Summit Hotel Properties (INN) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01Our business strategy, future results of operations and growth prospects are dependent on achieving revenue and net income growth from anticipated increases in demand for lodging guestrooms and general economic conditions
2. 02Our expenses may not decrease if our revenue decreases
3. 03Changes in federal or state regulations or policies may have a material adverse effect on labor markets and our business
4. 04Actions by organized labor could have a material adverse effect on our business
5. 05We may be unable to complete acquisitions that would grow our business
6. 06The sale of certain properties could result in significant tax liabilities unless we are able to offset taxable gains through tax planning strategies under the IRC including the use of net operating loss carryforwards ("NOLs") or like-kind exchanges under Section 1031 of the IRC ("1031 Exchanges")
7. 07We may fail to successfully integrate acquired lodging properties or achieve expected operating performance
8. 08We may assume liabilities in connection with the acquisition of lodging properties, including unknown liabilities
9. 09We may not be able to cause our management companies to operate any of our lodging properties in a manner that is satisfactory to us, and termination of our management agreements may be costly and disruptive
10. 10The management of a large number of lodging properties in our portfolio is currently concentrated with one property management company
11. 11Our lodging properties may be clustered geographically increasing business risks based on adverse market conditions
12. 12Restrictive covenants and other provisions in management and franchise agreements could preclude us from taking actions with respect to the sale, refinancing or rebranding of a lodging property that would otherwise be in our best interest
13. 13We are required to expend funds to maintain franchisor operating standards and we may experience a loss of a franchise license or a decline in the value of a franchise brand
14. 14We rely on external sources of capital to fund future capital needs, and if we encounter difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations
15. 15We have a significant amount of debt, and our organizational documents have no limitation on the amount of additional indebtedness that we may incur in the future
16. 16The agreements governing our indebtedness place restrictions on us and our subsidiaries, reducing operational flexibility and creating default risks
17. 17Secured debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in any lodging property subject to mortgage debt or equity pledges
18. 18An increase in interest rates would increase our interest costs on our variable rate debt and continued high rates of interest on our variable rate debt could have broader effects on the cost of capital for real estate companies and real estate asset values
19. 19We hedge our interest rate exposure to manage our exposure to interest rate volatility, however, such arrangements may adversely affect us
20. 20Our success depends on key personnel whose continued service is not guaranteed
21. 21We could incur uninsured and underinsured losses
22. 22We may not be able to manage rapidly advancing artificial intelligence in our business which could adversely affect our competitive position
23. 23Joint venture investments could be adversely affected by a lack of sole decision-making authority with respect to such investments, disputes with joint venture partners, and the financial condition of joint venture partners
24. 24Inflation may affect consumer confidence which could reduce consumer demand for lodging, and may increase our operating costs, resulting in a material adverse effect on our business, consolidated financial position, results of operations and cash flows

Risks Related to the Lodging Industry

1. 25The outbreak of any highly infectious or contagious diseases, could adversely affect the number of guests visiting our lodging properties and disrupt our operations, resulting in a material adverse effect on our business, consolidated financial position, results of operations and cash flows
2. 26Economic conditions may adversely affect the lodging industry
3. 27We experience a high level of competition from other hotels and alternative accommodations in the markets in which we operate
4. 28Our operating results and ability to make distributions to our stockholders may be adversely affected by the risks inherent to the ownership of lodging properties and the markets in which we operate
5. 29We have significant ongoing needs to make capital expenditures at our lodging properties, which require us to devote funds to these purposes
6. 30Development of lodging properties is subject to timing, budgeting and other risks
7. 31Customers may increasingly use Internet travel intermediaries
8. 32Consumer trends and preferences, particularly with respect to younger generations, could change away from select-service lodging properties

Risks Related to the Real Estate Industry and Real Estate-Related Investments

1. 33Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our lodging properties or to adjust our portfolio in response to changes in economic and other conditions
2. 34We could incur significant costs related to government regulation and litigation over environmental, health and safety matters
3. 35Compliance with the laws, regulations and covenants that apply to our lodging properties, including permit, license and zoning requirements, may adversely affect our ability to make future acquisitions or renovations, result in significant costs or delays and adversely affect our growth strategy
4. 36We have fixed obligations related to right-of-use assets on which certain of our lodging properties are located
5. 37The states and localities in which we own material amounts of property or conduct material business operations could raise their income and property tax rates or amend their tax regimes in a manner that increases our state and local tax liabilities

Risks Related to Our Organization and Structure

1. 38Our fiduciary duties as the general partner of our Operating Partnership could create conflicts of interest
2. 39Provisions of our charter may limit the ability of a third-party to acquire control of us by authorizing our board of directors to issue additional securities
3. 40Provisions of Maryland law may limit the ability of a third-party to acquire control of us by requiring our board of directors or stockholders to approve proposals to acquire our Company or effect a change in control
4. 41Our rights and the rights of our stockholders to take action against our directors and officers are limited
5. 42Our stockholders have limited voting rights and our charter contains provisions that make removal of our directors difficult
6. 43The ability of our board of directors to change our major policies without the consent of stockholders may not be in our stockholders’ interest
7. 44Our board of directors has the ability to revoke our REIT qualification without stockholder approval
8. 45If we are unable to maintain an effective system of internal controls, we may not be able to produce and report accurate financial information on a timely basis or prevent fraud

Risks Related to Ownership of Our Securities

1. 46The New York Stock Exchange (“NYSE”) or another nationally-recognized exchange may not continue to list our securities
2. 47The cash available for distribution may not be sufficient to make distributions at expected levels and we may use borrowed funds or funds from other sources to make distributions
3. 48The market price of our stock may be volatile due to numerous circumstances beyond our control
4. 49We may execute future offerings of debt securities, which would be senior to our common and preferred stock upon liquidation, and issuances of equity securities (including Common Units)

Risks Related to Our Status as a REIT

1. 50Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation
2. 51Even if we continue to qualify as a REIT, we may face other tax liabilities
3. 52Failure to make required distributions would subject us to federal corporate income tax
4. 53The REIT distribution requirements may adversely affect our operations
5. 54The formation of our TRSs increases our overall tax liability
6. 55Our TRS Lessee structure subjects us to the risk of increased lodging property operating expenses
7. 56Our Operating Partnership could be treated as a publicly traded partnership taxable as a corporation for federal income tax purposes
8. 57Our ownership of our TRSs is subject to limitations and our transactions with our TRSs could cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms
9. 58If any subsidiary REIT failed to qualify as a REIT, we could be subject to higher taxes and could fail to remain qualified as a REIT
10. 59We may be subject to adverse legislative or regulatory tax changes
11. 60The stock ownership restrictions of the IRC for REITs and the 9.8% stock ownership limit in our charter may inhibit market activity in our capital stock and restrict our business combination opportunities
12. 61We may pay taxable dividends in our common stock and cash, in which case stockholders may sell shares of our common stock to pay taxes on such dividends
13. 62The 100% prohibited transactions tax may limit our ability to dispose of our properties, and we could incur a material tax liability if the IRS successfully asserts that the 100% prohibited transaction tax applies to some or all of our past or future dispositions
14. 63The IRS could determine that certain payments we have received in the nature of liquidated damages may not be ignored for purposes of the gross income tests applicable to REITs

Risks Related to Certain Corporate Responsibility Matters

1. 64Increasing attention to and evolving expectations for corporate responsibility matters may increase our costs, harm our reputation, or otherwise adversely affect our business
2. 65Our business is subject to risks that may arise from climate change