Overview of the Company’s Financial Performance

Ashford Hospitality Trust, Inc. (the “Company”) is a real estate investment trust (REIT) that owns and invests in hotel properties. As of June 30, 2024, the Company’s portfolio consisted of 69 consolidated operating hotel properties with 17,087 total rooms, as well as four consolidated operating hotel properties with 405 total rooms owned through a 99.3% ownership interest in Stirling OP.

The Company’s net income attributable to common stockholders changed significantly, from a net loss of $85.5 million for the six months ended June 30, 2023 to net income of $121.8 million for the six months ended June 30, 2024. This $207.3 million improvement was driven by several key factors:

Revenue Trends

• Rooms revenue from the Company’s hotel properties decreased $74.1 million, or 13.5%, primarily due to the disposition of several hotel properties and the derecognition of the KEYS A and B properties that went into receivership.
• Food and beverage revenue decreased $8.1 million, or 6.7%, also due to the hotel dispositions and derecognized properties.
• Other hotel revenue, such as from internet access and parking, decreased $2.0 million, or 5.5%.

Expense Management

• Hotel operating expenses decreased $47.5 million, or 10.2%, driven by lower expenses from the disposed and derecognized properties.
• Property taxes, insurance and other expenses decreased $1.3 million, or 3.6%.
• Depreciation and amortization decreased $17.3 million, or 18.2%, primarily due to the hotel dispositions and derecognized properties.

Asset Transactions

• The Company recognized significant gains from the disposition of several hotel properties, totaling $94.4 million.
• The Company also recognized a $145.6 million gain from the derecognition of the KEYS A and B properties that went into receivership.

Financing Activities

• The Company refinanced the $240 million mortgage loan on the Renaissance Hotel in Nashville and the Westin Hotel in Princeton, obtaining a new $267.2 million loan.
• The Company repaid several mortgage loans using proceeds from hotel dispositions, including the $98 million loan on the Hilton Boston Back Bay Hotel.
• The Company continued to access the capital markets, raising $42.3 million in net proceeds from preferred stock offerings and $7.7 million from common stock offerings.

Analysis of Strengths and Weaknesses

Strengths:

• The Company has been able to generate significant gains from the disposition of non-core hotel properties, allowing it to pay down debt and strengthen its balance sheet.
• The Company has been successful in accessing the capital markets to raise additional equity capital, providing financial flexibility.
• The Company has been proactive in restructuring and refinancing its debt, extending maturities and obtaining more favorable terms.
• The Company’s asset management strategies have helped control operating costs and improve profitability at its remaining hotel properties.

Weaknesses:

• The Company’s revenue has declined due to the disposition of hotel properties and the derecognition of the KEYS A and B properties, which has impacted overall financial performance.
• The Company continues to have a significant amount of variable-rate debt, exposing it to interest rate risk.
• The Company’s portfolio is still concentrated in certain geographic markets and hotel segments, making it vulnerable to regional economic conditions and industry trends.
• The Company’s reliance on related-party service providers, such as Ashford Inc. and its subsidiaries, creates potential conflicts of interest that could impact decision-making.

Outlook and Future Prospects

The Company’s current key priorities and financial strategies include:

• Preserving capital and maintaining significant cash and cash equivalents liquidity
• Continuing to dispose of non-core hotel properties
• Acquiring hotel properties that are expected to be accretive to the portfolio
• Pursuing capital market activities to enhance long-term stockholder value
• Accessing cost-effective capital, including through the issuance of non-traded preferred securities
• Opportunistically exchanging preferred stock into common stock
• Implementing selective capital improvements to increase profitability and maintain asset quality
• Implementing effective asset management strategies to minimize operating costs and increase revenues
• Financing or refinancing hotels on competitive terms
• Modifying or extending property-level indebtedness
• Utilizing hedges, derivatives and other strategies to mitigate risks
• Pursuing opportunistic value-add additions to the hotel portfolio
• Making other investments or divestitures as deemed appropriate by the board of directors

The Company’s current investment strategy is to focus on owning predominantly full-service hotels in the upper upscale segment in domestic markets that have RevPAR generally less than twice the national average. The Company believes it will be able to shift its investment strategy to take advantage of new lodging-related investment opportunities as market conditions change.

The Company’s ability to execute its strategies and achieve its objectives will depend on various factors, including:

• Continued access to capital markets and ability to obtain financing on favorable terms
• Successful disposition of non-core hotel properties and redeployment of capital
• Effective asset management and cost control initiatives
• Ability to identify and acquire accretive hotel properties
• Navigating potential conflicts of interest with related-party service providers
• Mitigating the impact of interest rate fluctuations and other macroeconomic conditions

Overall, the Company has made significant progress in strengthening its financial position and positioning itself for future growth, but it continues to face challenges and risks that will require careful management and execution of its strategic plan.