DESCRIPTION OF BUSINESS

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

Summit Hotel Properties, Inc. (the “Company”) is a self-managed hotel investment company that was organized on June 30, 2010 as a Maryland corporation. The Company holds both general and limited partnership interests in Summit Hotel OP, LP (the “Operating Partnership”), a Delaware limited partnership also organized on June 30, 2010. Unless the context otherwise requires, “we,” “us,” and “our” refer to the Company and its consolidated subsidiaries.

We focus on owning primarily premium-branded hotels with efficient operating models primarily in the Upscale segment of the lodging industry. At March 31, 2020, our portfolio consisted of 72 hotels with a total of 11,288 guestrooms located in 23 states. As of March 31, 2020, we own 100% of the outstanding equity interests in 67 of our 72 hotels. We own a 51% controlling interest in five hotels that we acquired in 2019 through a joint venture. We have elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. To qualify as a REIT, we cannot operate or manage our hotels. Accordingly, all of our hotels are leased to our taxable REIT subsidiaries (“TRS Lessees”).

Risks and Uncertainties

The Company is subject to risks and uncertainties as a result of the effects of the novel coronavirus, designated as COVID-19 (“COVID-19”). The extent of the effects of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the pandemic varies by state and municipalities within states. The Company first began to experience effects from COVID-19 in March 2020, when the World Health Organization (“WHO”) declared a public health emergency of international concern related to COVID-19 and the U.S. Centers for Disease Control and Prevention (“CDC”) issued warnings against holding or attending gatherings larger than 50 people, including conferences, festivals, parades, concerts, sporting events and weddings. By March 31, 2020, stay-at-home directives had been issued in many states across the United States and many local jurisdictions had additionally required the temporary closure of businesses deemed to be non-essential. These actions have had a significant negative effect on the U.S. and global economies, including a rapid and sharp decline in all forms of travel, both domestic and international, and a significant decline in the demand for hotels and guestrooms. These conditions have resulted in a substantial decline in our revenues, profitability and cash flows from operations during the first quarter of 2020 and are expected to continue to materially adversely affect our operations and financial results until travel and business restrictions are eased, stay-at-home directives are lifted, consumer confidence is restored and an economic recovery commences. The COVID-19 pandemic has also significantly increased economic uncertainty and has led to disruption and volatility in the global capital markets, which could increase our cost of, and limit accessibility to, capital.

The COVID-19 pandemic has caused the Company to temporarily suspend operations at 6 hotels containing 934 guestrooms. An additional 9 hotels, containing 1,278 guestrooms, each of which is adjacent to another of our hotels, continue to accept reservations, but guests are being directed to stay at the adjacent properties. The Company has taken several actions to mitigate the effects of the COVID-19 pandemic on the Company, including the following:


•	Borrowed an additional net amount of $100.0 million on our $400 million unsecured revolving credit facility during the three months ended March 31, 2020 and an additional $25.0 million on April 1, 2020;


•	Amended certain loan agreements to provide for a financial covenant waiver through March 31, 2021, to modify certain financial covenant measures for the final three quarters of 2021 and to access additional borrowing capacity of $150.0 million under our $400 Million Revolver;


•	Suspended the declaration and payment of dividends on our common stock and operating partnership units;


•	Postponed all non-essential capital improvement projects planned for 2020 beyond those already substantially complete;


•	Adopted comprehensive cost reduction initiatives, including the reduction of labor and temporary elimination of certain services and amenities at all hotels;


•	Negotiated the temporary suspension of FF&E funding requirements for certain of our hotels and facilitated the interim or permanent use of cash deposited in the FF&E Reserve Accounts of certain of our hotels for general working capital purposes;


•	Implemented a voluntary 25% temporary reduction of base salaries and fees, respectively, for executive officers and independent members of the Board of Directors;


•	Furloughed approximately 25% of the corporate-level staff and implemented temporary salary reductions for the majority of employees not subject to furlough; and


•	Implemented a temporary hiring freeze for any new corporate-level positions.

It is currently extremely difficult to predict how long the effects of the COVID-19 pandemic on the Company will continue, when an economic recovery will commence, and the length of time it will take for us to return to operational and financial performance that is consistent with our most recent fiscal year.