We measure the cost of employee service received in exchange for an award of equity instruments based on the grant-date fair value of the award. The compensation cost is amortized on a straight-line basis over the period during which an employee is required to provide service in exchange for the award. The compensation cost related to performance awards that are contingent upon market-based criteria being met is recorded at the fair value of the award on the date of the grant and amortized over the performance period. As discussed in Note 1 forfeitures of share-based awards are expensed as they occur.

Our shareholders approved the Hersha Hospitality Trust 2012 Equity Incentive Plan, as amended, (the “2012 Plan”) for the purpose of attracting and retaining executive officers, employees, trustees and other persons and entities that provide services to the Company.

The Compensation Committee of our Board of Trustees implements executive compensation strategies that align the interests of the Company’s executives with those of shareholders. It does so through a mix of base salary, the Short Term Incentive Program ("STIP"), and the Long-Term Incentive Program ("LTIP"). The STIP and LTIP are incentive compensation programs that align executive compensation with the performance of the Company. Prior to 2019, executives participated in our legacy incentive compensation programs, the Annual Cash Incentive Program ("ACIP"), the Annual Long Term Equity Incentive Program ("Annual EIP"), and the Multi-Year Long Term Equity Incentive Program ("Multi-Year EIP"). Equity may be awarded under any of these programs in the form of stock awards, LTIP Units, or performance share awards issuable pursuant to the 2012 Plan.

•Short Term Incentive Program - On March 6, 2019, the Compensation Committee approved the 2019 STIP, pursuant to which the executive officers are eligible to earn cash and equity awards based on achieving a threshold, target or maximum level of defined performance objectives at the end of the performance period, December 31, 2019. Any amounts earned are satisfied 50% in cash and 50% in equity awards. The Compensation Committee provided the option to the executive officers to elect equity awards in lieu of cash payment for amounts earned under the 2019 STIP. For the 2019 STIP and the 2018 and 2017 ACIP, each executive elected to receive 100% of amounts earned under each program in equity. Equity issued under the 2019 STIP and the 2018 and 2017 ACIP vest on the two year anniversary following the end of the performance period.

The Company accounts for grants earned under the STIP as performance awards for which the Company assesses the probability of achievement of the performance conditions at the end of each period. Estimates of amounts earned under the STIP are recorded in general and administrative expense on the consolidated statement of operations and a liability is recorded in accounts payable, accrued expenses and other liabilities on the consolidated balance sheet. As of December 31, 2019, no shares or LTIP Units have been issued to the executive officers in settlement of 2019 STIP.

•Long Term Incentive Program - On March 6, 2019, the Compensation Committee approved the 2019 LTIP pursuant to which the executive officers are eligible to earn equity awards based on achieving a threshold, target or maximum level of defined market and performance objectives at the end of the performance period, December 31, 2019. This program has a three-year performance period which commenced on January 1, 2019 and ends December 31, 2021. The shares or LTIP Units issuable under the LTIP or legacy long term incentive programs are based on the Company’s achievement of a certain level of (1) absolute total shareholder return (37.5% of the award), (2) relative total shareholder return as compared to the Company’s peer group (37.5% of the award), and (3) relative growth in revenue per available room (RevPar) compared to the Company’s peer group (25.0% of the award).

The Company accounts for the total shareholder return components of these grants as market based awards where the Company estimates unearned compensation at the grant date fair value which is then amortized into compensation cost over the vesting period of each individual plan. The Company accounts for the RevPAR component of the grants as performance-based awards for which the Company assesses the probable achievement of the performance conditions at the end of the reporting period. As of December 31, 2019, no shares or LTIP Units have been issued to the executive officers in settlement of 2019 LTIP awards.

Remaining unearned compensation for LTIP Units issued to executives in settlement of awards under the STIP, LTIP or the Company’s legacy incentive compensation programs is recorded in noncontrolling interests on the Company’s consolidated balance sheets and is amortized in general and administrative expense on the consolidated statement of operations over the remaining vesting period.

•Board Fee Compensation Elected in Equity - Trustees may make a voluntary election to receive any portion of their board fee compensation in the form of common equity valued at a 25% premium to the cash that would have been received. Shares issued for board retainer elected in equity vest over the year of service covered by the retainer and shares issued for service as lead director, committee chair and committee membership vest immediately upon issuance.

For shares issued that are subject to vesting, unearned compensation is recorded in additional paid in capital on the consolidated balance sheet and is amortized in general and administrative expense on the consolidated statement of operations over the vesting period. Share based compensation for shares issued that immediately vest is recorded in general and administrative expense on the consolidated statement of operations.

Grants of restricted shares are issued to attract, retain and reward employees and non-employees that are critical to the Company’s success. These restricted shares typically vest over a period of between one and four years subject to continued service to the Company.



	LTIP Unit Awards				Restricted Share Awards				Share Awards
	Number of Units		Weighted Average Grant Date Fair Value		Number of Restricted Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value

Unvested Balance as of January 1, 2017	210,209		$	22.21	54,761		$	21.10	—

Granted	183,784		18.53		79,712		18.21		32,674		$	18.16
Vested	(286,776	)	20.82		(44,585	)	21.01		(32,674	)	18.16
Forfeited	—		N/A		(3,055	)	18.49		—

Unvested Balance as of December 31, 2017	107,217		19.63		86,833		18.58		—

Granted	589,106		17.91		76,314		19.56		34,752		19.64
Vested	(245,420	)	18.59		(70,713	)	18.38		(34,752	)	19.64
Forfeited	—		N/A		(575	)	18.04		—

Unvested Balance as of December 31, 2018	450,903		17.95		91,859		19.56		—

Granted	530,281		18.00		83,805		16.40		42,533		16.01
Vested	(539,983	)	17.97		(80,924	)	19.11		(42,533	)	16.01
Forfeited	—		N/A		(2,638	)	19.78		—

Unvested Balance as of December 31, 2019	441,201		17.99		92,102		17.07		—



	Share Based Compensation Expense						Unearned Compensation
	For the Year Ended						As of
	12/31/2019		12/31/2018		12/31/2017		12/31/2019		12/31/2018

Issued Awards
LTIP Unit Awards	5,646		4,120		2,486		2,878		3,027
Restricted Share Awards	1,495		1,443		1,033		1,051		1,318
Share Awards	680		680		593		—		—
Unissued Awards
Market Based	1,467		1,120		1,002		2,739		2,200
Performance Based	1,515		4,073		4,172		—		—

Total	$	10,803	$	11,436	$	9,286	$	6,668	$	6,545