Incentive Award Plan

6 Months Ended

Jun. 30, 2023

Incentive Award Plan

Incentive Award Plan

10. Incentive Award Plan

The Company’s Incentive Award Plan (the “Plan”) provides for granting discretionary awards to employees, consultants and non-employee directors. The awards may be made in the form of options, restricted stock awards, dividend equivalents, stock payments, restricted stock units, other incentive awards, LTIP units or share appreciation rights.

Should a stock grant be forfeited prior to its vesting, the shares covered by the stock grant are added back to the Plan and remain available for future issuance. Shares of common stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligations upon the vesting of a stock grant are not added back to the Plan.

Restricted shares and units are measured at fair value on the date of grant and amortized as compensation expense over the relevant requisite service period or derived service period. The Company has elected to account for forfeitures as they occur.

As of both June 30, 2023 and 2022, the Company’s issued and outstanding awards consisted of both time-based and performance-based restricted stock grants. The Company’s amortization expense, including forfeitures related to restricted shares was as follows (unaudited and in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Amortization expense, including forfeitures	$	3,325	$	2,853	$	5,752	$	6,431
Capitalized compensation cost (1)	$	117	$	118	$	235	$	241

(1) The Company capitalizes compensation costs related to restricted shares granted to certain employees whose work is directly related to the Company’s capital investment in its hotels.

Restricted Stock Awards

The Company’s restricted stock awards are time-based restricted shares that generally vest over periods ranging from three years to five years from the date of grant. The following is a summary of non-vested restricted stock award activity for the six months ended June 30, 2023:

		Weighted-Average
		Grant Date
	Number of Shares	Fair Value
Unvested at January 1, 2023	1,289,146	$	11.65
Granted	450,964	$	10.58
Vested	(699,652)	$	11.76
Forfeited	(7,894)	$	11.14
Unvested at June 30, 2023	1,032,564	$	11.11

Restricted Stock Units

The Company’s restricted stock units are performance-based restricted shares that generally vest based on the Company’s total relative shareholder return and the achievement of pre-determined stock price targets during performance periods ranging from two years to five years. The following is a summary of non-vested restricted stock unit activity, at target performance, for the six months ended June 30, 2023:

		Weighted-Average
	Target Number	Grant Date
	of Shares	Fair Value
Unvested at January 1, 2023	612,584	$	10.40
Granted	463,576	$	11.07
Unvested at June 30, 2023	1,076,160	$	10.69

The restricted stock units granted during the first six months of 2023 vest based on the Company’s total relative shareholder return following a three year performance period. The number of shares that may become vested ranges from zero to 200%. The grant date fair values of the restricted stock units were determined using a Monte Carlo simulation model with the following assumptions:

Expected volatility	38.0	%
Dividend yield (1)	—
Risk-free rate	4.18	%
Expected term	3 years

(1) Dividend equivalents are assumed to be reinvested in shares of the Company’s common stock and dividend equivalents will only be paid to the extent the award vests.