Apple Hospitality REIT (APLE) risk factors, FY2024 10-K

Risks Related to the Company’s Business and Operations

1. 01The Company is subject to various risks which are common to the hotel industry on a national, regional and local market basis that are beyond its control and could adversely affect its business
2. 02Economic conditions in the U.S. and individual markets may adversely affect the Company’s business operations and financial performance
3. 03The Company is affected by restrictions in, and compliance with, its franchise and license agreements
4. 04Substantially all of the Company’s hotels operate under Marriott or Hilton brands; therefore, the Company is subject to risks associated with concentrating its portfolio in these brand families
5. 05Competition in the markets where the Company owns hotels may adversely affect the Company’s results of operations
6. 06The Company is dependent on third-party hotel managers to operate its hotels and could be adversely affected if such management companies do not manage the hotels successfully
7. 07Labor shortages and increased labor costs could cause significant increases to the Company’s operating costs and decreases to the Company’s operating income
8. 08The growing use of non-franchisor lodging distribution channels could adversely affect the Company’s business and profitability
9. 09Renovations and capital improvements at the Company’s existing hotels or new hotel developments may reduce the Company’s profitability
10. 10Certain hotels are subject to ground leases that may affect the Company’s ability to use the hotel or restrict its ability to sell the hotel
11. 11The Company may not be able to complete hotel dispositions when and as anticipated
12. 12Real estate impairment losses may adversely affect the Company’s financial condition and results of operations
13. 13The Company’s failure to identify and complete accretive acquisitions may adversely affect the profitability of the Company
14. 14The Company’s inability to obtain financing on favorable terms or pay amounts due on its financing may adversely affect the Company’s operating results
15. 15Compliance with financial and other covenants in the Company’s existing or future debt agreements may reduce operational flexibility and create default risk
16. 16Pandemics and other health crises could negatively impact the Company’s business, financial performance and condition, operating results and cash flows
17. 17increased labor costs to attract employees due to perceived risk of exposure to an infectious disease or virus, as well as potential for increased workers’ compensation claims if hotel employees are exposed to such diseases or viruses in the workplace
18. 18Technology is used in operations, and any material failure, inadequacy, interruption or security failure of that technology from cyber-attacks or other events could harm the Company’s business
19. 19Potential losses not covered by insurance may adversely affect the Company’s financial condition
20. 20The Company faces possible risks associated with the physical effects of, and laws and regulations related to, climate change
21. 21The Company could incur significant, material costs related to government regulation and litigation with respect to environmental matters, which could have a material adverse effect on the Company
22. 22The Company may incur significant costs complying with various regulatory requirements, which could materially and adversely affect the Company
23. 23Heightened focus on corporate responsibility, specifically related to ESG practices, may impose additional costs and expose the Company to new risks
24. 24The nature of the hotel business exposes the Company to litigation and claims that may result in costs and expenses that cannot be anticipated with any degree of certainty

Risks Related to the Company’s Organization and Structure

1. 25The Company’s ownership limitations may restrict or prevent certain acquisitions and transfers of its shares
2. 26The Company’s future issuances of preferred shares or debt securities may adversely affect the voting power or ownership interest of the holders of common shares or may limit the ability of a third party to acquire control of the Company
3. 27Provisions of the Company’s third amended and restated bylaws could inhibit changes in control
4. 28The Company’s Executive Chairman has interests that may conflict with the interests of the Company and that may detract from the time devoted to the Company
5. 29Qualifying as a REIT involves highly technical and complex provisions of the Code and failure of the Company to qualify as a REIT would have adverse consequences to the Company and its shareholders
6. 30If the Company does not qualify as a REIT or if the Company fails to remain qualified as a REIT, the Company will be subject to U.S. federal corporate income tax and potentially state and local taxes, which would reduce the Company’s earnings and the amount of cash available for distribution to its shareholders
7. 31Even if the Company qualifies as a REIT, it may face other tax liabilities that reduce its cash flow
8. 32REIT distribution requirements could adversely affect the Company’s ability to execute its business plan or cause it to increase debt levels or issue additional equity during unfavorable market conditions
9. 33The Company may in the future choose to pay dividends in the form of common shares, in which case shareholders may be required to pay income taxes in excess of the cash dividends they receive
10. 34If the Company’s leases are not respected as true leases for U.S. federal income tax purposes, the Company would likely fail to qualify as a REIT
11. 35If any of the hotel management companies that the Company’s TRSs engage do not qualify as “eligible independent contractors,” or if the Company’s hotels are not “qualified lodging facilities,” the Company would likely fail to qualify as a REIT
12. 36The Company’s ownership of TRSs is limited, and the Company’s transactions with its TRSs will cause it to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms
13. 37Complying with REIT requirements may force the Company to forgo and/or liquidate otherwise attractive investment opportunities
14. 38The Company may be subject to adverse legislative or regulatory tax changes
15. 39The Company may change its distribution policy or may not have funds available to make distributions to shareholders
16. 40The market price and trading volume of the Company’s common shares may fluctuate widely and could decline substantially in the future
17. 41the realization of any of the other risk factors presented in this Annual Report on Form 10-K
18. 42Future offerings or the perception that future offerings could occur may adversely affect the market price of the Company’s common shares and future offerings may be dilutive to existing shareholders