other losses on the consolidated statement of operations and comprehensive income for the year ended December 31, 2017.

(2)	Includes acquisition, terminated transaction costs, pre-opening and hotel rebranding expenses. Hotel rebranding expenses represent costs incurred for the rebranding of Mandarin Oriental, Atlanta to the Waldorf Astoria Atlanta Buckhead and the transition of management of the property, which the Company acquired in December 2018.

(3)	Loan related costs included amortization of debt discounts and deferred loan origination costs.

(4)	The TCJA introduced many significant changes to the U.S. federal income tax code, including a significant reduction in our future estimated tax rates. For the year ended December 31, 2017, we recorded a one-time adjustment to our net deferred tax asset resulting in the recognition of deferred income tax expense.

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(1)	Variable index is one-month LIBOR. Interest rates as of December 31, 2019.

(2)	The Company entered into interest rate swap agreements to fix the interest rate of the variable rate mortgage loans for portion of or the entire term of the loan.

(3)	A variable interest loan for which the interest rate has been fixed on $90 million of the balance through January 2022, after which the rate reverts to variable.

(4)	Represents the weighted average interest rate as of December 31, 2019.

(5)	LIBOR has been fixed for either a portion of or the entire term of the loan. The spread may vary, as it is determined by the Company's leverage ratio.

(6)	Includes loan discounts recognized upon modification and deferred financing costs, net of the accumulated amortization.

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Cash provided by operating activities was $246.6 million and $254.2 million for the year ended December 31, 2019 and 2018, respectively. Our cash flows provided by operating activities generally consist of the net cash generated by our hotel operations, partially offset by the cash paid for corporate expenses and other working capital changes. Our cash flows provided by operating activities may also be affected by changes in our portfolio resulting from hotel acquisitions, dispositions or renovations. The net decrease to cash provided by operating activities during the year ended December 31, 2019 was primarily due to changes in our portfolio composition reflecting completed acquisitions and dispositions and the timing of such transactions. Refer to the "Results of Operations" section for further discussion of our operating results for the year ended December 31, 2019 and 2018.

•

Cash used in investing activities during the year ended December 31, 2019 was $222.9 million compared to $49.8 million during 2018. Cash used in investing activities for the year ended December 31, 2019 was primarily due to (i) $190.0 million for the acquisition of Hyatt Regency Portland at the Oregon Convention Center and (ii) $93.0 million in capital improvements at our hotel properties, which was offset by (iii) proceeds from the dispositions of Marriott Chicago at Medical District/UIC and Marriott Griffin Gate Resort & Spa for net proceeds of $60.2 million. Cash used in investing activities for the year ended December 31, 2018 was primarily due to (i) $354.1 million for the acquisition of The Ritz-Carlton, Denver, Fairmont Pittsburgh, Park Hyatt Aviara Resort, Golf Club & Spa, and Waldorf Astoria Atlanta Buckhead and (ii) $108.2 million in capital improvements at our hotel properties, which was offset by (iii) proceeds from the disposition of Aston Waikiki Beach Hotel, Hilton Garden Inn Washington D.C. Downtown, and Residence Inn Denver City Center for net proceeds of $412.6 million.

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Cash provided by financing activities during the year ended December 31, 2019 was $9.7 million and cash used in financing activities was $173.2 million for the year ended December 31, 2018. Cash provided by financing activities for the year ended December 31, 2019 was primarily attributed to (i) proceeds of $85.0 million from the draw down of the remaining balance of the unsecured term loan entered into in during 2018, (ii) proceeds of $160.0 million from the draw on the senior unsecured revolving credit facility to acquire the Hyatt Regency Portland at the Oregon Convention Center, which was offset by (iii) the payment of $125.9 million in dividends, (iv) the repayment of mortgage debt totaling $104.9 million, and (v) principal payments of $3.6 million. Cash used in financing activities for the year ended December 31, 2018 was primarily attributed to (i) the payment of $121.7 million in dividends, (ii) the repayment of mortgage debt totaling $271.7 million and $3.9 million of principal payments, (iii) the net repayment of the

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(1)	Includes principal and interest payments, for both variable and fixed rate loans. The variable rate interest payments were calculated based upon the variable rate spread plus 1 month LIBOR as of December 31, 2019.

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(1)	The debt maturity excludes net mortgage discounts and unamortized deferred financing costs of $6.0 million as of December 31, 2019.

(2)	Includes all fixed rate debt, and all variable rate debt that was swapped to fixed rates as of December 31, 2019.

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•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that our receipts and our expenditures are being made only in accordance with authorizations of our management and our board of directors; and

•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

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(1)	Represents (i) 247,108 shares underlying awards of restricted stock units and (ii) 1,683,965 LTIP Units (as defined in the Xenia Hotels & Resorts, Inc., XHR Holding, Inc. and XHR LP 2015 Incentive Award Plan) outstanding under the 2015 Incentive Award Plan, in each case, as of December 31, 2019.

(2)	Includes shares of common stock available for future grants under the 2015 Incentive Award Plan as of December 31, 2019.

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(a)	List of documents filed as a part of this Annual Report on Form 10-K:

1)	Financial Statements.

2)	Financial Statement Schedules. The following financial statement schedule is filed herein on pages F-44 through F-47:

3)	Exhibits. The following exhibits are filed (or incorporated by reference herein) as a part of this Annual Report on Form 10-K.

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Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby agrees to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.

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–	Evaluating the market comparable transactions, including adjustments to such transactions, used by the Company in the determination of fair value; and

–	Independently obtaining third-party audit evidence of comparable sales transactions from industry sources, including information about the transaction prices and features of the comparable assets, and compared this to the Company’s fair value of land acquired.

–	Assessing the Company’s revenue growth rates by comparing the revenue growth rates in the Company’s analyses to industry reports; and

–	Evaluating the terminal capitalization rate and discount rate by comparing them against a rate range that was independently developed using publicly available market data for comparable entities.

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(1)

Funded with $30 million from cash on hand and $160 million of proceeds drawn on the Company's senior unsecured credit facility. The Company accounted for the transaction as an asset acquisition and therefore capitalized the $0.5 million of acquisition costs as part of the purchase price. Per the terms of the respective purchase agreement the Company may be obligated to pay additional consideration to the seller of up to $35 million, which is based on adjusted profit for calendar years 2022 and 2023.

(2)	Funded with cash on hand.

(3)	Funded with cash on hand and proceeds drawn on the Company's senior unsecured revolving credit facility.

(4)

The Company acquired the Mandarin Oriental, Atlanta a 127-room (unaudited) hotel in Atlanta, Georgia for $60.5 million. The hotel was rebranded as Waldorf Astoria Atlanta Buckhead immediately upon completion of this acquisition. In conjunction with the rebranding, the Company entered into a new management agreement with Hilton. The acquisition included a free-standing restaurant (the "Buckhead Atlanta Restaurant"), which is part of the same mixed-use development. The restaurant is currently leased and operated as Del Frisco's Grille. The acquisition was funded with cash on hand.

(5)	The Company accounted for these transactions as asset acquisitions and capitalized the related acquisition costs as part of the respective purchase price. As such, approximately $1.8 million was capitalized during the year ended December 31, 2018.

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(1)	As part of the purchase price allocation for Hyatt Regency Portland at the Oregon Convention Center, the Company allocated $3.2 million to advanced bookings that will be amortized over 6.0 years.

(2)	As part of the purchase price allocation for The Ritz-Carlton Denver, the Company allocated $0.5 million to advanced bookings that will be amortized over approximately 1.4 years.

(3)	As part of the purchase price allocation for Park Hyatt Aviara Resort, Golf Club & Spa, the Company allocated $1.9 million to advanced bookings that will be amortized over approximately 2.4 years.

(4)	As part of the purchase price allocation for Waldorf Astoria Atlanta Buckhead, the Company allocated $1.0 million to advanced bookings and lease intangibles that will be amortized over a weighted average useful life of 3.2 years.

(5)	During the years ended December 31, 2019 and 2018, the total cost capitalized included acquisition costs as each transaction was accounted for as an asset acquisition.

(1)	During the year ended December 31, 2019, the Company recognized adjustments amounting to a gain of $0.1 million related to the 2018 dispositions.

(2)	As part of the disposition in November 2018, the Company derecognized $5.4 million of goodwill related to Hilton Garden Inn Washington D.C Downtown that was included in intangible assets, net of accumulated amortization on the consolidated balance sheet as of December 31, 2017.

(3)	During the year ended December 31, 2018, the Company recognized adjustments amounting to a loss of $0.1 million related to the 2017 dispositions.

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(4)	As part of the disposition in April 2017, the Company derecognized $2.3 million of goodwill related to Courtyard Birmingham at UAB that was included in intangible assets, net of accumulated amortization on the consolidated balance sheet as of December 31, 2016.

(5)	The hotels were sold as part of a portfolio sales agreement.

(1)	Upon the adoption date of Topic 842, a total of $20.3 million of net intangibles for existing above and below market ground leases was derecognized and subsequently recorded as an adjustment to the beginning right of use asset. See Notes 2 and 14 for additional information.

(2)	During the year ended December 31, 2019, the Company recognized a goodwill impairment loss of $9.4 million. See Note 9 for further details.

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(1)	Upon the adoption date of Topic 842, a total of $20.3 million of net intangibles for existing above and below market ground leases was derecognized and subsequently recorded as an adjustment to the beginning right of use asset. See Notes 2 and 14 for additional information.

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(1)	Variable index is one-month LIBOR. Interest rates as of December 31, 2019.

(2)	During the year ended December 31, 2019, the Company elected its prepayment option per the terms of the mortgage loan agreement and repaid the outstanding balance.

(3)	The Company entered into interest rate swap agreements to fix the interest rate of the variable rate mortgage loans for a portion of or the entire term of loan.

(4)

During the year ended December 31, 2019, the Company elected its prepayment option per the terms of the respective mortgage loan agreement and repaid the outstanding balance of $90 million, plus accrued interest. The interest rate swap was transferred to the interest payments for $90 million of the $100.0 million variable rate mortgage loan collateralized by Renaissance Atlanta Waverly Hotel & Convention Center, which matures in 2024. See Note 8 for further details related to our derivative instruments.

(5)

In September 2018, the Company amended its mortgage loan agreement to extend the maturity date from March 2019 through September 2024 and received additional loan proceeds of $18 million. The interest rate was fixed for the original principal of $38 million through March 2019, after which the rate reverted back to variable for the entire mortgage loan balance of $56 million through maturity in 2024.

(6)	The Company entered into interest rate swap agreements to fix the interest rate of the variable rate mortgage loan from June 2018 through January 2023. The effective interest rate on the loan was 3.69% through January 2019 after which the rate increased to 4.95% through January 2023.

(7)	Represents the weighted average interest rate as of December 31, 2019.

(8)	LIBOR has been fixed for certain interest periods throughout the term of the loan. The spread may vary, as it is determined by the Company's leverage ratio.

(9)	In August 2018, the Company entered into an unsecured term loan for $150 million that matures in August 2023. The term loan includes an accordion option that allows the Company to request additional lender commitments of up to $100 million. In October 2018, the Company funded $65 million of the term loan and in February 2019, the remaining $85 million was funded.

(10)

In September 2019, the Company repriced its $125 million unsecured term loan maturing in September 2024 to reduce the borrowing cost. The term loan now bears an interest rate based on a pricing grid with a range of 135 to 200 basis points over LIBOR as determined by the Company's leverage ratio, a reduction of 35 to 55 basis points from the previous leverage-based grid. The Company previously fixed LIBOR on the loan through September 2022 at 1.92% which results in a current annual interest rate of 3.32%.

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(11)	The maturity of the senior unsecured credit facility can be extended through February 2023 at the Company's discretion and requires the payment of an extension fee.

(12)	Includes loan discounts recognized upon modification and deferred financing costs, net of the accumulated amortization.

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•	Level 1 - Quoted prices for identical assets or liabilities in active markets that the entity has the ability to access.

•	Level 2 - Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•	Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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(1)	Interest rate swap fair values are netted as applicable per the terms of the respective master netting agreements.

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(1)	Includes Time-Based LTIP Units and Class A LTIP Units.

(2)	During the year ended December 31, 2019 and 2018, the Company redeemed 34,118 and 58,555, respectively, shares of common stock to satisfy federal and state tax withholding requirements on the vesting of Share Units and Restricted Stock Units under the 2014 Share Unit Plan and the 2015 Incentive Award Plan.

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(1)	The weighted average remaining lease term including all available extension options is approximately 62 years.

(2)	The ROU asset is included in other assets on the accompanying consolidated balance sheet as of December 31, 2019.

(3)	The lease liability is included in other liabilities on the accompanying consolidated balance sheet as of December 31, 2019.

(4)	Variable lease costs represent percentage rent of $2.3 million and real estate taxes and insurance costs of $6.5 million incurred for ground leases during the year ended December 31, 2019.

(1)	The lease liability is included in other liabilities on the accompanying consolidated balance sheet as of December 31, 2019.

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(A)	The initial cost to the Company represents the original purchase price of the property, including amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired.

(B)	The aggregate cost of real estate owned at December 31, 2019 for federal income tax purposes was approximately $3,864 million (unaudited).

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(C)	Cost capitalized subsequent to acquisition includes payments under master lease agreements as well as additional tangible costs associated with investment properties, including any earn-out of tenant space. Impairment charges and write-offs of fully depreciated assets are recorded as a reduction in the basis.

(D)	Reconciliation of real estate owned (includes continuing operations and operations of assets classified as held for sale):

(E)	Reconciliation of accumulated depreciation (includes continuing operations and operations of assets classified as held for sale):

(F)	Depreciation is computed based upon the following estimated lives: