XML 31 R19.htm IDEA: XBRL DOCUMENT
v3.22.0.1

Commitments and Contingencies | 12 Months Ended
--- | ---
Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Operating Leases As of December 31, 2021, 13 of Company's hotel properties were subject to ground lease agreements that cover the land underlying the respective hotels. The ground leases are classified as operating leases. The total ground lease expense was $13.1 million for the year ended December 31, 2021, which consisted of $11.6 million of fixed lease expense and $1.5 million of variable lease expense. The total ground lease expense was $12.4 million for the year ended December 31, 2020, which consisted of $11.6 million of fixed lease expense and $0.8 million of variable lease expense. The total ground lease expense was $15.7 million for the year ended December 31, 2019, which consisted of $11.6 million of fixed lease expense and $4.1 million of variable lease expense. The total ground lease expense is included in property tax, insurance and other in the accompanying consolidated statements of operations and comprehensive (loss) income. The Company's ground leases consisted of the following (in thousands):
|  |  |  |  |  | Ground Lease Expense
|  |  |  |  |  | For the year ended December 31,
Hotel Property Name |  | Initial Term Expiration |  | Extension Term(s) Expiration |  | 2021 |  | 2020 |  | 2019
Wyndham Boston Beacon Hill |  | 2028 |  | — |  | $ | 556 |  |  | $ | 400 |  |  | $ | 900 |
Wyndham San Diego Bayside |  | 2029 |  | — |  | 4,042 |  |  | 4,100 |  |  | 4,800 |
DoubleTree Suites by Hilton Orlando Lake Buena Vista |  | 2032 |  | 2057 |  | 666 |  |  | 300 |  |  | 900 |
Residence Inn Palo Alto Los Altos |  | 2033 |  | — |  | 86 |  |  | 100 |  |  | 100 |
Wyndham Pittsburgh University Center |  | 2038 |  | 2083 |  | 726 |  |  | 700 |  |  | 700 |
Marriott Louisville Downtown |  | 2053 |  | 2153 (1) |  | — |  |  | — |  |  | — |
Embassy Suites San Francisco Airport Waterfront |  | 2059 |  | — |  | 1,239 |  |  | 1,200 |  |  | 2,400 |
Wyndham New Orleans French Quarter |  | 2065 |  | — |  | 487 |  |  | 500 |  |  | 500 |
Courtyard Charleston Historic District |  | 2096 |  | — |  | 1,019 |  |  | 950 |  |  | 1,000 |
Courtyard Austin Downtown Convention Center and Residence Inn Downtown Convention Center |  | 2100 |  | — |  | 555 |  |  | 449 |  |  | 800 |
Courtyard Waikiki Beach |  | 2112 |  | — |  | 3,742 |  |  | 3,700 |  |  | 3,600 |
Moxy Denver Cherry Creek (2) |  | 2115 |  | — |  | 5 |  |  | — |  |  | — |
|  |  |  |  |  | $ | 13,123 |  |  | $ | 12,399 |  |  | $ | 15,700 |
(1) The lease may be extended up to four twenty-five year terms at the Company's option. (2) In connection with the acquisition of this hotel property in December 2021, the Company recognized a lease liability of $3.1 million and related lease right-of-use asset of $7.4 million on the consolidated balance sheet for the ground lease. In order to determine the present value of the future lease payments over the lease term, the Company used an incremental borrowing rate of 6.9%. The future lease payments for the Company's operating leases are as follows (in thousands):
| December 31, 2021 |  |
2022 | $ | 11,521 |  |  |
2023 | 11,617 |  |  |
2024 | 11,677 |  |  |
2025 | 11,728 |  |  |
2026 | 11,003 |  |  |
Thereafter | 542,537 |  |  |
Total future lease payments | 600,083 |  |  |
Imputed interest | (477,052) |  |  |
Lease liabilities | $ | 123,031 |  |  |
The following table presents certain information related to the Company's operating leases as of December 31, 2021:
Weighted average remaining lease term | 63 years
Weighted average discount rate | 7.03 | %
Restricted Cash Reserves The Company is obligated to maintain cash reserve funds for future capital expenditures at the hotels (including the periodic replacement or refurbishment of FF&E) as determined pursuant to the management agreements, franchise agreements and/or mortgage loan documents. The management agreements, franchise agreements and/or mortgage loan documents require the Company to reserve cash ranging typically from 3.0% to 5.0% of the individual hotel’s revenues. Any unexpended amounts will remain the property of the Company upon termination of the management agreements, franchise agreements or mortgage loan documents. As of December 31, 2021 and 2020, approximately $48.5 million and $35.0 million, respectively, was available in the restricted cash reserves for future capital expenditures, real estate taxes and insurance, and debt obligations where certain lenders held restricted cash due to a cash trap event. Litigation Neither the Company nor any of its subsidiaries is currently involved in any regulatory or legal proceedings that management believes will have a material and adverse effect on the Company's financial position, results of operations or cash flows. Management Agreements As of December 31, 2021, 97 of the Company's consolidated hotel properties were operated pursuant to management agreements with initial terms ranging from one to 25 years, with 14 different management companies as noted in the table below. This number includes 29 consolidated hotel properties that receive the benefits of a franchise agreement pursuant to management agreements with Hilton, Hyatt, or Marriott.
Management Company |  | Number of Hotel Properties
Aimbridge Hospitality |  | 30
Colwen Management, Inc. |  | 1
Crestline Hotels and Resorts |  | 1
Davidson Hotels and Resorts |  | 2
Hilton Management and affiliates |  | 19
HEI Hotels and Resorts |  | 1
Highgate Hotels |  | 4
Hyatt Corporation and affiliates |  | 11
InnVentures |  | 3
Marriott International, Inc. |  | 3
Sage Hospitality |  | 6
Urgo Hotels |  | 3
White Lodging Services |  | 8
Wyndham |  | 5
|  | 97
Each management company receives a base management fee between 1.75% and 3.5% of hotel revenues. Management agreements that include the benefits of a franchise agreement incur a base management fee between 2.0% and 7.0% of hotel revenues. The management companies are also eligible to receive an incentive management fee if hotel operating income, as defined in the management agreements, exceeds certain thresholds. The incentive management fee is generally calculated as a percentage of hotel operating income after the Company has received a priority return on its investment in the hotel. Management fees are included in management and franchise fee expense in the accompanying consolidated statements of operations and comprehensive (loss) income. For the years ended December 31, 2021, 2020 and 2019, the Company incurred management fee expense of approximately $24.2 million, $13.2 million and $45.5 million, respectively. Subsequent to the year ended December 31, 2021, four hotel properties that were managed by White Lodging Services were transferred to Hersha Hospitality Management effective February 1, 2022. Franchise Agreements As of December 31, 2021, 67 of the Company's consolidated hotel properties were operated under franchise agreements with initial terms ranging from one to 30 years. This number excludes 29 consolidated hotel properties that receive the benefits of a franchise agreement pursuant to management agreements with Hilton, Hyatt, or Marriott. In addition, The Knickerbocker is not operated with a hotel brand so the hotel does not have a franchise agreement. Franchise agreements allow the hotel properties to operate under the respective brands. Pursuant to the franchise agreements, the Company pays a royalty fee between 3.0% and 6.0% of room revenue, plus additional fees for marketing, central reservation systems and other franchisor costs between 1.0% and 4.3% of room revenue. Certain hotels are also charged a royalty fee between 1.5% and 3.0% of food and beverage revenues. Franchise fees are included in management and franchise fee expense in the accompanying consolidated statements of operations and comprehensive (loss) income. For the years ended December 31, 2021, 2020 and 2019, the Company incurred franchise fee expense of approximately $43.2 million, $25.6 million and $75.3 million, respectively. Wyndham Agreements Prior to January 1, 2020, the Wyndham management agreements guaranteed minimum levels of annual net operating income at each of the Wyndham-managed hotels. In 2019, the Company entered into an agreement with Wyndham to terminate the net operating income guarantee effective December 31, 2019 and received termination payments totaling $36.0 million from Wyndham. In addition, during the year ended December 31, 2021, the Company extended certain Wyndham management agreements to December 31, 2022. For the years ended December 31, 2021 and 2020, the Company recognized approximately $14.1 million and $17.8 million, respectively, as a reduction to management and franchise fee expense related to the amortization of the termination payments over the remaining terms of the management agreements. Other During the year ended December 31, 2020, the Company incurred approximately $8.7 million in corporate and property-level severance costs as a result of the COVID-19 pandemic. This amount includes $6.7 million for the year ended December 31, 2020 related to severance for associates at the Company's New York City hotels operating under collective bargaining agreements. The severance costs are included in other operating expense in the accompanying consolidated statement of operations and comprehensive (loss) income.

X
- References No definition available. + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for commitments and contingencies. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 450 -URI http://asc.fasb.org/topic&trid=2127136 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 440 -URI http://asc.fasb.org/topic&trid=2144648 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 954 -SubTopic 440 -Section 50 -Paragraph 1 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6491277&loc=d3e6429-115629 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 440 -SubTopic 10 -Section 50 -Paragraph 4 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=123406679&loc=d3e25336-109308 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 440 -SubTopic 10 -Section 50 -Paragraph 4 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123406679&loc=d3e25336-109308 + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration