10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number: 001-35972

BRAEMAR HOTELS & RESORTS INC.

(Exact name of registrant as specified in its charter)

Maryland	46-2488594
(State or other jurisdiction of incorporation or organization)	(IRS employer identification number)
14185 Dallas Parkway, Suite 1100
Dallas, Texas	75254
(Address of principal executive offices)	(Zip code)

(972) 490-9600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨		Accelerated filer	þ
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨
			Emerging growth company	þ

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) if the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes þ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 par value per share	32,501,880
(Class)	Outstanding at August 7, 2018

BRAEMAR HOTELS & RESORTS INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2018

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017	2
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and 2017	3
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2018 and 2017	4
Condensed Consolidated Statement of Equity for the Six Months Ended June 30, 2018	5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017	6
Notes to Condensed Consolidated Financial Statements	8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	52
ITEM 4. CONTROLS AND PROCEDURES	53
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	53
ITEM 1A. RISK FACTORS	53
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	53
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	55
ITEM 4. MINE SAFETY DISCLOSURES	55
ITEM 5. OTHER INFORMATION	55
ITEM 6. EXHIBITS	56
SIGNATURES	57

PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS (unaudited)

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share amounts)

	June 30, 2018			December 31, 2017
ASSETS
Investments in hotel properties, gross	$	1,520,011		$	1,403,110
Accumulated depreciation	(241,928		)	(257,268		)
Investments in hotel properties, net	1,278,083			1,145,842
Cash and cash equivalents	169,235			137,522
Restricted cash	83,096			47,820
Accounts receivable, net of allowance of $91 and $94, respectively	22,338			14,334
Insurance receivable	—			8,825
Inventories	1,898			1,425
Note receivable	—			8,098
Deferred costs, net	477			656
Prepaid expenses	4,325			3,670
Investment in Ashford Inc., at fair value	12,628			18,124
Investment in unconsolidated entity	1,935			—
Derivative assets	1,007			594
Other assets	7,800			9,426
Intangible assets, net	27,994			22,545
Due from related party, net	588			349
Due from third-party hotel managers	5,522			4,589
Total assets	$	1,616,926		$	1,423,819
LIABILITIES AND EQUITY
Liabilities:
Indebtedness, net	$	985,205		$	820,959
Accounts payable and accrued expenses	63,976			56,803
Dividends and distributions payable	8,572			8,146
Due to Ashford Inc.	1,100			1,703
Due to third-party hotel managers	2,299			1,709
Intangible liability, net	—			3,569
Other liabilities	21,585			1,628
Total liabilities	1,082,737			894,517
Commitments and contingencies (note 16)
5.50% Series B cumulative convertible preferred stock, $0.01 par value, 4,965,850 shares issued and outstanding at both June 30, 2018 and December 31, 2017	106,123			106,123
Redeemable noncontrolling interests in operating partnership	47,818			46,627
Equity:
Common stock, $0.01 par value, 200,000,000 shares authorized, 32,501,880 and 32,120,210 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	325			321
Additional paid-in capital	472,945			469,791
Accumulated deficit	(87,777		)	(88,807		)
Total stockholders’ equity of the Company	385,493			381,305
Noncontrolling interest in consolidated entities	(5,245		)	(4,753		)
Total equity	380,248			376,552
Total liabilities and equity	$	1,616,926		$	1,423,819

See Notes to Condensed Consolidated Financial Statements.

2

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
REVENUE
Rooms	$	78,439		$	79,449		$	143,946		$	146,867
Food and beverage	25,393			27,980			48,893			52,453
Other	17,286			8,626			30,768			13,991
Total hotel revenue	121,118			116,055			223,607			213,311
Other	—			37			—			77
Total revenue	121,118			116,092			223,607			213,388
EXPENSES
Hotel operating expenses:
Rooms	16,652			17,613			31,570			33,410
Food and beverage	17,287			19,263			32,907			36,124
Other expenses	33,768			32,021			63,432			59,752
Management fees	4,501			4,209			8,118			7,754
Total hotel expenses	72,208			73,106			136,027			137,040
Property taxes, insurance and other	6,077			5,370			11,681			10,444
Depreciation and amortization	14,811			13,469			27,817			25,440
Impairment charges	59			—			71			—
Advisory services fee	4,880			3,143			10,124			4,008
Contract modification cost	—			5,000			—			5,000
Transaction costs	461			2,066			949			6,394
Corporate general and administrative	1,206			1,531			1,234			5,405
Total expenses	99,702			103,685			187,903			193,731
OPERATING INCOME (LOSS)	21,416			12,407			35,704			19,657
Equity in earnings (loss) of unconsolidated entity	(62		)	—			(65		)	—
Interest income	230			165			430			277
Gain (loss) on sale of hotel property	15,711			—			15,711			—
Other income (expense)	(63		)	(113		)	(126		)	(270		)
Interest expense and amortization of loan costs	(12,678		)	(9,931		)	(22,857		)	(18,133		)
Write-off of loan costs and exit fees	(4,176		)	—			(4,178		)	(1,963		)
Unrealized gain (loss) on investment in Ashford Inc.	(6,024		)	(1,563		)	(5,496		)	1,528
Unrealized gain (loss) on derivatives	(298		)	(100		)	(225		)	(998		)
INCOME (LOSS) BEFORE INCOME TAXES	14,056			865			18,898			98
Income tax (expense) benefit	(1,202		)	(479		)	(1,774		)	(1		)
NET INCOME (LOSS)	12,854			386			17,124			97
(Income) loss attributable to noncontrolling interest in consolidated entities	(89		)	(1,614		)	(47		)	(1,593		)
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	(1,235		)	343			(1,527		)	598
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	11,530			(885		)	15,550			(898		)
Preferred dividends	(1,708		)	(1,707		)	(3,415		)	(3,380		)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	9,822		$	(2,592	)	$	12,135		$	(4,278	)
INCOME (LOSS) PER SHARE - BASIC:
Net income (loss) attributable to common stockholders	$	0.30		$	(0.09	)	$	0.37		$	(0.16	)
Weighted average common shares outstanding – basic	32,006			31,469			31,845			29,380
INCOME (LOSS) PER SHARE - DILUTED:
Net income (loss) attributable to common stockholders	$	0.29		$	(0.09	)	$	0.37		$	(0.16	)
Weighted average common shares outstanding – diluted	38,588			31,469			31,853			29,380
Dividends declared per common share	$	0.16		$	0.16		$	0.32		$	0.32

See Notes to Condensed Consolidated Financial Statements.

3

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
NET INCOME (LOSS)	$	12,854		$	386		$	17,124		$	97
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Total other comprehensive income (loss)	—			—			—			—
TOTAL COMPREHENSIVE INCOME (LOSS)	12,854			386			17,124			97
Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities	(89		)	(1,614		)	(47		)	(1,593		)
Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership	(1,235		)	343			(1,527		)	598
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	11,530		$	(885	)	$	15,550		$	(898	)

See Notes to Condensed Consolidated Financial Statements.

4

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited, in thousands)

	Common Stock				Additional Paid-in Capital			Accumulated Deficit			Noncontrolling Interest in Consolidated Entities			Total			5.50% Series B Cumulative Convertible  Preferred Stock			Redeemable Noncontrolling Interests in Operating Partnership
	Shares		Amount														Shares	Amount
Balance at January 1, 2018	32,120		$	321	$	469,791		$	(88,807	)	$	(4,753	)	$	376,552		4,966	$	106	$	46,627
Purchase of common stock	(19	)	—		(203		)	—			—			(203		)	—	—		—
Equity-based compensation	—		—		3,303			—			—			3,303			—	—		732
Issuance of restricted shares/units	406		4		54			—			—			58			—	—		18
Forfeiture of restricted common shares	(5	)	—		—			—			—			—			—	—		—
Dividends declared – common stock	—		—		—			(10,547		)	—			(10,547		)	—	—		—
Dividends declared – preferred stock	—		—		—			(3,415		)	—			(3,415		)	—	—		—
Distributions to noncontrolling interests	—		—		—			—			(539		)	(539		)	—	—		(1,644		)
Net income (loss)	—		—		—			15,550			47			15,597			—	—		1,527
Redemption value adjustment	—		—		—			(558		)	—			(558		)	—	—		558
Balance at June 30, 2018	32,502		$	325	$	472,945		$	(87,777	)	$	(5,245	)	$	380,248		4,966	$	106	$	47,818

See Notes to Condensed Consolidated Financial Statements.

5

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Six Months Ended June 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	17,124		$	97
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
Depreciation and amortization	27,817			25,440
Equity-based compensation	4,035			(1,071		)
Bad debt expense	109			128
Amortization of loan costs	2,063			2,398
Write-off of loan costs and exit fees	4,178			1,963
Amortization of intangibles	92			93
Amortization of non-refundable membership initiation fees	(5		)	—
Interest expense accretion on refundable membership club deposits	150			—
(Gain) loss on sale of hotel property	(15,711		)	—
Impairment charges	71			—
Unrealized (gain) loss on investment in Ashford Inc.	5,496			(1,528		)
Realized and unrealized (gain) loss on derivatives	225			1,269
Net settlement of trading derivatives	(290		)	—
Equity in (earnings) loss of unconsolidated entity	65			—
Deferred tax expense (benefit)	122			(216		)
Changes in operating assets and liabilities, exclusive of the effect of hotel acquisitions and dispositions:
Accounts receivable and inventories	(4,525		)	2,422
Prepaid expenses and other assets	3,249			(2,358		)
Accounts payable and accrued expenses	(3,239		)	92
Due to/from related party, net	(252		)	56
Due to affiliate	—			(2,500		)
Due to/from third-party hotel managers	2,085			5,013
Due to/from Ashford Trust OP, net	—			489
Due to/from Ashford Inc.	(603		)	(1,271		)
Other liabilities	(3,595		)	88
Net cash provided by (used in) operating activities	38,661			30,604
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from property insurance	24,663			—
Acquisition of hotel properties, net of cash and restricted cash acquired	(177,875		)	(243,666		)
Investment in unconsolidated entity	(2,000		)	—
Proceeds from liquidation of AQUA U.S. Fund	—			2,289
Net proceeds from sale of hotel property	65,336			—
Improvements and additions to hotel properties	(32,423		)	(21,740		)
Net cash provided by (used in) investing activities	(122,299		)	(263,117		)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on indebtedness	575,000			483,500
Repayments of indebtedness	(399,312		)	(335,458		)
Payments of loan costs and exit fees	(9,406		)	(9,832		)
Payments for derivatives	(348		)	(338		)
Purchase of common stock	(203		)	(119		)
Payments for dividends and distributions	(15,122		)	(12,058		)
Issuance of preferred stock	—			40,169
Issuance of common stock	—			66,451
Other	18			21
Net cash provided by (used in) financing activities	150,627			232,336
Net change in cash, cash equivalents and restricted cash	66,989			(177		)
Cash, cash equivalents and restricted cash at beginning of period	185,342			164,645
Cash, cash equivalents and restricted cash at end of period	$	252,331		$	164,468

6

	Six Months Ended June 30,
	2018		2017
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid	$	21,976	$	16,134
Income taxes paid (refund)	704		929
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Dividends and distributions declared but not paid	8,572		8,356
Capital expenditures accrued but not paid	3,658		1,498
Distributions declared but not paid to a noncontrolling interest in a consolidated entity	—		1,628
Non-cash dividends paid	58		—
Non-cash settlement of note receivable	8,098		—
Non-cash settlement of TIF loan	8,098		—
SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents at beginning of period	$	137,522	$	126,790
Restricted cash at beginning of period	47,820		37,855
Cash, cash equivalents and restricted cash at beginning of period	$	185,342	$	164,645
Cash and cash equivalents at end of period	$	169,235	$	129,675
Restricted cash at end of period	83,096		34,793
Cash, cash equivalents and restricted cash at end of period	$	252,331	$	164,468

See Notes to Condensed Consolidated Financial Statements.

7

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Description of Business

Braemar Hotels & Resorts Inc. (formerly Ashford Hospitality Prime, Inc.), together with its subsidiaries (“Braemar”), is a Maryland corporation that invests primarily in high revenue per available room (“RevPAR”) luxury hotels and resorts. High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then-current U.S. national average RevPAR for all hotels as determined by Smith Travel Research. Braemar has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code. Braemar conducts its business and owns substantially all of its assets through its operating partnership, Braemar Hospitality Limited Partnership (formerly Ashford Hospitality Prime Limited Partnership) (“Braemar OP”). In this report, the terms “the Company,” “we,” “us” or “our” refers to Braemar Hotels & Resorts Inc. and, as the context may require, all entities included in its condensed consolidated financial statements.

We are advised by Ashford Hospitality Advisors LLC (“Ashford LLC” or the “Advisor”) through an advisory agreement. Ashford LLC is a subsidiary of Ashford Inc. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.

As of June 30, 2018, Remington Lodging & Hospitality, LLC, together with its affiliates (“Remington Lodging”), which is beneficially wholly-owned by Mr. Monty J. Bennett, Chairman of our board of directors, and Mr. Archie Bennett, Jr., Chairman Emeritus of Ashford Hospitality Trust, Inc. (“Ashford Trust”), managed three of our twelve hotel properties. Third-party management companies managed the remaining hotel properties.

The accompanying condensed consolidated financial statements include the accounts of such wholly-owned and majority owned subsidiaries of Braemar OP that as of June 30, 2018, own and operate twelve hotel properties in six states, the District of Columbia and the U.S. Virgin Islands. The portfolio includes ten wholly-owned hotel properties and two hotel properties that are owned through a partnership in which Braemar OP has a controlling interest. These hotel properties represent 3,549 total rooms, or 3,314 net rooms, excluding those attributable to our partner. As a REIT, Braemar needs to comply with limitations imposed by the Internal Revenue Code related to operating hotels. As of June 30, 2018, eleven of our twelve hotel properties were leased by wholly-owned or majority-owned subsidiaries that are treated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes (collectively the TRS entities are referred to as “Braemar TRS”). One hotel property located in the U.S. Virgin Islands is owned by our U.S. Virgin Islands TRS. Braemar TRS then engages third-party or affiliated hotel management companies to operate the hotel properties under management contracts. Hotel operating results related to the hotel properties are included in the condensed consolidated statements of operations.

As of June 30, 2018, nine of the twelve hotel properties were leased by Braemar’s wholly-owned TRS and the two hotel properties majority-owned through a consolidated partnership were leased to a TRS wholly-owned by such consolidated partnership. Each leased hotel is leased under a percentage lease that provides for each lessee to pay in each calendar month the base rent plus, in each calendar quarter, percentage rent, if any, based on hotel revenues. Lease revenue from Braemar TRS is eliminated in consolidation. The hotel properties are operated under management contracts with Marriott International, Inc. (“Marriott”), Hilton Worldwide (“Hilton”), Accor Business and Leisure Management, LLC (“Accor”), Hyatt Hotels Corporation (“Hyatt”), Ritz-Carlton, Inc., a subsidiary of Marriott (“Ritz-Carlton”) and Remington Lodging, which are eligible independent contractors under the Internal Revenue Code.

2. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed consolidated financial statements include the accounts of Braemar Hotels & Resorts Inc., its majority-owned subsidiaries, and its majority-owned entities in which it has a controlling interest. All significant intercompany accounts and transactions between consolidated entities have been eliminated in these condensed consolidated financial statements. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2017 Annual Report on Form 10-K, as originally filed with the Securities and Exchange Commission (“SEC”) on March 14, 2018.

8

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Braemar OP is considered to be a variable interest entity (“VIE”), as defined by authoritative accounting guidance. A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. All major decisions related to Braemar OP that most significantly impact its economic performance, including but not limited to operating procedures with respect to business affairs and any acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives, are subject to the approval of our wholly-owned subsidiary, Braemar OP General Partner LLC (formerly Ashford Prime OP General Partner LLC), its general partner. As such, we consolidate Braemar OP.

The following items affect reporting comparability of our historical condensed consolidated financial statements:

• historical seasonality patterns at some of our hotel properties cause fluctuations in our overall operating results. Consequently, operating results for the three and six months ended June 30, 2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018;

• on March 31, 2017, we acquired the Park Hyatt Beaver Creek and on May 11, 2017, we acquired the Hotel Yountville. The operating results of these hotel properties have been included in our results of operations as of their acquisition dates;

• on November 1, 2017, we sold the Plano Marriott Legacy Town Center;

• on April 4, 2018, we acquired the Ritz-Carlton, Sarasota. The operating results of the hotel has been included in the results of operations as of its acquisition date; and

• on June 1, 2018, we sold the Tampa Renaissance.

Use of Estimates—The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Restricted Cash—Restricted cash includes reserves for debt service, real estate taxes and insurance, as well as excess cash flow deposits and reserves for furniture, fixtures and equipment replacements of approximately 4% to 5% of property revenue for certain hotels, as required by certain management or mortgage debt agreement restrictions and provisions.

Impairment of Investments in Hotel Properties—Hotel properties are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of the hotel is measured by comparison of the carrying amount of the hotel to the estimated future undiscounted cash flows, which take into account current market conditions and our intent with respect to holding or disposing of the hotel. If our analysis indicates that the carrying value of the hotel is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the property’s net book value exceeds its estimated fair value, or fair value, less cost to sell. In evaluating the impairment of hotel properties, we make many assumptions and estimates, including projected cash flows, expected holding period and expected useful life. Fair value is determined through various valuation techniques, including internally developed discounted cash flow models, comparable market transactions and third-party appraisals, where considered necessary. Asset write-downs resulting from property damage are recorded up to the amount of the allocable property insurance deductible in the period that the property damage occurs. See note 4.

Investment in Ashford Inc.—We hold approximately 195,000 shares of Ashford Inc. common stock, which represented an approximate 9.2% ownership interest in Ashford Inc. and had a fair value of $12.6 million at June 30, 2018. This investment would typically be accounted for under the equity method of accounting, under Accounting Standard Codification (“ASC”) 323-10 - Investments - Equity Method and Joint Ventures since we exercise significant influence. However, we have elected to record our investment in Ashford Inc. using the fair value option under ASC 825-10 - Fair Value Option - Financial Assets and Financial Liabilities.

Investment in Unconsolidated Entity—Investment in unconsolidated entity, in which we have ownership interest of 8.2% at June 30, 2018, is accounted for under the equity method of accounting by recording the initial investment and our percentage of interest in the entities’ net income/loss. We review our investment in unconsolidated entity for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of our investment. Any impairment is recorded in equity in earnings (loss) in unconsolidated entity. No such impairment was recorded for the three and six months ended June 30, 2018.

9

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Our investment in unconsolidated entity is considered to be a variable interest in the underlying entity. VIEs, as defined by authoritative accounting guidance, must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Because we do not have the power and financial responsibility to direct the unconsolidated entity’s activities and operations, we are not considered to be the primary beneficiary of this entity on an ongoing basis and therefore such entity should not be consolidated. In evaluating VIEs, our analysis involves considerable management judgment and assumptions.

Equity-Based Compensation—Stock/unit-based compensation for non-employees is accounted for at fair value based on the market price of the shares at period end in accordance with applicable authoritative accounting guidance that results in recording expense, included in “advisory services fee” and “management fees,” equal to the fair value of the award in proportion to the requisite service period satisfied during the period. Performance stock units (“PSUs”) and performance-based Long-Term Incentive Plan (“LTIP”) units granted to certain executive officers are accounted for at fair value at period end based on a Monte Carlo simulation valuation model that results in recording expense, included in “advisory services fee,” equal to the fair value of the award in proportion to the requisite service period satisfied during the period. Stock/unit grants to independent directors are recorded at fair value based on the market price of the shares at grant date, which amount is fully expensed as the grants of stock/units are fully vested on the date of grant and included in “corporate general and administrative” expense in the condensed consolidated statements of operations.

Recently Adopted Accounting Standards—In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model, which requires a company to recognize revenue to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The update replaces most existing revenue recognition guidance in U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date, which defers the effective date to fiscal periods beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect (modified) transition method. This standard, referred to as “Topic 606,” does not materially affect the amount or timing of revenue recognition for revenues from room, food and beverage, and other hotel level sales. Additionally, we have historically disposed of hotel properties for cash sales with no contingencies and no future involvement in the hotel operations. Therefore, Topic 606 does not impact the recognition of hotel sales. We adopted this standard effective January 1, 2018, under the modified retrospective method, and the adoption of this standard did not have a material impact on our condensed consolidated financial statements. See related disclosures in note 3.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in other comprehensive income the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available-for-sale (“AFS”) debt securities in combination with other deferred tax assets. ASU 2016-01 provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. It also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Certain provisions of ASU 2016-01 are eligible for early adoption. We adopted this standard effective January 1, 2018. The adoption of this standard did not have a material impact on our condensed consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments - a consensus of the Emerging Issues Task Force (“ASU 2016-15”). The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Certain issues addressed in this guidance include - debt payments or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, distributions received from equity method investments and beneficial interests in securitization transactions. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We adopted this standard effective January 1, 2018 on a prospective basis as there were no required changes as a result of adoption. The adoption of this standard did not have a material impact on our consolidated statement of cash flows.

10

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether a transaction should be accounted for as an acquisition (or disposal) of an asset or a business. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. We adopted this standard effective January 1, 2018. Under the new standard, certain future hotel acquisitions may be considered asset acquisitions rather than business combinations, which would affect capitalization of acquisitions costs (such costs are expensed for business combinations and capitalized for asset acquisitions).

In February 2017, the FASB issued ASU 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (ASU “2017-05”), which clarifies the scope of ASC Subtopic 610-20, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets and adds guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. An entity may elect to apply ASU 2017-05 under a retrospective or modified retrospective method. We adopted this standard effective January 1, 2018, under the modified retrospective method. The adoption of this standard did not have a material impact on our condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Standards—In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases ("ASU 2018-10"). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02, including but not limited to lease residual value guarantee, rate implicit in the lease, lease term and purchase option. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases ("ASU 2018-10") and ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02, including but not limited to lease residual value guarantee, rate implicit in the lease, lease term and purchase option and etc. The amendments in ASU 2018-11 provide an optional transition method for adoption of the new standard, which will allow entities to continue to apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented in the year of adoption. ASU 2016-02 is effective for annual and interim periods for fiscal years beginning after December 15, 2018, which will require us to adopt these provisions in the first quarter of 2019 on a modified retrospective basis. The accounting for leases under which we are the lessor remains largely unchanged. While we continue evaluating our lease portfolio to assess the impact that ASU 2016-02 will have on our condensed consolidated financial statements, we expect the primary impact to our condensed consolidated financial statements upon adoption will be the recognition, on a discounted basis, of our future minimum rentals due under noncancelable leases on our condensed consolidated balance sheets resulting in the recording of ROU assets and lease obligations. We disclosed $175.4 million in undiscounted future minimum rentals due under non-cancelable leases in note 13 of our most recent 10-K. We are involving our property managers and implementing repeatable processes to manage ongoing lease data collection and analysis, and evaluating accounting policies and internal controls that will be impacted by the new standards.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The ASU sets forth an “expected credit loss” impairment model to replace the current “incurred loss” method of recognizing credit losses. The standard requires measurement and recognition of expected credit losses for most financial assets held. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for periods beginning after December 15, 2018. We are currently evaluating the impact that ASU 2016-13 will have on our consolidated financial statements and related disclosures.

In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07"). The ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees and aligns the guidance for share-based payments to non-employees with the requirements for share-based payments granted to employees. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that ASU 2018-07 will have on the condensed consolidated financial statements and related disclosures and expect that the associated compensation expense of the majority of our equity awards will be based on the grant date fair value.

11

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

3. Revenue

On January 1, 2018, we adopted Topic 606 using the modified retrospective method. As the adoption of this standard did not have a material impact on our consolidated financial statements, no adjustments to opening retained earnings were made as of January 1, 2018. Results for reporting periods beginning after January 1, 2018, are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic 605-Revenue Recognition.

Rooms revenue represents revenues from the occupancy of our hotel rooms and is driven by the occupancy and average daily rate charged. Rooms revenue includes revenue for guest no-shows, day use, and early/late departure fees. The contracts for room stays with customers are generally short in duration and revenues are recognized as services are provided over the course of the hotel stay.

Food & Beverage (“F&B”) revenue consists of revenue from the restaurants and lounges at our hotel properties, In-room dining and mini-bars revenue, and banquet/catering revenue from group and social functions. Other F&B revenue may include revenue from audio-visual equipment/services, rental of function rooms, and other F&B related revenues. Revenue is recognized as the services or products are provided. Our hotel properties may employ third parties to provide certain services at the property, for example, audio visual services. We evaluate each of these contracts to determine if the hotel is the principal or the agent in the transaction, and record the revenues as appropriate (i.e. gross vs. net).

Other revenue consists of ancillary revenue at the property, including attrition and cancellation fees, condo management fees, resort and destination fees, health center fees, spas, golf, telecommunications, parking, entertainment and other guest services, as well as rental revenue, primarily consisting of leased retail outlets at our hotel properties, and membership initiation fees and dues, primarily from club memberships. Attrition and cancellation fees are recognized for non-cancellable deposits when the customer provides notification of cancellation within established management policy time frames. Non-refundable membership initiation fees are recognized over the expected life of an active membership. For the three and six months ended June 30, 2018, the Company recorded $3.3 million of business interruption income for the Tampa Renaissance related to a settlement for lost profits from the BP Deepwater Horizon oil spill in the Gulf of Mexico in 2010.

Taxes collected from customers and submitted to taxing authorities are not recorded in revenue. Interest income is recognized when earned. We discontinue recording interest and amortizing discounts/premiums when the contractual payment of interest and/or principal is not received when contractually due.

The following tables present our revenue disaggregated by geographical areas (in thousands):

	Three Months Ended June 30, 2018
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	23,535	$	5,649	$	2,379	$	—	$	31,563
Colorado	1	1,761		1,745		1,731		—		5,237
Florida	2	10,807		7,053		3,172		—		21,032
Illinois	1	7,783		2,569		371		—		10,723
Pennsylvania	1	8,351		1,719		303		—		10,373
Washington	1	9,050		1,701		361		—		11,112
Washington, D.C.	1	12,791		3,896		337		—		17,024
USVI	1	1,472		132		5,253		—		6,857
Sold hotel properties	1	2,889		929		3,379		—		7,197
Corporate entities	—	—		—		—		—		—
Total	13	$	78,439	$	25,393	$	17,286	$	—	$	121,118

12

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

	Three Months Ended June 30, 2017
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	19,655	$	5,435	$	2,764	$	—	$	27,854
Colorado	1	1,717		1,544		1,685		—		4,946
Florida	1	4,687		1,139		335		—		6,161
Illinois	1	7,824		2,377		185		—		10,386
Pennsylvania	1	7,781		1,298		346		—		9,425
Washington	1	8,761		2,614		293		—		11,668
Washington, D.C.	1	12,516		4,109		372		—		16,997
USVI	1	7,329		4,552		2,215		—		14,096
Sold hotel properties	2	9,179		4,912		431		—		14,522
Corporate entities	—	—		—		—		37		37
Total	13	$	79,449	$	27,980	$	8,626	$	37	$	116,092

	Six Months Ended June 30, 2018
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	42,639	$	12,954	$	5,854	$	—	$	61,447
Colorado	1	11,558		6,564		5,274		—		23,396
Florida	2	16,280		7,856		3,923		—		28,059
Illinois	1	11,202		3,820		581		—		15,603
Pennsylvania	1	14,504		2,892		600		—		17,996
Washington	1	14,552		3,365		626		—		18,543
Washington, D.C.	1	21,752		8,236		620		—		30,608
USVI	1	3,288		331		9,799		—		13,418
Sold hotel properties	1	8,171		2,875		3,491		—		14,537
Corporate entities	—	—		—		—		—		—
Total	13	$	143,946	$	48,893	$	30,768	$	—	$	223,607

	Six Months Ended June 30, 2017
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	36,579	$	11,452	$	4,164	$	—	$	52,195
Colorado	1	1,717		1,544		1,685		—		4,946
Florida	1	10,369		2,073		696		—		13,138
Illinois	1	11,297		3,590		285		—		15,172
Pennsylvania	1	12,741		2,277		529		—		15,547
Washington	1	14,174		4,443		549		—		19,166
Washington, D.C.	1	23,390		8,760		682		—		32,832
USVI	1	17,072		8,071		4,628		—		29,771
Sold hotel properties	2	19,528		10,243		773		—		30,544
Corporate entities	—	—		—		—		77		77
Total	13	$	146,867	$	52,453	$	13,991	$	77	$	213,388

13

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

4. Investments in Hotel Properties, net

Investments in hotel properties, net consisted of the following (in thousands):

	June 30, 2018			December 31, 2017
Land	$	428,567		$	344,937
Buildings and improvements	982,275			962,478
Furniture, fixtures and equipment	95,443			87,796
Construction in progress	13,726			7,899
Total cost	1,520,011			1,403,110
Accumulated depreciation	(241,928		)	(257,268		)
Investments in hotel properties, net	$	1,278,083		$	1,145,842

Impairment Charges and Insurance Recoveries

In September 2017, the Ritz-Carlton, St. Thomas located in St. Thomas, USVI, the Key West Pier House located in Key West, FL and the Tampa Renaissance located in Tampa, FL were impacted by the effects of Hurricanes Irma and Maria. The Company holds insurance policies that provide coverage for property damage and business interruption after meeting certain deductibles at all of its hotel properties. During the year ended December 31, 2017, the Company recognized impairment charges, net of anticipated insurance recoveries of $1.1 million. Additionally, the Company recognized remediation and other costs, net of anticipated insurance recoveries of $3.8 million, included primarily in other hotel operating expenses. As of December 31, 2017, the Company recorded an insurance receivable of $8.8 million, net of deductibles of $4.9 million, related to the anticipated insurance recoveries. During the year ended December 31, 2017, the Company received proceeds of $11.1 million for business interruption losses associated with lost profits, of which $4.1 million was recorded as “other” hotel revenue in our consolidated statement of operations, $3.3 million represented reimbursement of incurred expenses in excess of the deductible of $1.1 million and $3.7 million was recorded as a reduction to insurance receivable.

For the three and six months ended June 30, 2018, the Company recorded revenue from business interruption losses associated with lost profits from the hurricanes of $5.2 million and $10.1 million, respectively, which are included in “other” hotel revenue in our condensed consolidated statements of operations. The Company received proceeds of $34.0 million from our insurance carriers for property damage and business interruption from the hurricanes during the three and six months ended June 30, 2018. Additionally, during the three and six months ended June 30, 2018, the Company recorded revenue of $190,000 and $1.9 million, net of deductibles of $500,000, for business interruption losses associated with lost profits at the Bardessono Hoteland Hotel Yountville as a result of the Napa wildfires, which is included in “other” hotel revenue in our condensed consolidated statements of operations. During the three and six months ended June 30, 2018, we recorded impairment charges of $59,000 and $71,000 as a result of a change in estimate of property damage as a result of the hurricanes. As of June 30, 2018, the Company has a net liability of $10.4 million, included in “other liabilities” on the condensed consolidated balance sheet, as it has received insurance proceeds in excess of the sum of its impairment, remediation expenses and business interruption revenue recorded through June 30, 2018. The Company will not record revenue for business interruption losses associated with lost profits or gains from property damage recoveries until the amount for such recoveries is known and the amount is realizable.

Ritz-Carlton, Sarasota

On April 4, 2018, the Company acquired a 100% interest in the 266-room Ritz-Carlton, Sarasota in Sarasota, Florida for $171.7 million and a 22-acre plot of vacant land for $9.7 million. Concurrent with the closing of the acquisition, we completed the financing of a $100.0 million mortgage loan. See note 8.

The acquisition of the Ritz-Carlton, Sarasota included the hotel, a golf club, a beach club and a plot of vacant land, which are considered to be a group of dissimilar assets per ASU 2017-01. As such, we have accounted for this acquisition as a business combination. We have allocated the purchase price to the assets acquired and liabilities assumed on a preliminary basis using estimated fair value information currently available. We are in the process of evaluating the values assigned to investment in hotel property, property level working capital balances and intangibles. This valuation is considered a Level 3 valuation technique. Thus, the balances reflected below are subject to change, and any such changes could result in adjustments to the allocation. Any change to the amounts recorded within the investments in hotel properties or intangibles will also impact depreciation and amortization expense.

14

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table summarizes the preliminary estimated fair value of the assets acquired in the acquisition (in thousands):

Land (1)	$	83,630
Buildings and improvements	86,316
Furniture, fixtures and equipment	13,740
Customer relationships	5,682
Refundable membership club deposits (2)	(9,960		)
Income guarantee (3)	2,000
	$	181,408
Net other assets (liabilities)	$	(3,533	)

________

⁽¹⁾  Amount includes the$9.7 million, 22-acre plot of vacant land.

⁽²⁾  Recorded within “other liabilities” on our condensed consolidated balance sheets.

⁽³⁾  Recorded within “other assets” on our condensed consolidated balance sheets.

The results of operations of the hotel property have been included in our results of operations as of the acquisition date. For both the three and six months ended June 30, 2018, we have included total revenue of $15.1 million and net loss of $719,000, in our condensed consolidated statements of operations. The unaudited pro forma results of operations as if the acquisition had occurred on January 1, 2017 are included below under “Pro Forma Financial Results.”

Pro Forma Financial Results

The following table reflects the unaudited pro forma results of operations as if the acquisitions had occurred and the applicable indebtedness was incurred on January 1, 2017, and the removal of $462,000 and $949,000 of non-recurring transaction costs directly attributable to the acquisitions for the three and six months ended June 30, 2018 (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017
Total revenue	$	121,763	$	136,590		$	243,680	$	248,128
Net income (loss)	13,617		1,390			20,842		2,037
Net income (loss) attributable to common stockholders	10,500		(1,705		)	15,437		(2,578		)
Pro Forma income per share:
Basic	$	0.32	$	(0.06	)	$	0.47	$	(0.10	)
Diluted	$	0.31	$	(0.06	)	$	0.47	$	(0.10	)
Weighted average common shares outstanding (in thousands):
Basic	32,006		31,469			31,845		29,380
Diluted	38,588		31,469			35,971		29,380

15

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

5. Hotel Dispositions

On November 1, 2017, the Company sold the Plano Marriott Legacy Town Center for $104.0 million in cash. The sale resulted in a gain of $23.8 million for the year ended December 31, 2017.

On June 1, 2018, the Company sold the Tampa Renaissance hotel for $68.0 million in cash. The sale resulted in a gain of $15.7 million for both the three and six months ended June 30, 2018 and is included in “gain (loss) on sale of hotel property” in our condensed consolidated statements of operations.

Since the sale of the hotel property did not represent a strategic shift that has (or will have) a major effect on our operations or financial results, its results of operations were not reported as discontinued operations in our consolidated financial statements.

We included the results of operations for this hotel property through the date of disposition in net income (loss) as shown in our condensed consolidated statements of operations for the three and six months ended June 30, 2018 and 2017. The following table includes the condensed financial information from this hotel property (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Total hotel revenue	$	7,197		$	14,522		$	14,537		$	30,544
Total hotel operating expenses	(2,521		)	(9,029		)	(7,499		)	(19,082		)
Operating income (loss)	4,676			5,493			7,038			11,462
Property taxes, insurance and other	(217		)	(735		)	(486		)	(1,372		)
Depreciation and amortization	(357		)	(2,180		)	(1,294		)	(4,301		)
Impairment charges	—			—			(12		)	—
Gain (loss) on sale of hotel property	15,711			—			15,711			—
Interest expense and amortization of loan costs	(303		)	(1,115		)	(791		)	(2,137		)
Income (loss) before income taxes	19,510			1,463			20,166			3,652
(Income) loss before income taxes attributable to redeemable noncontrolling interests in operating partnership	(2,179		)	(171		)	(2,253		)	(428		)
Income (loss) before income taxes attributable to the Company	$	17,331		$	1,292		$	17,913		$	3,224

6. Note Receivable

As of December 31, 2017, we held a note receivable of $8.1 million from the city of Philadelphia, Pennsylvania, which had a stated interest rate of 12.85%. The note matured in June 2018. Prior to maturity the interest income recorded on the note receivable was offset against the interest expense recorded on the TIF loan of the same amount. See note 8.

7. Investment in Unconsolidated Entity

Ashford Inc.

As of June 30, 2018 and December 31, 2017, we held approximately 195,000 shares of Ashford Inc. common stock. The closing price per share of Ashford Inc. common stock on the NYSE American LLC was $64.80 and $93.00 as of June 30, 2018 and December 31, 2017, respectively. This represented an approximate 9.2% and 9.3% ownership interest in Ashford Inc. for June 30, 2018 and December 31, 2017, respectively. See notes 11 and 12.

We have elected to use the fair value option, under the applicable accounting guidance, to account for our investment in Ashford Inc. as the fair value is readily available since Ashford Inc. common stock is traded on a national exchange. The fair value of our investment in Ashford Inc. is included in “investment in Ashford Inc., at fair value” on our condensed consolidated balance sheets, and changes in market value are included in “unrealized gain (loss) on investment in Ashford Inc.” on our condensed consolidated statements of operations.

16

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following tables summarize the condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017, and the condensed consolidated statements of operations for the three and six months ended June 30, 2018 and 2017, of Ashford Inc. (in thousands):

Ashford Inc.

Condensed Consolidated Balance Sheets

(unaudited)

	June 30, 2018		December 31, 2017
Total assets	$	138,145	$	114,810
Total liabilities	90,331		78,742
Redeemable noncontrolling interests	4,852		5,111
Total stockholders’ equity of Ashford Inc.	41,541		30,185
Noncontrolling interests in consolidated entities	1,421		772
Total equity	42,962		30,957
Total liabilities and equity	$	138,145	$	114,810
Our investment in Ashford Inc., at fair value	$	12,628	$	18,124

Ashford Inc.

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Total revenue	$	54,811		$	19,639		$	102,979		$	32,652
Total operating expenses	(43,941		)	(18,221		)	(97,145		)	(33,370		)
Operating income (loss)	10,870			1,418			5,834			(718		)
Realized and unrealized gain (loss) on investments	—			(16		)	—			(91		)
Other	(333		)	10			(426		)	128
Income tax (expense) benefit	(1,605		)	(8,643		)	(2,311		)	(9,273		)
Net income (loss)	8,932			(7,231		)	3,097			(9,954		)
(Income) loss from consolidated entities attributable to noncontrolling interests	118			190			291			165
Net (income) loss attributable to redeemable noncontrolling interests	(90		)	332			(151		)	695
Net income (loss) attributable to Ashford Inc.	$	8,960		$	(6,709	)	$	3,237		$	(9,094	)
Our unrealized gain (loss) on investment in Ashford Inc.	$	(6,024	)	$	(1,563	)	$	(5,496	)	$	1,528

OpenKey

On March 28, 2018, the Company made a $2.0 million investment in OpenKey, which is controlled and consolidated by Ashford Inc., for an 8.2% ownership interest, which investment was approved by our Related Party Transactions Committee and the independent members of our board of directors. OpenKey is a hospitality focused mobile key platform that provides a universal smart phone app for keyless entry into hotel guest rooms. Our investment is recorded as a component of “investment in unconsolidated entity” in our condensed consolidated balance sheet and is accounted for under the equity method of accounting as we have been deemed to have significant influence over the entity under the applicable accounting guidance. As of June 30, 2018, our ownership interest had a carrying value of $1.9 million. For the three and six months ended June 30, 2018, our equity in loss of the unconsolidated entity was $62,000 and $65,000, respectively.

17

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

8. Indebtedness

Indebtedness consisted of the following (in thousands):

Indebtedness	Collateral	Maturity	Interest Rate	June 30, 2018			December 31, 2017
Secured revolving credit facility(3)	None	November 2019	Base Rate (2) + 1.25% to 2.50% or LIBOR(1) + 2.25% to 3.50%	$	—		$	—
TIF loan(4)	Courtyard Philadelphia	June 2018	12.85%	—			8,098
Mortgage loan(5)	Ritz-Carlton, St. Thomas	December 2018	LIBOR(1) + 4.95%	42,000			42,000
Mortgage loan(6) (7)	Courtyard Philadelphia	February 2019	LIBOR(1) + 2.58%	—			277,628
	Courtyard San Francisco
	Marriott Seattle Waterfront
	Tampa Renaissance
Mortgage loan(6)	Sofitel Chicago Magnificent Mile	March 2019	LIBOR(1) + 2.55%	—			80,000
Mortgage loan(8)	Pier House Resort	March 2019	LIBOR(1) + 2.25%	70,000			70,000
Mortgage loan(9)	Park Hyatt Beaver Creek	April 2019	LIBOR(1) + 2.75%	67,500			67,500
Mortgage loan(10)	Capital Hilton	November 2019	LIBOR(1) + 2.65%	188,326			190,010
	Hilton La Jolla Torrey Pines
Mortgage loan(6)	Courtyard Philadelphia	June 2020	LIBOR(1) + 2.16%	435,000			—
	Courtyard San Francisco
	Marriott Seattle Waterfront
	Sofitel Chicago Magnificent Mile
Mortgage loan	Hotel Yountville	May 2022	LIBOR(1) + 2.55%	51,000			51,000
Mortgage loan	Bardessono Hotel	August 2022	LIBOR(1) + 2.55%	40,000			40,000
Mortgage loan	Ritz-Carlton, Sarasota	April 2023	LIBOR(1) + 2.65%	100,000			—
				993,826			826,236
Deferred loan costs, net				(8,621		)	(5,277		)
Indebtedness, net				$	985,205		$	820,959

__________________

⁽¹⁾  LIBOR rates were 2.090% and 1.564% at June 30, 2018 and December 31, 2017, respectively.

⁽²⁾  Base Rate, as defined in the secured revolving credit facility agreement, is the greater of (i) the prime rate set by Bank of America, (ii) federal funds rate + 0.5%, or (iii) LIBOR + 1.0%.

⁽³⁾  Our borrowing capacity under our secured revolving credit facility is $100.0 million. We have an option, subject to lender approval, to further increase the borrowing capacity to an aggregate of $250.0 million. We may use up to $15.0 million for standby letters of credit. The secured revolving credit facility has twoone-year extension options subject to advance notice, satisfaction of certain conditions and a 0.25% extension fee.

⁽⁴⁾  The TIF loan matured on June 30, 2018. See note 6.

⁽⁵⁾  This mortgage loan has threeone-year extension options, subject to satisfaction of certain conditions, of which the first was exercised in December 2017.

⁽⁶⁾  On May 23, 2018, we refinanced two mortgage loans totaling $357.6 million with a new $435.0 million mortgage loan with a two-year initial term and fiveone-year extension options subject to the satisfaction of certain conditions. The new mortgage loan is interest only and bears interest at a rate of LIBOR + 2.16%.

⁽⁷⁾  A portion of this mortgage loan at December 31, 2017 relates to the Tampa Renaissance, which was sold on June 1, 2018. See note 5.

⁽⁸⁾  This mortgage loan has threeone-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in March 2018.

⁽⁹⁾  This mortgage loan has threeone-year extension options, subject to satisfaction of certain conditions.

⁽¹⁰⁾  This mortgage loan has twoone-year extension options, subject to satisfaction of certain conditions.

⁽¹¹⁾  The Ritz-Carlton, Sarasota property was acquired on April 4, 2018. The new mortgage loan is a five-year interest-only loan and bears interest at a rate of LIBOR + 2.65%.

On March 31, 2017, in connection with the acquisition of the Park Hyatt Beaver Creek, we completed the financing of a $67.5 million mortgage loan. This mortgage loan is interest only and provides for a floating interest rate of LIBOR + 2.75%. The stated maturity date of the mortgage loan is April 2019, with threeone-year extension options, subject to the satisfaction of certain conditions. The mortgage loan is secured by the Park Hyatt Beaver Creek.

On May 11, 2017, in connection with the acquisition of the Hotel Yountville, we completed the financing of a $51.0 million mortgage loan. This mortgage loan is interest only and provides for a floating interest rate of LIBOR + 2.55%. The stated maturity date of the mortgage loan is May 2022. The mortgage loan is secured by the Hotel Yountville.

18

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

On August 18, 2017, we refinanced our existing $40.0 million mortgage loan with a final maturity date in December 2020 with a new $40.0 million mortgage loan that is interest only, provides for a floating interest rate of LIBOR + 2.55% and has a stated maturity date of August 2022. The mortgage loan is secured by the Bardessono Hotel.

On April 4, 2018, in connection with the acquisition of the 266 -room Ritz-Carlton, Sarasota in Sarasota, Florida, the Company completed the financing of a $100.0 million mortgage loan. This mortgage loan provides for a floating interest rate of LIBOR + 2.65%. The mortgage loan is interest only until July 1, 2021 and then amortizes 1% annually for the remaining term. The stated maturity is April 2023.

On May 23, 2018, the Company refinanced two mortgage loans totaling $357.6 million with a new $435.0 million mortgage loan with a two-year initial term and fiveone-year extension options subject to the satisfaction of certain conditions. As a result of the refinance the Tampa Renaissance became unencumbered. The new mortgage loan is interest only and bears interest at a rate of LIBOR + 2.16%. The loan is secured by four hotels: Seattle Marriott Waterfront, San Francisco Courtyard Downtown, Philadelphia Courtyard Downtown and Sofitel Chicago Magnificent Mile.

We are required to maintain certain financial ratios under our secured revolving credit facility. If we violate covenants in any debt agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. Violations of certain debt covenants may result in our inability to borrow unused amounts under our line of credit, even if repayment of some or all of our borrowings is not required. The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group. As of June 30, 2018, we were in compliance in all material respects with all covenants or other requirements set forth in our debt agreements as amended.

9. Income (Loss) Per Share

The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income (loss) attributable to common stockholders - basic and diluted:
Net income (loss) attributable to the Company	$	11,530		$	(885	)	$	15,550		$	(898	)
Less: Dividends on preferred stock	(1,708		)	(1,707		)	(3,415		)	(3,380		)
Less: Dividends on common stock	(5,122		)	(5,036		)	(10,238		)	(10,069		)
Less: Dividends on unvested performance stock units	(72		)	(86		)	(144		)	(153		)
Less: Dividends on unvested restricted shares	(78		)	(75		)	(165		)	(125		)
Less: Net (income) loss allocated to unvested restricted shares	(70		)	—			(24		)	—
Undistributed net income (loss) allocated to common stockholders	4,480			(7,789		)	1,564			(14,625		)
Add back: Dividends on common stock	5,122			5,036			10,238			10,069
Distributed and undistributed net income (loss) - basic	$	9,602		$	(2,753	)	$	11,802		$	(4,556	)
Dividends on preferred stock	1,708			—			—			—
Distributed and undistributed net income (loss) - diluted	$	11,310		$	(2,753	)	$	11,802		$	(4,556	)
Weighted average common shares outstanding:
Weighted average common shares outstanding – basic	32,006			31,469			31,845			29,380
Effect of assumed conversion of preferred stock	6,569			—			—			—
Incentive fee shares	13			—			8			—
Weighted average common shares outstanding – diluted	38,588			31,469			31,853			29,380
Income (loss) per share - basic:
Net income (loss) allocated to common stockholders per share	$	0.30		$	(0.09	)	$	0.37		$	(0.16	)
Income (loss) per share - diluted:
Net income (loss) allocated to common stockholders per share	$	0.29		$	(0.09	)	$	0.37		$	(0.16	)

19

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect the adjustments for the following items (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017
Net income (loss) allocated to common stockholders is not adjusted for:
Income (loss) allocated to unvested restricted shares	$	148	$	75		$	189	$	125
Income (loss) allocated to unvested performance stock units	72		86			144		153
Income (loss) attributable to redeemable noncontrolling interests in operating partnership	1,235		(343		)	1,527		(598		)
Dividends on preferred stock	—		1,707			3,415		3,380
Total	$	1,455	$	1,525		$	5,275	$	3,060
Weighted average diluted shares are not adjusted for:
Effect of unvested restricted shares	41		113			45		82
Effect of unvested performance stock units	—		—			8		—
Effect of assumed conversion of operating partnership units	4,114		4,290			4,119		4,256
Effect of assumed conversion of preferred stock	—		6,560			6,569		5,555
Effect of incentive fee shares	—		124			—		153
Total	4,155		11,087			10,741		10,046

10. Derivative Instruments

Interest Rate Derivatives—We are exposed to risks arising from our business operations, economic conditions and financial markets. To manage these risks, we primarily use interest rate derivatives to hedge our debt and our cash flows. The interest rate derivatives include interest rate caps and interest rate floors, which are subject to master netting settlement arrangements. All derivatives are recorded at fair value.

During the six months endedJune 30, 2018 and 2017, we entered into interest rate caps as summarized in the table below:

	Six Months Ended June 30,
	2018			2017
Notional amount (in thousands)	$	685,000		$	619,500
Strike rate minimum	2.43		%	3.00		%
Strike rate maximum	7.80		%	5.35		%
Effective date range	February 2018 - May 2018			January 2017 - May 2017
Maturity date range	March 2019 - June 2020			March 2018 - May 2019
Total cost of interest rate cap (in thousands)	$	348		$	338

_______________

No instruments were designated as cash flow hedges

20

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

As of June 30, 2018, we held interest rate instruments as summarized in the table below:

Interest rate caps (1)
Notional amount (in thousands)	$	1,393,200
Strike rate minimum	2.43		%
Strike rate maximum	11.61		%
Effective date range	January 2017 - May 2018
Maturity date range	November 2018 - June 2020
Aggregate principal balance on corresponding mortgage loans (in thousands)	$	993,826
Interest rate floors (1) (2)
Notional amount (in thousands)	$	6,850,000
Strike rate minimum	(0.25		)%
Strike rate maximum	1.50		%
Maturity date range	March 2019 - July 2020

_______________

⁽¹⁾  No instruments were designated as cash flow hedges

⁽²⁾  Cash collateral is posted by us as well as our counterparties. We offset the fair value of the derivative and the obligation/right to return/reclaim cash collateral.

Credit Default Swap Derivatives—We use credit default swaps, tied to the CMBX index, to hedge financial and capital market risk. A credit default swap is a derivative contract that functions like an insurance policy against the credit risk of an entity or obligation. The seller of protection assumes the credit risk of the reference obligation from the buyer (us) of protection in exchange for annual premium payments. If a default or a loss, as defined in the credit default swap agreements, occurs on the underlying bonds, then the buyer of protection is protected against those losses. The only liability for us, the buyer, is the annual premium and any change in value of the underlying CMBX index (if the trade is terminated prior to maturity). For all CMBX trades completed to date, we were the buyer of protection. Credit default swaps are subject to master-netting settlement arrangements and credit support annexes. As of June 30, 2018, we held a credit default swap with a notional amount of $50.0 million, an effective date of August 2017 and an expected maturity date of October 2026. Assuming the underlying bonds pay off at par over their remaining average life, our estimated total exposure for these trades was approximately $2.3 million as of June 30, 2018. Cash collateral is posted by us as well as our counterparties. We offset the fair value of the derivative and the obligation/right to return/reclaim cash collateral. The change in market value of credit default swaps is settled net through posting cash collateral or reclaiming cash collateral between us and our counterparties when such change in market value is over $250,000.

11. Fair Value Measurements

Fair Value Hierarchy—Our financial instruments measured at fair value either on a recurring or a non-recurring basis are classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs in the market place as discussed below:

• Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets.

• Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

• Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.

The fair value of interest rate caps is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rates of the caps. The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves (LIBOR forward curves) and volatilities (the Level 2 inputs). We also incorporate credit valuation adjustments (the Level 3 inputs) to appropriately reflect both our own non-performance risk and the respective counterparty’s non-performance risk.

21

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Fair value of credit default swaps are obtained from a third party who publishes various information including the index composition and price data (Level 2 inputs). The fair value of credit default swaps does not contain credit-risk-related adjustments as the change in fair value is settled net through posting cash collateral or reclaiming cash collateral between us and our counterparty.

The fair value of interest rate floors is calculated using a third-party discounted cash flow model based on future cash flows that are expected to be received over the remaining life of the floor. These expected future cash flows are probability-weighted projections based on the contract terms, accounting for both the magnitude and likelihood of potential payments, which are both computed using the appropriate LIBOR forward curve and market implied volatilities as of the valuation date (Level 2 inputs).

The fair value of options on futures contracts is determined based on the last reported settlement price as of the measurement date (Level 1 inputs). These exchange-traded options are centrally cleared, and a clearinghouse stands in between all trades to ensure that the obligations involved in the trades are satisfied.

When a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when the valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counter-parties, which we consider significant (10% or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy. Transfers of inputs between levels are determined at the end of each reporting period. In determining the fair values of our derivatives at June 30, 2018, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 2.090% to 2.848% for the remaining term of our derivatives. Credit spreads (Level 3 inputs) used in determining the fair values of hedge and non-hedge designated derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates.

22

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands):

	Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting(1)		Total
June 30, 2018
Assets
Derivative assets:
Interest rate derivatives - floors	$	—	$	33	$	—	$	41	$	74
Interest rate derivatives - caps	—		92		—		—		92
Credit default swaps	—		222		—		619		841
	—		347		—		660		1,007		(2)
Non-derivative assets:
Investment in Ashford Inc.	12,628		—		—		—		12,628
Total	$	12,628	$	347	$	—	$	660	$	13,635

	Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting(1)		Total
December 31, 2017
Assets
Derivative assets:
Interest rate derivatives - floors	$	—	$	118	$	—	$	12	$	130
Interest rate derivatives - caps	—		4		—		—		4
Credit default swaps	—		102		—		358		460
	—		224		—		370		594		(2)
Non-derivative assets:
Investment in Ashford Inc.	18,124		—		—		—		18,124
Total	$	18,124	$	224	$	—	$	370	$	18,718

__________________

⁽¹⁾  Represents net cash collateral posted between us and our counterparties.

⁽²⁾  Reported as “derivative assets” in our condensed consolidated balance sheets.

23

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

Effect of Fair Value Measured Assets and Liabilities on Condensed Consolidated Statements of Operations

The following table summarizes the effect of fair value measured assets and liabilities on the condensed consolidated statements of operations (in thousands):

	Gain (Loss) Recognized in Income
	Three Months Ended June 30,								Six Months Ended June 30,
	2018				2017				2018				2017
Assets
Derivative assets:
Interest rate derivatives - floors	$	(57	)		$	(135	)		$	(84	)		$	(894	)
Interest rate derivatives - caps	(256		)		(61		)		(261		)		(317		)
Credit default swaps	15			(1)	—				120			(1)	—
Options on futures contracts	—				(19		)		—				(58		)
Non-derivative assets:
Investment in Ashford Inc.	(6,024		)		(1,563		)		(5,496		)		1,528
Total	$	(6,322	)		$	(1,778	)		$	(5,721	)		$	259
Total combined
Interest rate derivatives - floors	$	(57	)		$	(135	)		$	(84	)		$	(894	)
Interest rate derivatives - caps	(256		)		(61		)		(261		)		(317		)
Credit default swaps	15				—				120				—
Options on futures contracts	—				96				—				213
Unrealized gain (loss) on derivatives	(298		)		(100		)		(225		)		(998		)
Realized gain (loss) on options on futures contracts	—				(115		)	(2)	—				(271		)	(2)
Unrealized gain (loss) on investment in Ashford Inc.	(6,024		)		(1,563		)		(5,496		)		1,528
Net	$	(6,322	)		$	(1,778	)		$	(5,721	)		$	259

_______________

⁽¹⁾  Excludes costs of $63 and $126 associated with credit default swaps for the three and six months endedJune 30, 2018 included in “other income (expense)” in our condensed consolidated statements of operations.

⁽²⁾  Included in “other income (expense)” in our condensed consolidated statements of operations.

12. Summary of Fair Value of Financial Instruments

Determining the estimated fair values of certain financial instruments such as notes receivable and indebtedness requires considerable judgment to interpret market data. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled.

24

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):

	June 30, 2018				December 31, 2017
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets and liabilities measured at fair value:
Investment in Ashford Inc.	$	12,628	$	12,628	$	18,124	$	18,124
Derivative assets	1,007		1,007		594		594
Financial assets not measured at fair value:
Cash and cash equivalents	$	169,235	$	169,235	$	137,522	$	137,522
Restricted cash	83,096		83,096		47,820		47,820
Accounts receivable, net	22,338		22,338		14,334		14,334
Insurance receivable	—		—		8,825		8,825
Note receivable	—		—		8,098		8,020 to 8,864
Due from related party, net	588		588		349		349
Due from third-party hotel managers	5,522		5,522		4,589		4,589
Financial liabilities not measured at fair value:
Indebtedness	$	993,826	$942,117 to $1,041,287		$	826,236	$ 780,243 to $ 862,372
Accounts payable and accrued expenses	63,976		63,976		56,803		56,803
Dividends and distributions payable	8,572		8,572		8,146		8,146
Due to Ashford Inc.	1,100		1,100		1,703		1,703
Due to third-party hotel managers	2,299		2,299		1,709		1,709

Cash, cash equivalents and restricted cash. These financial assets have maturities of less than 90 days and most bear interest at market rates. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.

Accounts receivable, net, insurance receivable, due from related party, net, accounts payable and accrued expenses, dividends and distributions payable, due to Ashford Inc. and due to/from third-party hotel managers. The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique.

Note receivable. Fair value of the note receivable was determined by using similar loans with similar collateral. Since there is very little to no trading activity, we relied on our internal analysis of what we believe a willing buyer would pay for this note at December 31, 2017. We estimated the fair value of the note receivable to be approximately 1.0% lower to 9.5% higher than the carrying value of $8.1 million at December 31, 2017. This is considered a Level 2 valuation technique.

Investment in Ashford Inc. Fair value of the investment in Ashford Inc. is based on the quoted closing price on the balance sheet date. This is considered a Level 1 valuation technique.

Derivative assets. Fair value of interest rate derivatives is determined using the net present value of expected cash flows of each derivative based on the market-based interest rate curve and adjusted for credit spreads of us and our counterparties. Fair value of credit default swaps are obtained from a third party who publishes the CMBX index composition and price data. Fair values of interest rate floors are calculated using a third-party discounted cash flow model based on future cash flows that are expected to be received over the remaining life of the floor. See notes 10 and 11 for a complete description of the methodology and assumptions utilized in determining fair values.

Indebtedness. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. The current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied, and adjusted for the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral. We estimated the fair value of the total indebtedness to be approximately 94.8% to 104.8% of the carrying value of $993.8 million at June 30, 2018, and approximately 94.4% to 104.4% of the carrying value of $826.2 million at December 31, 2017. This is considered a Level 2 valuation technique.

25

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

13. Redeemable Noncontrolling Interests in Operating Partnership

Redeemable noncontrolling interests in the operating partnership represents the limited partners’ proportionate share of equity and their allocable share of equity in earnings/losses of Braemar OP, which is an allocation of net income/loss attributable to the common unitholders based on the weighted average ownership percentage of these limited partners’ common units of limited partnership interest in the operating partnership (“common units”) and units issued under our Long-Term Incentive Plan (the “LTIP units”) that are vested. Each common unit may be redeemed, by the holder, for either cash or, at our sole discretion, up to one share of our REIT common stock, which is either (i) issued pursuant to an effective registration statement; (ii) included in an effective registration statement providing for the resale of such common stock; or (iii) issued subject to a registration rights agreement.

LTIP units, which are issued to certain executives and employees of Ashford LLC as compensation, generally have vesting periods of three years. Additionally, certain independent members of the board of directors have elected to receive LTIP units as part of their compensation, which are fully vested upon grant. Upon reaching economic parity with common units, each vested LTIP unit can be converted by the holder into one common unit which can then be redeemed for cash or, at our election, settled in our common stock. An LTIP unit will achieve parity with the common units upon the sale or deemed sale of all or substantially all of the assets of our operating partnership at a time when our stock is trading at a level in excess of the price it was trading on the date of the LTIP issuance. More specifically, LTIP units will achieve full economic parity with common units in connection with (i) the actual sale of all or substantially all of the assets of our operating partnership or (ii) the hypothetical sale of such assets, which results from a capital account revaluation, as defined in the partnership agreement, for our operating partnership.

The compensation committee of the board of directors of the Company approves performance-based LTIP units to certain executive officers from time to time. The award agreements provide for the grant of a target number of performance-based LTIP units that will be settled in common units of Braemar OP, if and when the applicable vesting criteria have been achieved following the end of the performance and service period. The target number of performance-based LTIP units may be adjusted from 0% to 200% based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s Compensation Committee on the grant date. As of June 30, 2018, there are approximately 804,000 performance-based LTIP units, representing 200% of the target, outstanding. The performance criteria for the performance-based LTIP units are based on market conditions under the relevant literature, and the performance-based LTIP units were granted to non-employees.

As of June 30, 2018, we have issued a total of 1.9 million LTIP units (including performance-based LTIP units), net of forfeitures, all of which, other than approximately 295,000 LTIP units and 1.2 million performance based LTIP units issued from March 2015 to March 2018 had reached full economic parity with, and are convertible into, common units.

The following table presents compensation expense for performance LTIP units and LTIP units (in thousands):

		Three Months Ended June 30,						Six Months Ended June 30,
Type	Line Item	2018		2017				2018		2017
Performance LTIP units	Advisory services fee	$	286	$	(57	)	(1)	$	294	$	(1,104	)	(1)
LTIP units	Advisory services fee	$	302	$	130			$	438	$	173
LTIP units	Corporate, general and administrative	$	—	$	64			$	—	$	64

____________________________________

⁽¹⁾  The credit to compensation expense is a result of lower fair values as compared to prior periods.

The unamortized fair value of performance-based LTIP units of $2.1 million at June 30, 2018 will be expensed over a period of 2.5 years, subject to future mark to market adjustments. The fair value of the unrecognized cost of LTIP units of $2.4 million at June 30, 2018, will be amortized over a period of 2.7 years, subject to future mark to market adjustments.

During the three and six months ended June 30, 2017, approximately 1,000 and 6,000 common units, with an aggregate redemption fair value of $15,000 and $82,000, were redeemed by the holders and, at our election, we issued shares of our common stock to satisfy the redemption. During the three and six months ended June 30, 2018, no common units were redeemed.

26

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

The following table presents the redeemable noncontrolling interests in Braemar OP (in thousands) and the corresponding approximate ownership percentage of our operating partnership:

	June 30, 2018			December 31, 2017
Redeemable noncontrolling interests in Braemar OP	$	47,818		$	46,627
Adjustments to redeemable noncontrolling interests (1)	558			—
Ownership percentage of operating partnership	11.17		%	11.43		%

____________________________________

⁽¹⁾  to reflect the excess of the redemption value over the accumulated historical costs^. 

We allocated net income (loss) to the redeemable noncontrolling interests and declared aggregate cash distributions to the holders of common units and holders of LTIP units, which are recorded as a reduction of redeemable noncontrolling interests in operating partnership, as illustrated in the table below (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
Allocated net income (loss) to the redeemable noncontrolling interests	$	(1,235	)	$	343	$	(1,527	)	$	598
Aggregate distributions to holders of common units, LTIP units and performance LTIP units	$	822		$	859	$	1,644		$	1,649

14. Equity and Stock-Based Compensation

Dividends—The following table summarizes the common stock dividends declared during the period (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Common stock dividends declared	$	5,200	$	5,112	$	10,403	$	10,195

Performance Stock Units—The compensation committee of the board of directors of the Company approves grants of PSUs to certain executive officers from time to time. The award agreements provide for the grant of a target number of PSUs that will be settled in shares of common stock of the Company, if and when the applicable vesting criteria have been achieved following the end of the performance and service period, generally, three years from the issuance date. The target number of PSUs may be adjusted from 0% to 200% based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s Compensation Committee on the grant date. The performance criteria for the PSUs are based on market conditions under the relevant literature, and the PSUs were granted to non-employees. At June 30, 2018, the outstanding PSUs had a fair value of $3.1 million.

The following table summarizes the compensation expense for PSUs (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
Line Item	2018		2017			2018		2017
Advisory services fee	$	292	$	(8	)	$	1,869	$	(808	)

During the six months ended June 30, 2018, approximately $1.6 million of the compensation expense was related to the accelerated vesting of PSUs granted to one of our executive officers upon his passing, in accordance with the terms of the awards. These amounts are included in “advisory services fee” on our condensed consolidated statements of operations.

As of June 30, 2018, we had unamortized compensation expense of $2.6 million related to PSUs which is expected to be recognized over a period of 2.5 years, subject to future mark to market adjustments.

Restricted Stock Units—We incur stock-based compensation expense in connection with restricted stock units awarded to employees of Ashford LLC, included in “advisory services fee,” on our condensed consolidated statements of operations, employees of Remington Lodging, included in “management fees” on our condensed consolidated statements of operations and common

27

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

stock issued to our independent directors, which immediately vests, and is included in “corporate general and administrative” expense on our condensed consolidated statements of operations.

At June 30, 2018, the outstanding restricted shares had a fair value of $5.6 million. At June 30, 2018, the unamortized cost of the unvested shares of restricted stock was $4.9 million, which will be expensed over a period of 3.3 years, subject to future mark to market adjustments, and have vesting dates between March 2019 and November 2021.

The following table summarizes the stock-based compensation expense for restricted stock units (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Line Item	2018		2017		2018		2017
Advisory services fee	$	498	$	271	$	1,323	$	389
Management fees	64		34		111		34
Corporate general and administrative	—		163		—		181
	$	562	$	468	$	1,434	$	604

During the six months ended June 30, 2018, approximately $640,000 of the compensation expense was related to the accelerated vesting of equity awards granted to one of our executive officers upon his passing, in accordance with the terms of the awards.

Stock Repurchases—On December 5, 2017, our board of directors reapproved the stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share having an aggregate value of up to $50 million. The board of directors’ authorization replaced any previous repurchase authorizations.

No shares were repurchased during the three and six months ended June 30, 2018 and 2017, pursuant to this authorization. As of June 30, 2018, we have purchased a cumulative 4.3 million shares of our common stock, for approximately $63.2 million, since the program’s inception on November 4, 2014.

At-the-Market Equity Distribution Program—On December 11, 2017, the Company established an “at-the-market” equity distribution program pursuant to which it may, from time to time, sell shares of its Common Stock having an aggregate offering price of up to $50 million. As of June 30, 2018, no shares of our common stock have been sold under this program.

Noncontrolling Interest in Consolidated Entities—A partner had noncontrolling ownership interests of 25% in two hotel properties with a total carrying value of $(5.2) million and $(4.8) million at June 30, 2018 and December 31, 2017, respectively.

The following table summarizes the (income) loss allocated to noncontrolling interests in consolidated entities (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
(Income) loss allocated to noncontrolling interests	$	(89	)	$	(1,614	)	$	(47	)	$	(1,593	)

15. 5.5% Series B Cumulative Convertible Preferred Stock

Each share of our 5.5% Series B Cumulative Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) is convertible at any time, at the option of the holder, into a number of whole shares of common stock at an initial conversion price of $18.90 (which represents an initial conversion rate of 1.3228 shares of our common stock, subject to certain adjustments). The Series B Convertible Preferred Stock is also subject to conversion upon certain events constituting a change of control. Holders of the Series B Convertible Preferred Stock have no voting rights, subject to certain exceptions.

The Company may, at its option, cause the Series B Convertible Preferred Stock to be converted in whole or in part, on a pro-rata basis, into fully paid and nonassessable shares of the Company’s common stock at the conversion price, provided that the “Closing Bid Price” (as defined in the Articles Supplementary) of the Company’s common stock shall have equaled or exceeded 110% of the conversion price for the immediately preceding 45 consecutive trading days ending three days prior to the date of notice of conversion. In the event of such mandatory conversion, the Company shall pay holders of the Series B Convertible Preferred Stock any additional dividend payment to make the holder whole on dividends expected to be received through June 11, 2019, in an amount equal to the net present value, where the discount rate is the dividend rate on the Series B Convertible Preferred Stock, of the difference between (i) the annual dividend payments the holders of Series B Convertible Preferred Stock would have

28

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

received in cash from the date of the mandatory conversion to June 11, 2019, and (ii) the common stock quarterly dividend payments the holders of Series B Convertible Preferred Stock would have received over the same time period had such holders held common stock.

On March 7, 2017, we closed an offering of approximately 2.0 million shares of our Series B Convertible Preferred Stock at $20.19 per share for gross proceeds of $39.9 million. The net proceeds to us, after underwriting discounts and offering expenses were approximately $38.2 million. Dividends on the Series B Convertible Preferred Stock accrue at a rate of 5.50% on the liquidation preference of $25.00 per share. On March 31, 2017, the underwriters partially exercised their over-allotment option and purchased an additional 100,000 shares of the Series B Convertible Preferred Stock, which closed on April 5, 2017. The net proceeds from the partial exercise of the over-allotment option after underwriting discounts were approximately $1.9 million.

At June 30, 2018, we had 5.0 million outstanding shares of Series B Convertible Preferred Stock that do not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside our control. As such, the Series B Convertible Preferred Stock is classified outside of permanent equity.

The Series B Convertible Preferred Stock dividend for all issued and outstanding shares is set at $1.375 per annum per share.

The following table summarizes dividends declared (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Series B convertible preferred stock	$	1,708	$	1,707	$	3,415	$	3,380

16. Commitments and Contingencies

Restricted Cash—Under certain management and debt agreements for our hotel properties existing at June 30, 2018, escrow payments are required for insurance, real estate taxes and debt service. In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow 4% to 5% of gross revenues for capital improvements.

Management Fees—Under management agreements for our hotel properties existing at June 30, 2018, we pay a) monthly property management fees equal to the greater of $13,000 (increased annually based on consumer price index adjustments) or 3% of gross revenues, or in some cases 2% to 7% of gross revenues, as well as annual incentive management fees, if applicable, b) project management fees of up to 4% of project costs, c) market service fees including purchasing, design and construction management not to exceed 16.5% of project management budget cumulatively, including project management fees, and d) other general fees at current market rates as approved by our independent directors, if required. These management agreements expire from December 2019 through December 2065, with renewal options. If we terminate a management agreement prior to its expiration, we may be liable for estimated management fees through the remaining term, liquidated damages or, in certain circumstances, we may substitute a new management agreement.

Income Taxes—We and our subsidiaries file income tax returns in the federal jurisdiction and various states. Tax years 2014 through 2017 remain subject to potential examination by certain federal and state taxing authorities.

Litigation—We are engaged in various legal proceedings which have arisen but have not been fully adjudicated. The likelihood of loss from these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible and to probable. Based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position or results of operations. However, the final results of legal proceedings cannot be predicted with certainty and if we fail to prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position or results of operations could be materially adversely affected in future periods.

17. Segment Reporting

We operate in one business segment within the hotel lodging industry: direct hotel investments. Direct hotel investments refer to owning hotel properties through either acquisition or new development. We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments have similar economic characteristics and exhibit similar long-term financial performance. As of June 30, 2018 and December 31, 2017, all of our hotel properties were in the U.S. and its territories.

29

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

18. Related Party Transactions

Ashford LLC, a subsidiary of Ashford Inc., acts as our advisor, and as a result, we pay advisory fees to Ashford LLC. We are required to pay Ashford LLC a monthly base fee that is 1/12th of 0.70% of our total market capitalization plus the Key Money Asset Management Fee (defined in our advisory agreement as the aggregate gross asset value of all key money assets multiplied by 1/12th of 0.70%), subject to a minimum monthly base fee, as payment for managing our day-to-day operations in accordance with our investment guidelines. Total market capitalization includes the aggregate principal amount of our consolidated indebtedness (including our proportionate share of debt of any entity that is not consolidated but excluding our joint venture partners’ proportionate share of consolidated debt). We are also required to pay Ashford LLC an incentive fee that is measured annually. Each year that our annual total stockholder return exceeds the average annual total stockholder return for our peer group, we will pay Ashford LLC an incentive fee over the following three years, subject to the Fixed Charge Coverage Ratio (“FCCR”) Condition, as defined in the advisory agreement, which relates to the ratio of adjusted EBITDA to fixed charges. We also reimburse Ashford LLC for certain reimbursable overhead and internal audit, risk management advisory and asset management services, as specified in the advisory agreement. We also record equity-based compensation expense for equity grants of common stock and LTIP units awarded to our officers and employees of Ashford LLC in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period.

The following table summarizes the advisory services fees incurred (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Advisory services fee
Base advisory fee	$	2,313	$	2,276	$	4,420	$	4,279
Reimbursable expenses (1)	499		532		919		1,079
Equity-based compensation (2)	1,377		335		3,924		(1,350		)
Incentive fee	691		—		861		—
Total	$	4,880	$	3,143	$	10,124	$	4,008

________

⁽¹⁾  Reimbursable expenses include overhead, internal audit, risk management advisory and asset management services.

⁽²⁾  Equity-based compensation is associated with equity grants of Braemar’s common stock, PSUs, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC.

In connection with the acquisition of the Bardessono Hotel in 2015 and Ashford Inc.’s engagement to provide hotel advisory services to us, Ashford Inc. agreed to provide $2.0 million of key money consideration in the form of furniture, fixtures and equipment to be used by Braemar. This arrangement is accounted for as a lease, in accordance with the applicable accounting guidance. As such, a portion of the base advisory fee is allocated to lease expense equal to the estimated fair value of the lease payments that would have been made. Lease expense of $84,000 and $168,000 was recognized for the three and six months ended June 30, 2018, respectively, and was included in “other” hotel expense in the consolidated statements of operations. For the three and six months ended June 30, 2017, this expense was $84,000 and $168,000.

Certain employees of Remington Lodging, who perform work on behalf of Braemar, were granted approximately 22,000 and 21,000 shares of restricted stock under the Braemar Stock Plan in 2017 and 2018, respectively. These share grants were accounted for under the applicable accounting guidance related to share-based payments granted to non-employees and are recorded as a component of “management fees” in our condensed consolidated statements of operations. For the three and six months ended June 30, 2018, expense related to such grants was $64,000 and $111,000, respectively. For both the three and six months ended June 30, 2017, expense related to such grants was $34,000. The unamortized fair value of these grants was $429,000 as of June 30, 2018, which will be amortized over a period of 2.7 years.

30

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

In accordance with our advisory agreement, our advisor, or entities in which our advisor has an interest, have a right to provide products or services to our hotel properties, provided such transactions are evaluated and approved by our independent directors. The following tables summarize the entities in which our advisor has an interest with which we or our hotel properties contracted for products and services, the amounts paid by us for those services and the applicable classification on our condensed consolidated financial statements (in thousands):

		Three Months Ended June 30, 2018
Company	Product or Service	Transaction Amount		Investments in Hotel Properties, net (1)		Indebtedness, net (2)			Other Hotel Expenses		Corporate General and Administrative
OpenKey	Mobile key app	$	4	$	—	$	—		$	4	$	—
Pure Rooms	“Allergy friendly” premium rooms	10		—		—			10		—
RED Leisure	Watersports activities and travel/transportation services	180		—		—			180		—
Lismore Capital	Mortgage placement services	999		—		(999		)	—		—
Ashford LLC	Insurance claims services	31		—		—			—		31

________

⁽¹⁾  Recorded in furniture, fixtures and equipment and depreciated over the estimated useful life.

⁽²⁾  Recorded as deferred loan costs, which are included in “indebtedness, net” on our consolidated balance sheets and amortized over the initial term of the applicable loan agreement.

		Six Months Ended June 30, 2018
Company	Product or Service	Transaction Amount		Investments in Hotel Properties, net (1)		Indebtedness, net (2)			Other Hotel Expenses		Corporate General and Administrative
OpenKey	Mobile key app	$	12	$	—	$	—		$	12	$	—
Pure Rooms	“Allergy friendly” premium rooms	19		—		—			19		—
RED Leisure	Watersports activities and travel/transportation services	360		—		—			360		—
Lismore Capital	Mortgage placement services	999		—		(999		)	—		—
Ashford LLC	Insurance claims services	69		—		—			—		69

________

⁽¹⁾  Recorded in furniture, fixtures and equipment and depreciated over the estimated useful life.

⁽²⁾  Recorded as deferred loan costs, which are included in “indebtedness, net” on our consolidated balance sheets and amortized over the initial term of the applicable loan agreement.

The following table summarizes the due to Ashford Inc. (in thousands):

		June 30, 2018		December 31, 2017
Company	Product or Service	Due to Ashford Inc.
Ashford LLC	Advisory services	$	1,065	$	1,654
Ashford LLC	Insurance claims services	32		—
OpenKey	Mobile key app	3		4
Pure Rooms	“Allergy friendly” premium rooms	—		45
		$	1,100	$	1,703

31

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used in this Quarterly Report on Form 10-Q, unless the context otherwise indicates, the references to “we,” “us,” “our,” the “Company” or “Braemar” refer to Braemar Hotels & Resorts Inc. (formerly Ashford Hospitality Prime, Inc.), a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Braemar Hospitality Limited Partnership (formerly Ashford Hospitality Prime Limited Partnership), a Delaware limited partnership, which we refer to as “our operating partnership” or “Braemar OP.” “Ashford Trust” refers to Ashford Hospitality Trust, Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Limited Partnership, a Delaware limited partnership and Ashford Trust’s operating partnership.” “Ashford LLC” refers to Ashford Hospitality Advisors LLC, a Delaware limited liability company and a subsidiary of Ashford Inc. “Remington Lodging” refers to Remington Lodging and Hospitality LLC, a Delaware limited liability company, a property management company owned by Mr. Monty J. Bennett, chairman of our board of directors, and his father, Mr. Archie Bennett, Jr., chairman emeritus of Ashford Trust. “Our TRSs” refers to our taxable REIT subsidiaries, including Braemar TRS Corporation (formerly Ashford Prime TRS Corporation), a Delaware corporation, which we refer to as “Braemar TRS,” and its subsidiaries, together with the two taxable REIT subsidiaries that lease our two hotels held in a consolidated joint venture and are wholly-owned by the joint venture and the U.S. Virgin Islands’ (“USVI”) taxable REIT subsidiary that owns the Ritz-Carlton, St. Thomas hotel.

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains registered trademarks that are the exclusive property of their respective owners, which are companies other than us, including Marriott International®, Hilton Worldwide®, Sofitel®, Hyatt® and Accor®.

FORWARD-LOOKING STATEMENTS

Throughout this Form 10-Q, we make forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Additionally, statements regarding the following subjects are forward-looking by their nature:

• our business and investment strategy;

• our projected operating results and dividend rates;

• our ability to obtain future financing arrangements;

• our understanding of our competition;

• market trends;

• projected capital expenditures;

• anticipated acquisitions or dispositions; and

• the impact of technology on our operations and business.

Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward looking information. Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, taking into account all information currently available to us, our actual results and performance could differ materially from those set forth in our forward-looking statements. Factors that could have a material adverse effect on our forward-looking statements include, but are not limited to:

• factors discussed in our Form 10-K for the year ended December 31, 2017, as originally filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2018 (the “ 2017 10-K”), including those set forth under the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and “Properties,” as updated in our subsequent Quarterly Reports on Form 10-Q;

• general volatility of the capital markets, the general economy or the hospitality industry, whether the result of market events or otherwise;

• our ability to deploy capital and raise additional capital at reasonable costs to repay debts, invest in our properties and fund future acquisitions;

• unanticipated increases in financing and other costs, including a rise in interest rates;

• the degree and nature of our competition;

• actual and potential conflicts of interest with Ashford Trust, Ashford LLC, Ashford Inc., Remington Lodging, our executive officers and our non-independent directors;

• changes in personnel of Ashford LLC or the lack of availability of qualified personnel;

32

• changes in governmental regulations, accounting rules, tax rates and similar matters;

• legislative and regulatory changes, including changes to the Internal Revenue Code and related rules, regulations and interpretations governing the taxation of real estate investment trusts (“REITs”); and

• limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes.

When considering forward-looking statements, you should keep in mind the matters summarized under “Item 1A. Risk Factors” in Part I of our 2017 10-K and any subsequent updates to this disclosure in our Quarterly Reports on Form 10-Q, and the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, could cause our actual results and performance to differ significantly from those contained in our forward-looking statements. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Form 10-Q. Furthermore, we do not intend to update any of our forward-looking statements after the date of this Form 10-Q to conform these statements to actual results and performance, except as may be required by applicable law.

Overview

We are a Maryland corporation formed in April 2013 as Ashford Hospitality Prime, Inc. and changed our name to Braemar Hotels & Resorts Inc. in April 2018. We invest primarily in high revenue per available room (“RevPAR”), luxury hotels and resorts. High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then-current U.S. national average RevPAR for all hotels as determined by Smith Travel Research. Two times the U.S. national average was $167 for the year ended December 31, 2017. We have elected to be taxed as a REIT under the Internal Revenue Code beginning with our short taxable year ended December 31, 2013. We conduct our business and own substantially all of our assets through our operating partnership, Braemar OP.

We operate in the direct hotel investment segment of the hotel lodging industry. As of June 30, 2018, we owned interests in twelve hotel properties in six states, the District of Columbia and St. Thomas, U.S. Virgin Islands with 3,549 total rooms, or 3,314 net rooms, excluding those attributable to our joint venture partner. The hotel properties in our current portfolio are predominantly located in U.S. urban markets and resort locations with favorable growth characteristics resulting from multiple demand generators. We own ten of our hotel properties directly, and the remaining two hotel properties through an investment in a majority-owned consolidated entity.

We are advised by Ashford LLC, a subsidiary of Ashford Inc., through an advisory agreement. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.

On April 23, 2018, in connection with our name change, we entered into the Fifth Amended and Restated Advisory Agreement with Ashford LLC (the “Fifth Amended and Restated Advisory Agreement”). The Fifth Amended and Restated Advisory Agreement amends the prior amended and restated advisory agreement only to reflect the name change and does not amend or otherwise alter the rights of any of the parties thereto.

Pursuant to the termination provisions of the Fifth Amended and Restated Advisory Agreement, the revenues and expenses used to calculate Net Earnings (as defined) for the twelve months ended June 30, 2018, are as follows (in thousands):

Revenues	$	18,384
Expenses	(7,178		)
Net Earnings	$	11,206

Recent Developments

On March 28, 2018, the Company made a $2.0 million investment in OpenKey, which is controlled and consolidated by Ashford Inc., for an 8.2% ownership interest, which investment was approved by our Related Party Transactions Committee and the independent members of our board of directors. OpenKey is a hospitality focused mobile key platform that provides a universal smart phone app for keyless entry into hotel guestrooms.

On April 4, 2018, the Company acquired a 100% interest in the 266-room Ritz-Carlton, Sarasota in Sarasota, Florida for $171.7 million and a 22-acre plot of vacant land for $9.7 million. Concurrent with the completion of the acquisition, the Company completed the financing of a $100.0 million mortgage loan. This mortgage loan provides for a floating interest rate of LIBOR +

33

2.65%. The mortgage loan is interest only until July 1, 2021 and then amortizes 1% annually for the remaining term. The stated maturity is April 2023.

On May 23, 2018, the Company refinanced two mortgage loans totaling $357.6 million with a new $435.0 million mortgage loan with a two-year initial term and five one-year extension options subject to the satisfaction of certain conditions. As a result of the refinance the Tampa Renaissance became unencumbered. The new mortgage loan is interest only and bears interest at a rate of LIBOR + 2.16%. The loan is secured by four hotels: Seattle Marriott Waterfront, San Francisco Courtyard Downtown, Philadelphia Courtyard Downtown and Sofitel Chicago Magnificent Mile.

On June 1, 2018, the Company completed the sale of the 293-room Tampa Renaissance in Tampa, Florida for $68.0 million. The sale resulted in a gain of $15.7 million for both the three and six months ended June 30, 2018 and is included in “gain (loss) on sale of hotel property” in our condensed consolidated statements of operations. The closing of the sale completed a reverse 1031 exchange that was initiated to acquire the Ritz-Carlton, Sarasota.

Key Indicators of Operating Performance

We use a variety of operating and other information to evaluate the operating performance of our business. These key indicators include financial information that is prepared in accordance with GAAP as well as other financial measures that are non-GAAP measures. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels and/or business as a whole. We also use these metrics to evaluate the hotels in our portfolio and potential acquisitions to determine each hotel’s contribution to cash flow and its potential to provide attractive long-term total returns. These key indicators include:

• Occupancy-Occupancy means the total number of hotel rooms sold in a given period divided by the total number of rooms available. Occupancy measures the utilization of our hotels’ available capacity. We use occupancy to measure demand at a specific hotel or group of hotels in a given period.

• ADR-ADR means average daily rate and is calculated by dividing total hotel rooms revenues by total number of rooms sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. We use ADR to assess the pricing levels that we are able to generate.

• RevPAR-RevPAR means revenue per available room and is calculated by multiplying ADR by the average daily occupancy. RevPAR is one of the commonly used measures within the hotel industry to evaluate hotel operations. RevPAR does not include revenues from food and beverage sales or parking, telephone or other non-rooms revenues generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our hotels between periods and to analyze results of our comparable hotels (comparable hotels represent hotels we have owned for the entire period). RevPAR improvements attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs. RevPAR improvements attributable to increases in ADR are generally accompanied by increases in limited categories of operating costs, such as management fees and franchise fees.

RevPAR changes that are primarily driven by changes in occupancy have different implications for overall revenues and profitability than changes that are driven primarily by changes in ADR. For example, an increase in occupancy at a hotel would lead to additional variable operating costs (including housekeeping services, utilities and room supplies) and could also result in increased other operating department revenue and expense. Changes in ADR typically have a greater impact on operating margins and profitability as they do not have a substantial effect on variable operating costs.

Occupancy, ADR and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring operating performance at the individual hotel level and across our entire business. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only rooms revenue. Rooms revenue comprised approximately 64.8% and 64.4% of our total hotel revenue for the three and six months ended June 30, 2018, and is dictated by demand (as measured by occupancy), pricing (as measured by ADR) and our available supply of hotel rooms.

We also use funds from operations (“FFO”), Adjusted FFO (“AFFO”), earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) and Adjusted EBITDAre as measures of the operating performance of our business. See “Non-GAAP Financial Measures.”

34

RESULTS OF OPERATIONS

Three Months Ended June 30, 2018 Compared to Three Months Ended June 30, 2017

The following table summarizes changes in key line items from our condensed consolidated statements of operations for the three months ended June 30, 2018 and 2017 (in thousands except percentages):

	Three Months Ended June 30,						Favorable (Unfavorable)
	2018			2017			$ Change			% Change
Revenue
Rooms	$	78,439		$	79,449		$	(1,010	)	(1.3	)%
Food and beverage	25,393			27,980			(2,587		)	(9.2	)
Other	17,286			8,626			8,660			100.4
Total hotel revenue	121,118			116,055			5,063			4.4
Other	—			37			(37		)	(100.0	)
Total revenue	121,118			116,092			5,026			4.3
Expenses
Hotel operating expenses:
Rooms	16,652			17,613			961			5.5
Food and beverage	17,287			19,263			1,976			10.3
Other expenses	33,768			32,021			(1,747		)	(5.5	)
Management fees	4,501			4,209			(292		)	(6.9	)
Total hotel expenses	72,208			73,106			898			1.2
Property taxes, insurance and other	6,077			5,370			(707		)	(13.2	)
Depreciation and amortization	14,811			13,469			(1,342		)	(10.0	)
Impairment charges	59			—			(59		)
Advisory services fee	4,880			3,143			(1,737		)	(55.3	)
Contract modification cost	—			5,000			5,000			100.0
Transaction costs	461			2,066			1,605			77.7
Corporate general and administrative	1,206			1,531			325			21.2
Total expenses	99,702			103,685			3,983			3.8
Operating income (loss)	21,416			12,407			9,009			72.6
Equity in earnings (loss) of unconsolidated entity	(62		)	—			(62		)	—
Interest income	230			165			65			39.4
Gain (loss) on sale of hotel property	15,711			—			15,711
Other income (expense)	(63		)	(113		)	50			44.2
Interest expense and amortization of loan costs	(12,678		)	(9,931		)	(2,747		)	(27.7	)
Write-off of loan costs and exit fees	(4,176		)	—			(4,176		)
Unrealized gain (loss) on investment in Ashford Inc.	(6,024		)	(1,563		)	(4,461		)	(285.4	)
Unrealized gain (loss) on derivatives	(298		)	(100		)	(198		)	(198.0	)
Income (loss) before income taxes	14,056			865			13,191			1,525.0
Income tax (expense) benefit	(1,202		)	(479		)	(723		)	(150.9	)
Net income (loss)	12,854			386			12,468			3,230.1
(Income) loss from consolidated entities attributable to noncontrolling interest	(89		)	(1,614		)	1,525			94.5
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	(1,235		)	343			(1,578		)	(460.1	)
Net income (loss) attributable to the Company	$	11,530		$	(885	)	$	12,415		(1,402.8	)%

35

All hotel properties owned for the three months ended June 30, 2018 and 2017 have been included in our results of operations during the respective periods in which they were owned. Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the three months ended June 30, 2018 and 2017. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties. The following acquisitions and dispositions affect reporting comparability related to our condensed consolidated financial statements:

Hotel Properties	Location	Acquisition/Disposition	Acquisition/Disposition Date
Hotel Yountville (1)	Yountville, CA	Acquisition	May 11, 2017
Plano Marriott Legacy Town Center	Plano, TX	Disposition	November 1, 2017
Ritz-Carlton, Sarasota (1)	Sarasota, FL	Acquisition	April 4, 2018
Tampa Renaissance	Tampa, FL	Disposition	June 1, 2018

________

⁽¹⁾  The operating results of these hotel properties have been included in our results of operations as of their acquisition dates.

The following table illustrates the key performance indicators of all hotel properties owned for the periods indicated:

	Three Months Ended June 30,
	2018			2017
Occupancy	84.90		%	84.07		%
ADR (average daily rate)	$	278.96		$	263.65
RevPAR (revenue per available room)	$	236.85		$	221.65
Rooms revenue (in thousands)	$	78,439		$	79,449
Total hotel revenue (in thousands)	$	121,118		$	116,055

The following table illustrates the key performance indicators of the ten hotel properties that were included for the full three months ended June 30, 2018 and 2017:

	Three Months Ended June 30,
	2018			2017
Occupancy	85.88		%	85.30		%
ADR (average daily rate)	$	271.08		$	275.16
RevPAR (revenue per available room)	$	232.80		$	234.72
Rooms revenue (in thousands)	$	65,794		$	68,288
Total hotel revenue (in thousands)	$	94,634		$	99,178

Net Income (Loss) Attributable to the Company. Net income (loss) attributable to the Company changed $12.4 million, from a net loss of $885,000 for the three months ended June 30, 2017 (the “2017 quarter”) to net income of $11.5 million for the three months ended June 30, 2018 (the “2018 quarter”), as a result of the factors discussed below.

Rooms Revenue. Rooms revenue decreased $1.0 million, or 1.3%, to $78.4 million during the 2018 quarter compared to the 2017 quarter. During the 2018 quarter, we experienced a 5.8%increase in room rates and an 83 basis point increase in occupancy. Rooms revenue at our ten comparable hotel properties decreased $2.5 million due to a decrease in room rates of 1.5%, partially offset by a 58 basis point increase in occupancy. Rooms revenue decreased (i) $5.9 million at the Ritz-Carlton, St. Thomas due to the negative impact caused by Hurricanes Irma and Maria. During the 2018 quarter approximately 82 rooms were in service as the hotel is being renovated; (ii) $5.2 million at the Plano Marriott Legacy Town Center as a result of its sale on November 1, 2017; (iii) $1.1 million at the Tampa Renaissance as a result of its sale on June 1, 2018; (iv) $177,000 at the Key West Pier House as a result of a 397 basis point decrease in occupancy, partially offset by 1.0% higher room rates at the hotel; (v) $60,000 at the Bardessono Hotel as a result of a 253 basis point decrease in occupancy, partially offset by 1.6% higher room rates at the hotel; and (vi) $41,000 at the Chicago Sofitel Magnificent Mile as a result of a 395 basis point decrease in occupancy due to a renovation during the 2018 quarter, partially offset by 4.1% higher room rates at the hotel. These decreases were partially offset by increases of (i) $6.3 million at the Ritz-Carlton, Sarasota as a result of its acquisition on April 4, 2018; (ii) $1.5 million at the Hotel Yountville as a result of its acquisition on May 11, 2017; (iii) $2.2 million at the San Francisco Courtyard Downtown as a result of 13.6% higher room rates and a 975 basis point increase in occupancy at the hotel due to a renovation during the 2017 quarter; (iv) $570,000 at the Philadelphia Courtyard as

36

a result of 2.1% higher room rates and a 449 basis point increase in occupancy at the hotel; (v) $293,000 at the Hilton La Jolla Torrey Pines as a result of 4.1% higher room rates and a 57 basis point increase in occupancy at the hotel; (vi) $289,000 at the Seattle Marriott Waterfront as a result of 3.9% higher room rates, partially offset by a 131 basis point decrease in occupancy at the hotel; (vii) $275,000 at the Capital Hilton as a result of 5.4% higher room rates, partially offset by a 287 basis point decrease in occupancy at the hotel; and (viii) $44,000 at the Park Hyatt Beaver Creek as a result of 4.0% higher room rates, partially offset by a 62 basis point decrease in occupancy at the hotel.

Food and Beverage Revenue. Food and beverage revenue decreased $2.6 million, or 9.2%, to $25.4 million during the 2018 quarter compared to the 2017 quarter. This decrease is primarily attributable to a decrease in food and beverage revenue of $4.4 million at the Ritz-Carlton, St. Thomas as a result of the hurricanes; $3.4 million at the Plano Marriott Legacy Town Center and $615,000 at the Tampa Renaissance due to their sales on November 1, 2017 and June 1, 2018, respectively, and an aggregate decrease in food and beverage revenue of $1.5 million at the Seattle Marriott Waterfront, Capital Hilton, Key West Pier House, and Hilton La Jolla Torrey Pines. These decreases were partially offset by increases of $184,000 at the Hotel Yountville and $6.1 million at the Ritz-Carlton, Sarasota due to their acquisitions on May 11, 2017 and April 4, 2018, respectively, and an aggregate increase in food and beverage revenue of $1.0 million at the Philadelphia Courtyard, Park Hyatt Beaver Creek Resort & Spa, Chicago Sofitel Magnificent Mile, San Francisco Courtyard Downtown and Bardessono Hotel.

Other Hotel Revenue. Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking and rentals and business interruption revenue, increased $8.7 million, or 100.4%, to $17.3 million during the 2018 quarter compared to the 2017 quarter. During the 2018 quarter we recognized business interruption revenue of $5.2 million at the Ritz-Carlton, St. Thomas and $190,000 at the Bardessono Hotel and Hotel Yountville as a result of the Napa wildfires. We also recorded $3.3 million of business interruption income for the Tampa Renaissance related to a settlement for lost profits from the BP Deepwater Horizon oil spill in the Gulf of Mexico in 2010. This increase is also attributable to an increase in other hotel revenue $125,000 at the Hotel Yountville and $2.7 million at the Ritz-Carlton, Sarasota as a result of their acquisitions on May 11, 2017 and April 4, 2018, respectively. There was also an aggregate increase of $615,000 at the Chicago Sofitel Magnificent Mile, San Francisco Courtyard Downtown, Key West Pier House, Seattle Marriott Waterfront, Bardessono Hotel and Park Hyatt Beaver Creek. These increases were partially offset by lower other hotel revenue of $290,000 at the Plano Marriott Legacy Town Center and $75,000 at the Tampa Renaissance due to their sales on November 1, 2017 and June 1, 2018, respectively, and an aggregate decrease of $3.2 million at the Ritz-Carlton, St. Thomas, Hilton La Jolla Torrey Pines, Philadelphia Courtyard and Capital Hilton.

Other Non-Hotel Revenue. Other non-hotel revenue decreased $37,000, or 100.0%, to $0 in the 2018 quarter compared to the 2017 quarter. The decrease is attributable to the disposition of Plano Marriott Legacy Town Center which included Texas margin tax recoveries from guests in the 2017 quarter.

Rooms Expense. Rooms expense decreased $961,000, or 5.5%, to $16.7 million in the 2018 quarter compared to the 2017 quarter. This decrease is attributable to $1.8 million at the Ritz-Carlton, St. Thomas as a result of the hurricanes, $993,000 at the Plano Marriott Legacy Town Center and $262,000 at the Tampa Renaissance due to their sales on November 1, 2017 and June 1, 2018, respectively. There was also an aggregate decrease of $466,000 at the Chicago Sofitel Magnificent Mile, Bardessono Hotel, Key West Pier House, Seattle Marriott Waterfront, and Capital Hilton. This decrease was partially offset by an increase of $297,000 at the Hotel Yountville and $1.7 million at the Ritz-Carlton, Sarasota, as a result of their acquisitions on May 11, 2017 and April 4, 2018, respectively, and an aggregate increase in rooms expense of $614,000 at the San Francisco Courtyard Downtown, Park Hyatt Beaver Creek, Hilton La Jolla Torrey Pines, and Philadelphia Courtyard.

Food and Beverage Expense. Food and beverage expense decreased $2.0 million, or 10.3%, to $17.3 million during the 2018 quarter compared to the 2017 quarter. The decrease is attributable $3.5 million at the Ritz-Carlton, St. Thomas as a result of the hurricanes, $1.7 million at the Plano Marriott Legacy Town Center and $386,000 at the Tampa Renaissance due to their sales on November 1, 2017 and June 1, 2018, respectively, and an aggregate decrease of $581,000 at our remaining comparable hotel properties. These decreases were partially offset by increases of $167,000 at the Hotel Yountville and $4.0 million at the Ritz-Carlton, Sarasota as a result of their acquisitions on May 11, 2017 and April 4, 2018, respectively.

Other Operating Expenses. Other operating expenses increased $1.7 million, or 5.5%, to $33.8 million in the 2018 quarter compared to the 2017 quarter. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees. We experienced an increase of $585,000 in direct expenses and an increase of $1.2 million in indirect expenses and incentive management fees in the 2018 quarter as compared to the 2017 quarter. Direct expenses were 2.8% of total hotel revenue for the 2018 quarter and 2.5% for the 2017 quarter. The increase in direct expenses is primarily attributable to increases of $45,000 at the Hotel Yountville and $1.6 million at the Ritz-Carlton, Sarasota as a result of their acquisitions on May 11, 2017 and April 4, 2018, respectively. The increase was partially offset by decreases in other operating expenses of $937,000 at Ritz-Carlton, St. Thomas as a result of the hurricanes, $69,000 at our remaining comparable hotel properties and $42,000 from the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales. The increase in indirect expenses is attributable to increases in (i) incentive management fees of $846,000 including $1.2 million at our

37

remaining comparable hotel properties and $233,000 from the acquisitions of Hotel Yountville and Ritz-Carlton, Sarasota, partially offset by decreases of $528,000 from the sales of the Plano Marriott Legacy Town Center and Tampa Renaissance and $91,000 at the Ritz-Carlton, St. Thomas as a result of the hurricanes; (ii) general and administrative costs of $424,000 including $2.1 million at the Hotel Yountville and Ritz-Carlton, Sarasota and $193,000 at our remaining comparable hotel properties, partially offset by a decrease of $982,000 from the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales and $895,000 at Ritz-Carlton, St. Thomas as a result of the hurricanes; and (iii) repairs and maintenance of $71,000 including $756,000 at the Hotel Yountville and Ritz-Carlton, Sarasota and $56,000 at our remaining comparable hotel properties, partially offset by a decrease of $384,000 at the Ritz-Carlton, St. Thomas and $357,000 at the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales. These increases were partially offset by decreases in (i) lease expense of $151,000, comprised of a decrease of $59,000 at the Hotel Yountville and Ritz-Carlton, Sarasota, $20,000 at the Ritz-Carlton, St. Thomas and $83,000 at our remaining comparable hotel properties, partially offset by an increase of $11,000 from the Plano Marriott Legacy Town Center and Tampa Renaissance; and (ii) energy costs of $32,000, comprised of a decrease of $254,000 at the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales, $157,000 at the Ritz-Carlton, St. Thomas, and $68,000 at our remaining comparable hotel properties, partially offset by an increase of $447,000 at the Hotel Yountville and Ritz-Carlton, Sarasota.

Management Fees. Base management fees increased $292,000, or 6.9%, to $4.5 million in the 2018 quarter compared to the 2017 quarter. The increase is comprised of an increase of $510,000 at the Hotel Yountville and Ritz-Carlton, Sarasota and $211,000 at our remaining comparable hotel properties. These increases were partially offset by a decrease of $217,000 at the Ritz-Carlton, St. Thomas as a result of the hurricanes and $212,000 at the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales.

Property Taxes, Insurance and Other. Property taxes, insurance and other increased $707,000, or 13.2%, to $6.1 million in the 2018 quarter compared to the 2017 quarter, which is attributable to increases of $29,000 at the Hotel Yountville and $731,000 at the Ritz-Carlton, Sarasota as a result of their acquisitions in May 2017 and April 2018, respectively, and $540,000 at our remaining comparable hotel properties. These increases were partially offset by a decrease of $475,000 at the Plano Marriott Legacy Town Center and $43,000 at the Tampa Renaissance as a result of their sales in November 2017 and June 2018, respectively, and $75,000 at the Ritz-Carlton, St. Thomas as a result of the hurricanes.

Depreciation and Amortization. Depreciation and amortization increased $1.3 million, or 10.0%, to $14.8 million for the 2018 quarter compared to the 2017 quarter, which is due to an aggregate increase of $2.6 million at the Hotel Yountville and Ritz-Carlton, Sarasota and $1.3 million at our remaining comparable hotel properties, partially offset by a decrease of $1.8 million at the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales and $708,000 at the Ritz-Carlton, St. Thomas as a result of the hurricanes.

Impairment Charges. We recorded impairment charges of $59,000 in the 2018 quarter. The impairment charges are related to damages incurred at the Key West Pier House as a result of changes in the estimates of property damage from the hurricanes.

Advisory Services Fee. Advisory services fee increased $1.7 million, or 55.3%, to $4.9 million in the 2018 quarter compared to the 2017 quarter due to increases in equity-based compensation of $1.0 million, incentive fee of $691,000 and base advisory fee of $37,000. These increases were partially offset by a decrease of $33,000 in reimbursable expenses. In the 2018 period, we recorded an advisory services fee of $4.9 million, which included a base advisory fee of $2.3 million, reimbursable expenses of $499,000, an incentive fee of $691,000 and $1.4 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. In the 2017 period, we recorded an advisory services fee of $3.1 million which included a base advisory fee of $2.3 million, reimbursable expenses of $532,000 and equity-based compensation expense of $335,000 associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc.

Contract Modification Cost. In 2017, we recorded a $5.0 million one-time payment to Ashford LLC upon entering into the Fourth Amended and Restated Advisory Agreement.

Transaction Costs. In the 2018 quarter, we recorded transaction costs of $461,000 primarily related to the acquisition of the Ritz-Carlton, Sarasota. In the 2017 quarter, we recorded transaction costs of $2.1 million primarily related to the acquisitions of the Hotel Yountville and Park Hyatt Beaver Creek.

Corporate General and Administrative. Corporate general and administrative expense decreased $325,000, or 21.2%, to $1.2 million in the 2018 quarter compared to the 2017 quarter as a result of lower public company costs of $152,000 and equity-based compensation to non-employee directors of $227,000, partially offset by higher professional fees of $34,000 and miscellaneous expenses of $20,000.

Equity in Earnings (Loss)of Unconsolidated Entity. We recorded equity in loss of unconsolidated entity of $62,000 in the 2018 quarter related to our investment in OpenKey. We did not have an investment in OpenKey during the 2017 quarter.

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Interest Income. Interest income increased $65,000, or 39.4%, to $230,000 for the 2018 quarter compared to the 2017 quarter.

Gain (loss) on sale of hotel property.In the 2018 quarter, we recorded a gain of $15.7 million related the sale of the Tampa Renaissance on June 1, 2018.

Other Income (Expense). We recorded other expense of $63,000 related to CMBX premiums and usage fees in the 2018 quarter. In the 2017 quarter, we recognized a realized loss of $113,000 related to the maturity of options on futures contracts.

Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs increased $2.7 million, or 27.7%, to $12.7 million for the 2018 quarter compared to the 2017 quarter. The increase is primarily due to new mortgage loans associated with the acquisitions of the Hotel Yountville and Ritz-Carlton, Sarasota as well as a higher average LIBOR rate. The average LIBOR rates for the 2018 quarter and the 2017 quarter were 1.91% and 1.06%, respectively.

Write-off of Loan Costs and Exit Fees. Write-off of loan costs and exit fees was $4.2 million for the 2018 quarter, resulting from the write-off of unamortized loan costs of $1.6 million and exit fees of $2.6 million associated with the refinancing of two mortgage loans. There were no write-off of loan costs and exit fees during the 2017 quarter.

Unrealized Gain (Loss) on Investment in Ashford Inc. Unrealized loss on investment in Ashford Inc. increased $4.5 million, or 285.4%, to $6.0 million in the 2018 quarter. The fair value is based on the closing market price of Ashford Inc. common stock at the end of the period.

Unrealized Gain (Loss) on Derivatives. Unrealized loss on derivatives of $298,000 for the 2018 quarter consisted of a $256,000 unrealized loss on interest rate caps and a $57,000 unrealized loss on interest rate floors, partially offset by a $15,000 unrealized gain on CMBX credit default swaps. Unrealized loss on derivatives of $100,000 for the 2017 period consisted of a $135,000 unrealized loss on interest rate floors and a $61,000 unrealized loss on interest rate caps, partially offset by a $96,000 unrealized gain on options on futures contracts. The fair value of the interest rate caps and floors are primarily based on movements in the LIBOR forward curve and the passage of time. The fair value of options on futures contracts is the last reported settlement price as of the measurement date. The fair value of credit default swaps is based on the change in value of CMBX indices.

Income Tax (Expense) Benefit. Income tax expense increased $723,000, or 150.9%, to $1.2 million for the 2018 quarter. This increase was primarily due to an increase in the profitability of the Company’s taxable REIT subsidiaries in the 2018 quarter compared to the 2017 quarter.

(Income) Loss from Consolidated Entities Attributable to Noncontrolling Interest.Our noncontrolling interest partner in consolidated entities was allocated income of $89,000 and $1.6 million for the 2018 quarter and the 2017 quarter, respectively. At June 30, 2018, noncontrolling interests in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated net income of $1.2 million and net loss of $343,000 for the 2018 quarter and the 2017 quarter, respectively. Redeemable noncontrolling interests in Braemar OP represented ownership interests of 11.17% and 11.71% as of June 30, 2018 and 2017, respectively.

39

Six Months Ended June 30, 2018 Compared to Six Months Ended June 30,2017

The following table summarizes changes in key line items from our condensed consolidated statements of operations for the six months endedJune 30, 2018 and 2017 (in thousands except percentages):

	Six Months Ended June 30,						Favorable (Unfavorable)
	2018			2017			$ Change			% Change
Revenue
Rooms	$	143,946		$	146,867		$	(2,921	)	(2.0	)%
Food and beverage	48,893			52,453			(3,560		)	(6.8	)
Other	30,768			13,991			16,777			119.9
Total hotel revenue	223,607			213,311			10,296			4.8
Other	—			77			(77		)	(100.0	)
Total revenue	223,607			213,388			10,219			4.8
Expenses
Hotel operating expenses:
Rooms	31,570			33,410			1,840			5.5
Food and beverage	32,907			36,124			3,217			8.9
Other expenses	63,432			59,752			(3,680		)	(6.2	)
Management fees	8,118			7,754			(364		)	(4.7	)
Total hotel expenses	136,027			137,040			1,013			0.7
Property taxes, insurance and other	11,681			10,444			(1,237		)	(11.8	)
Depreciation and amortization	27,817			25,440			(2,377		)	(9.3	)
Impairment charges	71			—			(71		)
Advisory services fee	10,124			4,008			(6,116		)	(152.6	)
Contract modification cost	—			5,000			5,000			100.0
Transaction costs	949			6,394			5,445			85.2
Corporate general and administrative	1,234			5,405			4,171			77.2
Total expenses	187,903			193,731			5,828			3.0
Operating income (loss)	35,704			19,657			16,047			81.6
Equity in earnings (loss) of unconsolidated entity	(65		)	—			(65		)
Interest income	430			277			153			55.2
Gain (loss) on sale of hotel property	15,711			—			15,711
Other income (expense)	(126		)	(270		)	144			53.3
Interest expense and amortization of loan costs	(22,857		)	(18,133		)	(4,724		)	(26.1	)
Write-off of loan costs and exit fees	(4,178		)	(1,963		)	(2,215		)	(112.8	)
Unrealized gain (loss) on investment in Ashford Inc.	(5,496		)	1,528			(7,024		)	(459.7	)
Unrealized gain (loss) on derivatives	(225		)	(998		)	773			77.5
Income (loss) before income taxes	18,898			98			18,800			(19,183.7	)
Income tax (expense) benefit	(1,774		)	(1		)	(1,773		)	(177,300.0	)
Net income (loss)	17,124			97			17,027			17,553.6
(Income) loss from consolidated entities attributable to noncontrolling interests	(47		)	(1,593		)	1,546			97.0
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	(1,527		)	598			(2,125		)	(355.4	)
Net income (loss) attributable to the Company	$	15,550		$	(898	)	$	16,448		1,831.6	%

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All hotel properties owned for the six months endedJune 30, 2018 and 2017 have been included in our results of operations during the respective periods in which they were owned. Based on when a hotel property was acquired or disposed of, operating results for certain hotel properties are not comparable for the six months endedJune 30, 2018 and 2017. The hotel properties listed below are not comparable hotel properties for the periods indicated and all other hotel properties are considered comparable hotel properties. The following acquisitions and dispositions affect reporting comparability related to our condensed consolidated financial statements:

Hotel Properties	Location	Acquisition/Disposition	Acquisition/Disposition Date
Park Hyatt Beaver Creek (1)	Beaver Creek, CO	Acquisition	March 31, 2017
Hotel Yountville (1)	Yountville, CA	Acquisition	May 11, 2017
Plano Marriott Legacy Town Center	Plano, TX	Disposition	November 1, 2017
Ritz-Carlton, Sarasota (1)	Sarasota, FL	Acquisition	April 4, 2018
Tampa Renaissance	Tampa, FL	Disposition	June 1, 2018

________

⁽¹⁾  The operating results of these hotel properties have been included in our results of operations as of their acquisition dates.

The following table illustrates the key performance indicators of all hotel properties for the periods indicated:

	Six Months Ended June 30,
	2018			2017
Occupancy	81.87		%	81.35		%
ADR (average daily rate)	$	272.91		$	261.03
RevPAR (revenue per available room)	$	223.45		$	212.35
Rooms revenue (in thousands)	$	143,946		$	146,867
Total hotel revenue (in thousands)	$	223,607		$	213,311

The following table illustrates the key performance indicators of the nine hotel properties that were included for the full six months endedJune 30, 2018 and 2017:

	Six Months Ended June 30,
	2018			2017
Occupancy	83.33		%	83.37		%
ADR (average daily rate)	$	255.51		$	272.56
RevPAR (revenue per available room)	$	212.90		$	227.24
Rooms revenue (in thousands)	$	112,345		$	123,640
Total hotel revenue (in thousands)	$	162,968		$	175,466

Net Income (Loss) Attributable to the Company. Net income (loss) attributable to the Company changed $16.4 million, from a net loss of $898,000 for the six months ended June 30, 2017 (the “2017 period”), to net income of $15.6 million for the six months ended June 30, 2018 (the “2018 period”), as a result of the factors discussed below.

Rooms Revenue. Rooms revenue decreased $2.9 million, or 2.0%, to $143.9 million during the 2018 period compared to the 2017 period. During the 2018 period, we experienced a 4.6%increase in room rates and a 52 basis point increase in occupancy. Rooms revenue at our nine comparable hotel properties decreased $11.3 million due to a decrease in room rates of 6.3% and a 4 basis point decrease in occupancy. Rooms revenue decreased (i) $13.8 million at the Ritz-Carlton, St. Thomas due to the negative impact caused by Hurricanes Irma and Maria. During the 2018 period approximately 82 rooms were in service as the hotel is being renovated; (ii) $10.3 million at the Plano Marriott Legacy Town Center as a result of its sale on November 1, 2017; (iii) $1.0 million at the Tampa Renaissance as a result of its sale on June 1, 2018; (iv) $1.6 million at the Capital Hilton as a result of 1.1% lower room rates and a 540 basis point decrease in occupancy at the hotel due to a renovation during the 2018 period and the presidential inauguration that occurred in the 2017 period; (v) $386,000 at the Key West Pier House as a result of a 377 basis point decrease in occupancy, partially offset by 0.6% higher room rates at the hotel; (vi) $168,000 at the Bardessono Hotel as a result of a 343 basis point decrease in occupancy, partially offset by 1.7% higher room rates at the hotel; and (vii) $95,000 at the Chicago Sofitel Magnificent Mile as a result of a 372 basis point decrease in occupancy, as a result of a renovation, partially offset by 4.1% higher room rates at the hotel. These decreases were partially offset by increases of (i) $9.8 million at the Park Hyatt Beaver Creek

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as a result of its acquisition on March 31, 2017; (ii) $3.6 million at the Hotel Yountville as a result of its acquisition on May 11, 2017; (iii) $6.3 million at the Ritz-Carlton, Sarasota as a result of its acquisition on April 4, 2018; (iv) $2.0 million at the San Francisco Courtyard Downtown as a result of 4.0% higher room rates and a 577 basis point increase in occupancy at the hotel; (iii) $1.8 million at the Philadelphia Courtyard as a result of 7.2% higher room rates and a 506 basis point increase in occupancy at the hotel due to a renovation during the 2017 period; (iv) $643,000 at the Hilton La Jolla Torrey Pines as a result of 1.0% higher room rates and a 346 basis point increase in occupancy at the hotel; and (v) $378,000 at the Seattle Marriott Waterfront as a result of 5.4% higher room rates, partially offset by a 296 basis point decrease in occupancy at the hotel.

Food and Beverage Revenue. Food and beverage revenue decreased $3.6 million, or 6.8%, to $48.9 million during the 2018 period compared to the 2017 period. This overall decrease is due to a decrease of $7.7 million at the Ritz-Carlton, St. Thomas as a result of the hurricanes; $6.6 million at the Plano Marriott Legacy Town Center and $786,000 at the Tampa Renaissance due to their sales on November 1, 2017 and June 1, 2018, respectively, and an aggregate decrease in food and beverage revenue of $2.1 million at the Seattle Marriott Waterfront, Capital Hilton, Key West Pier House, and Bardessono Hotel. These decreases were partially offset by increases of $5.0 million at the Park Hyatt Beaver Creek, $507,000 at the Hotel Yountville and $6.1 million at the Ritz-Carlton, Sarasota due to their acquisitions on March 31, 2017, May 11, 2017 and April 4, 2018, respectively, and an aggregate increase in food and beverage revenue of $2.0 million at the Hilton La Jolla Torrey Pines, Philadelphia Courtyard, Chicago Sofitel Magnificent Mile, and San Francisco Courtyard Downtown.

Other Hotel Revenue. Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking, rentals and business interruption revenue, increased $16.8 million, or 119.9%, to $30.8 million during the 2018 period compared to the 2017 period. During the 2018 period we recognized business interruption revenue of $10.1 million at the Ritz-Carlton, St. Thomas and Key West Pier House and $1.9 million, net of deductibles of $500,000 at the Bardessono Hotel and Hotel Yountville as a result of the Napa wildfires. We also recorded $3.3 million of business interruption income for the Tampa Renaissance related to a settlement for lost profits from the BP Deepwater Horizon oil spill in the Gulf of Mexico in 2010. This increase is also attributable to an increase in other hotel revenue of $3.6 million at the Park Hyatt Beaver Creek, $306,000 at the Hotel Yountville and $2.7 million at the Ritz-Carlton, Sarasota as a result of their acquisitions on March 31, 2017, May 11, 2017 and April 4, 2018, respectively. There was also an aggregate increase of $769,000 at the Chicago Sofitel Magnificent Mile, Key West Pier House, San Francisco Courtyard Downtown, Seattle Marriott Waterfront, Philadelphia Courtyard and Bardessono Hotel. These increases were partially offset by lower other hotel revenue of $530,000 at the Plano Marriott Legacy Town Center and $67,000 at the Tampa Renaissance due to their sales on November 1, 2017 and June 1, 2018, respectively, and an aggregate decrease of $5.4 million at the Ritz-Carlton, St. Thomas, Hilton La Jolla Torrey Pines and Capital Hilton.

Other Non-Hotel Revenue. Other non-hotel revenue decreased $77,000, or 100.0%, to $0 in the 2018 period compared to the 2017 period. The decrease is attributable to the disposition of Plano Marriott Legacy Town Center which included Texas margin tax recoveries from guests in the 2017 period.

Rooms Expense. Rooms expense decreased $1.8 million, or 5.5%, to $31.6 million in the 2018 period compared to the 2017 period. The decrease is attributable to a decrease of $3.7 million at the Ritz-Carlton, St. Thomas as a result of the hurricanes, $1.9 million at the Plano Marriott Legacy Town Center and $276,000 at the Tampa Renaissance due to their sales on November 1, 2017 and June 1, 2018, respectively. There was also an aggregate decrease of $757,000 at the Chicago Sofitel Magnificent Mile, Capital Hilton, Bardessono Hotel and Key West Pier House. This decrease was partially offset by an increase of $1.5 million at the Park Hyatt Beaver Creek, $862,000 at the Hotel Yountville and $1.7 million at the Ritz-Carlton, Sarasota, as a result of their acquisitions on March 31, 2017, May 11, 2017 and April 4, 2018, respectively. There was also an aggregate increase of $838,000 at the San Francisco Courtyard Downtown, Philadelphia Courtyard, Hilton La Jolla Torrey Pines and Seattle Marriott Waterfront

Food and Beverage Expense. Food and beverage expense decreased $3.2 million, or 8.9%, to $32.9 million during the 2018 period compared to the 2017 period. The decrease is attributable to $6.3 million at the Ritz-Carlton, St. Thomas as a result of the hurricanes, $3.2 million at the Plano Marriott Legacy Town Center and $424,000 at the Tampa Renaissance due to their sales on November 1, 2017 and June 1, 2018, respectively, and an aggregate decrease of $825,000 at our remaining comparable hotel properties. These decreases were partially offset by increases of $3.1 million at the Park Hyatt Beaver Creek, $532,000 at the Hotel Yountville and $4.0 million at the Ritz-Carlton, Sarasota as a result of their acquisitions on March 31, 2017, May 11, 2017 and April 4, 2018, respectively.

Other Operating Expenses. Other operating expenses increased $3.7 million, or 6.2%, to $63.4 million in the 2018 period compared to the 2017 period. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments and incentive management fees. We experienced an increase of $1.2 million in direct expenses and $2.4 million in indirect expenses and incentive management fees in the 2018 period compared to the 2017 period. Direct expenses were 2.7% of total hotel revenue for the 2018 period and 2.2% for the 2017 period. The increase in direct expenses is primarily attributable to increases of $1.8 million at the Park Hyatt Beaver Creek, $123,000 at the Hotel Yountville and $1.6 million at the Ritz-Carlton, Sarasota as a result of their acquisitions on March 31, 2017, May 11, 2017 and

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April 4, 2018, respectively. The increase was partially offset by decreases of $1.9 million at the Ritz-Carlton, St. Thomas as a result of the hurricanes, $269,000 at our remaining comparable hotel properties and $67,000 at the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales. The increase in indirect expenses is attributable to increases in (i) incentive management fees of $1.4 million including $1.8 million at the Park Hyatt Beaver Creek, Hotel Yountville and Ritz-Carlton, Sarasota and an aggregate increase of $1.0 million at our remaining comparable hotel properties, partially offset by decreases of $667,000 at the Ritz-Carlton, St. Thomas as a result of the hurricanes and $774,000 from the sales of the Plano Marriott Legacy Town Center and Tampa Renaissance; (ii) energy costs of $399,000, comprised of an increase of $828,000 at the Park Hyatt Beaver Creek, Hotel Yountville and Ritz-Carlton, Sarasota, $40,000 at our remaining comparable hotel properties, partially offset by a decrease of $426,000 from the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales and $43,000 at the Ritz-Carlton, St. Thomas; (iii) general and administrative costs of $383,000, including $3.7 million at the Park Hyatt Beaver Creek, Hotel Yountville and Ritz-Carlton, Sarasota and $272,000 at our remaining comparable hotel properties, partially offset by a decrease of $1.9 million from the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales and $1.6 million at Ritz-Carlton, St. Thomas as a result of the hurricanes; (iv) marketing costs of $232,000, including $1.8 million at the Park Hyatt Beaver Creek, Hotel Yountville and Ritz-Carlton, Sarasota and an aggregate increase of $964,000 at our remaining comparable hotel properties, partially offset by a decrease of $1.4 million at the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales and $1.1 million at the Ritz-Carlton, St. Thomas; and (v) repairs and maintenance of $18,000 including $1.2 million at the Park Hyatt Beaver Creek, Hotel Yountville and Ritz-Carlton, Sarasota and $121,000 at our remaining comparable hotel properties, partially offset by a decrease of $671,000 from the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales and $628,000 at the Ritz-Carlton, St. Thomas.

Management Fees. Base management fees increased $364,000, or 4.7%, to $8.1 million in the 2018 period compared to the 2017 period. The increase is comprised of an increase of $1.1 million at the Park Hyatt Beaver Creek, Hotel Yountville and Ritz-Carlton, Sarasota and $190,000 at our remaining comparable hotel properties. These increases are partially offset by a decrease of $473,000 at the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales and $491,000 at the Ritz-Carlton, St. Thomas as a result of the hurricanes.

Property Taxes, Insurance and Other. Property taxes, insurance and other increased $1.2 million, or 11.8%, to $11.7 million in the 2018 period compared to the 2017 period, which is attributable to increases of $760,000 at the Park Hyatt Beaver Creek, $352,000 at the Hotel Yountville and $731,000 at the Ritz-Carlton, Sarasota as a result of their acquisitions in March 2017, May 2017 and April 2018, respectively, and $360,000 at our remaining comparable hotel properties. These increases were partially offset by a decrease $830,000 at the Plano Marriott Legacy Town Center and $55,000 at the Tampa Renaissance as a result of their sales in November 2017 and June 2018, respectively, and $81,000 at the Ritz-Carlton, St. Thomas as a result of the hurricanes.

Depreciation and Amortization. Depreciation and amortization increased $2.4 million, or 9.3%, to $27.8 million for the 2018 period compared to the 2017 period due to an aggregate increase of $4.1 million at the Park Hyatt Beaver Creek, Hotel Yountville and Ritz-Carlton, Sarasota and $2.6 million at our remaining comparable hotel properties, partially offset by a decrease of $3.0 million at the Plano Marriott Legacy Town Center and Tampa Renaissance as a result of their sales and $1.3 million at the Ritz-Carlton, St. Thomas as a result of the hurricanes.

Impairment Charges. In the 2018 period we recorded an impairment charge of $59,000 at the Key West Pier House and $12,000 at the Tampa Renaissance as a result of changes in the estimates of property damage from the hurricanes.

Advisory Services Fee. Advisory services fee increased $6.1 million, or 152.6%, to $10.1 million in the 2018 period compared to the 2017 period due to increases in equity-based compensation of $5.3 million, incentive fee of $861,000 and base advisory fee of $141,000. These increases were partially offset by a decrease of $160,000 in reimbursable expenses. In the 2018 period, we recorded an advisory services fee of $10.1 million, which included a base advisory fee of $4.4 million, reimbursable expenses of $919,000, an incentive fee of $861,000 and $3.9 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. During the six months ended June 30, 2018, approximately $2.2 million of the equity-based compensation expense was related to the accelerated vesting of equity awards granted to one of our executive officers upon his passing, in accordance with the terms of the awards. In the 2017 period, we recorded an advisory services fee of $4.0 million which included a base advisory fee of $4.3 million, reimbursable expenses of $1.1 million and a credit to equity-based compensation expense in the amount of $1.4 million associated with equity grants of our common stock and LTIP units awarded to the officers and employees of Ashford Inc. The credit to equity-based compensation expense is a result of lower fair values at June 30, 2017 as compared to December 31, 2016.

Contract Modification Cost. In the 2017 period, we recorded a $5.0 million one-time payment to Ashford LLC upon entering into the Fourth Amended and Restated Advisory Agreement.

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Transaction Costs. In the 2018 period, we recorded transaction costs of $949,000 primarily related to the acquisition of Ritz-Carlton, Sarasota. In the 2017 period, we recorded transaction costs of $6.4 million related to the acquisitions of Park Hyatt Beaver Creek and the Hotel Yountville.

Corporate General and Administrative. Corporate general and administrative expenses decreased $4.2 million, or 77.2%, to $1.2 million in the 2018 period compared to the 2017 period. In the 2017 period we incurred professional fees associated with the proxy contest and litigation of $2.0 million. In the 2018 period we recorded insurance recoveries related to the proxy contest and litigation of $1.2 million. This resulted in a decrease in professional fees associated with the proxy contest and litigation of $3.2 million in the 2018 period compared to the 2017 period. We also incurred lower other professional fees of $322,000, miscellaneous expenses of $281,000, public company costs of $172,000 and equity-based compensation to non-employee directors of $245,000 in the 2018 period compared to the 2017 period.

Equity in Earnings (Loss)of Unconsolidated Entity. We recorded equity in loss of unconsolidated entity of $65,000 in the 2018 period related to our investment in OpenKey. We did not have an investment in OpenKey during the 2017 period.

Interest Income. Interest income increased $153,000, or 55.2%, to $430,000 for the 2018 period compared to the 2017 period.

Gain (loss) on sale of hotel property.In the 2018 period, we recorded a gain of $15.7 million related the sale of the Tampa Renaissance on June 1, 2018.

Other Income (Expense). Other expense decreased $144,000 from $270,000 to $126,000 in the 2018 period compared to the 2017 period. In the 2018 period, we recorded other expense of $126,000 related to CMBX premiums and usage fees. In the 2017 period, we recognized a realized loss of $270,000 related to options on futures contracts.

Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs increased $4.7 million, or 26.1%, to $22.9 million for the 2018 period compared to the 2017 period. The increase is primarily due to new mortgage loans associated with the acquisitions of the Park Hyatt Beaver Creek, Hotel Yountville and Ritz-Carlton, Sarasota as well as a higher average LIBOR rate. The average LIBOR rates for the 2018 period and the 2017 period were 1.78% and 0.94%, respectively.

Write-off of Loan Costs and Exit Fees. Write-off of loan costs and exit fees were $4.2 million for the 2018 period, resulting from the write-off of unamortized loan costs of $1.6 million and exit fees of $2.6 million associated with the refinancing of two mortgage loans. Write-off of loan costs and exit fees were $2.0 million for the 2017 period, resulting from the write-off of unamortized loan costs of $107,000 and exit fees of $1.9 million associated with the refinancing of three mortgage loans.

Unrealized Gain (Loss) on Investment in Ashford Inc. Unrealized gain (loss) on investment in Ashford Inc. changed $7.0 million, or 459.7%, from an unrealized gain of $1.5 million in the 2017 period to an unrealized loss of $5.5 million in the 2018 period. The fair value is based on the closing market price of Ashford Inc. common stock at the end of the period.

Unrealized Gain (Loss) on Derivatives. Unrealized loss on derivatives of $225,000 for the 2018 period consisted of a $261,000 unrealized loss on interest rate caps and a $84,000 unrealized loss on interest rate floors, partially offset by a $120,000 unrealized gain on CMBX credit default swaps. Unrealized loss on derivatives of $998,000 for the 2017 period consisted of a $894,000 unrealized loss on interest rate floors and a $317,000 unrealized loss on interest rate caps, partially offset by a $213,000 unrealized gain on options on futures contracts. The fair value of the interest rate caps and floors is primarily based on movements in the LIBOR forward curve and the passage of time. The fair value of options on futures contracts is primarily based on the last reported settlement price as of the measurement date. The fair value of credit default swaps is based on the change in value of CMBX indices.

Income Tax (Expense) Benefit. Income tax expense increased $1.8 million, from $1,000 for the 2017 period to $1.8 million for the 2018 period. This change was primarily due to an increase in the profitability of our TRSs in the 2018 period compared to the 2017 period.

(Income) Loss from Consolidated Entities Attributable to Noncontrolling Interest. Our noncontrolling interest partner in consolidated entities was allocated income of $47,000 and $1.6 million for the 2018 period and the 2017 period, respectively. At both June 30, 2018 and 2017, noncontrolling interest in consolidated entities represented an ownership interest of 25% in two hotel properties held by one entity.

Net (Income) Loss Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Noncontrolling interests in operating partnership were allocated net income of $1.5 million and net loss $598,000 for the 2018 period and the 2017 period, respectively. Redeemable noncontrolling interests represented ownership interests in Braemar OP of approximately 11.17% and 11.71% as of June 30, 2018 and 2017, respectively.

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LIQUIDITY AND CAPITAL RESOURCES

Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including:

• advisory fees payable to Ashford LLC;

• recurring maintenance necessary to maintain our hotel properties in accordance with brand standards;

• interest expense and scheduled principal payments on outstanding indebtedness, including our secured revolving credit facility (see “Contractual Obligations and Commitments”);

• distributions, in the form of dividends on our capital stock, necessary to qualify for taxation as a REIT; and

• capital expenditures to improve our hotel properties.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations, existing cash balances and, if necessary, short-term borrowings under our secured revolving credit facility.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotel properties and redevelopments, renovations, expansions and other capital expenditures that need to be made periodically with respect to our hotel properties and scheduled debt payments. We expect to meet our long-term liquidity requirements through various sources of capital, including our secured revolving credit facility and future equity and preferred equity issuances, existing working capital, net cash provided by operations, proceeds from insurance claims, hotel mortgage indebtedness and other secured and unsecured borrowings. However, there are a number of factors that may have a material adverse effect on our ability to access these capital sources, including the state of overall equity and credit markets, our degree of leverage, our unencumbered asset base and borrowing restrictions imposed by lenders (including as a result of any failure to comply with financial covenants in our existing and future indebtedness), general market conditions for REITs, our operating performance and liquidity and market perceptions about us. The success of our business strategy will depend, in part, on our ability to access these various capital sources.

Our hotel properties will require periodic capital expenditures and renovation to remain competitive. In addition, acquisitions, redevelopments or expansions of hotel properties may require significant capital outlays. We may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains. As a result, our ability to fund capital expenditures, acquisitions or hotel redevelopment through retained earnings is very limited. Consequently, we expect to rely heavily upon the availability of debt or equity capital for these purposes. If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations and prospects could be materially and adversely affected.

Certain of our loan agreements contain cash trap provisions that may be triggered if the performance of our hotel properties decline. When these provisions are triggered, substantially all of the profit generated by the hotel properties securing such loan is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders. This could affect our liquidity and our ability to make distributions to our stockholders until such time that a cash trap is no longer in effect for such loan.

On December 5, 2017, our board of directors reapproved the stock repurchase program pursuant to which the Board granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share having an aggregate value of up to $50 million. The Board’s authorization replaced any previous repurchase authorizations. No shares were repurchased during the three and six months ended June 30, 2018, pursuant to this authorization.

On December 11, 2017, we entered into equity distribution agreements with Morgan Stanley & Co. LLC and UBS Securities LLC, each acting as a sales agent (the “Equity Distribution Agreements”). Pursuant to the Equity Distribution Agreements, we may sell from time to time through the sales agents shares of our common stock having an aggregate offering price of up to $50.0 million. Sales of shares of our common stock, if any, may be made in negotiated transactions or transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 of the Securities Act, including sales made directly on the New York Stock Exchange, the existing trading market for our common stock, or sales made to or through a market maker other than on an exchange or through an electronic communications network. We will pay each of the sales agents a commission, which in each case shall not be more than 2.0% of the gross sales price of the shares of our common stock sold through such sales agent. As of June 30, 2018, no shares of our common stock have been sold under this program.

On April 4, 2018, in connection with the acquisition of the 266-room Ritz-Carlton, Sarasota in Sarasota, Florida, the Company completed the financing of a $100 million mortgage loan. This mortgage loan provides for a floating interest rate of LIBOR + 2.65%. The mortgage loan is interest only until July 1, 2021 and then amortizes 1% annually for the remaining term. The stated maturity is April 2023.

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On May 23, 2018, the Company refinanced two mortgage loans totaling $357.6 million with a new $435.0 million mortgage loan with a two-year initial term and five one-year extension options subject to the satisfaction of certain conditions. As a result of the refinance the Tampa Renaissance became unencumbered. The new mortgage loan is interest only and bears interest at a rate of LIBOR + 2.16%. The loan is secured by four hotels: Seattle Marriott Waterfront, San Francisco Courtyard Downtown, Philadelphia Courtyard Downtown and Sofitel Chicago Magnificent Mile.

Secured Revolving Credit Facility

We have a three-year, senior secured revolving credit facility in the amount of $100 million. It includes $15 million available in letters of credit and $15 million available in swingline loans. We believe the secured revolving credit facility will provide us with significant financial flexibility to fund future acquisitions and hotel redevelopments.

The secured revolving credit facility is provided by a syndicate of financial institutions with Bank of America, N.A., serving as the administrative agent to Braemar OP, as the borrower. We and certain of our subsidiaries guarantee the secured revolving credit facility, which is secured by a pledge of 100% of the equity interests we hold in Braemar OP and 100% of the equity interest issued by any guarantor (other than Braemar) or any other subsidiary of ours that is not restricted under its loan documents or organizational documents from having its equity pledged (subject to certain exclusions), all mortgage receivables held by the borrower or any guarantor, and certain deposit accounts and securities accounts held by the borrower and any guarantor. The proceeds of the secured revolving credit facility may be used for working capital, capital expenditures, property acquisitions, and any other lawful purposes.

The secured revolving credit facility also contains customary terms, covenants, negative covenants, events of default, limitations and other conditions for credit facilities of this type. Subject to certain exceptions, we are subject to restrictions on incurring additional indebtedness, mergers and fundamental changes, sales or other dispositions of property, changes in the nature of our business, investments and capital expenditures.

We also are subject to certain financial covenants, as set forth below, which are tested by the borrower on a consolidated basis (net of the amounts attributable to the non-controlling interest held by our partner in a majority-owned consolidated entity) and include, but are not limited to, the following:

• Consolidated indebtedness (less cash and cash equivalents in excess of $10,000,000) to total asset value (based on property capitalization rates defined within the secured revolving credit facility agreement) not to exceed 60%. Our ratio was 49.9% at June 30, 2018.

• Consolidated recourse indebtedness other than the secured revolving credit facility not to exceed $50,000,000.

• Consolidated fixed charge coverage ratio not less than 1.40x initially, with such ratio being increased beginning October 1, 2017 to 1.50x. Our ratio was 2.12x at June 30, 2018.

• Indebtedness of the consolidated parties that accrues interest at a variable rate (other than the secured revolving credit facility) that is not subject to a “cap,” “collar,” or other similar arrangement not to exceed 25% of consolidated indebtedness.

• Consolidated tangible net worth not less than 75% of the consolidated tangible net worth on the closing date of the secured revolving credit facility plus 75% of the net proceeds of any future equity issuances.

• Secured debt that is secured by real property not to exceed 70% of the as-is appraised value of such real property.

All financial covenants are tested and certified by the borrower on a quarterly basis. We were in compliance with all covenants at June 30, 2018.

The secured revolving credit facility includes customary events of default and the occurrence of an event of default will permit the lenders to terminate commitments to lend under the secured revolving credit facility and accelerate payment of all amounts outstanding thereunder. If a default occurs and is continuing, we will be precluded from making distributions on our shares of common stock (other than those required to allow us to qualify and maintain our status as a REIT, so long as such default does not arise from a payment default or event of insolvency).

Borrowings under the secured revolving credit facility bear interest, at our option, at either LIBOR for a designated interest period plus an applicable margin, or the base rate (as defined in the credit agreement) plus an applicable margin. The applicable margin for borrowings under the secured revolving credit facility for base rate loans range from 1.25% to 2.50% per annum and the applicable margin for borrowings under the secured revolving credit facility for LIBOR loans range from 2.25% to 3.50% per annum, depending on the ratio of consolidated indebtedness to EBITDA, with the lowest rate applying if such ratio is less than 4.0x and the highest rate applying if such ratio is greater than 6.0x.

The secured revolving credit facility is a three-year interest-only facility with all outstanding principal being due at maturity on November 10, 2019, subject to two one-year extension options if certain terms and conditions are satisfied and a 0.25% extension

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fee. The secured revolving credit facility has an accordion feature whereby the aggregate commitments may be increased up to $250 million, subject to certain terms.

We intend to repay any indebtedness incurred under our secured revolving credit facility from time to time out of net cash provided by operations and from the net proceeds of issuances of additional equity and debt securities or sale of assets, as market conditions permit.

Sources and Uses of Cash

We had approximately $169.2 million and $137.5 million of cash and cash equivalents at June 30, 2018 and December 31, 2017, respectively.

We anticipate that our principal sources of funds to meet our cash requirements will include cash on hand, positive cash flow from operations and capital market activities.

Net Cash Flows Provided by (Used in) Operating Activities. Net cash flows provided by operating activities were $38.7 million and $30.6 million for the six months endedJune 30, 2018 and 2017, respectively. Cash flows from operations are impacted by changes in hotel operations of our nine comparable hotel properties, the sale of the Plano Marriott Legacy Town Center on November 1, 2017 and the Tampa Renaissance on June 1, 2018 as well as the acquisitions of the Park Hyatt Beaver Creek on March 31, 2017, Hotel Yountville on May 11, 2017, and Ritz-Carlton, Sarasota on April 4, 2018. Cash flows from operations are also impacted by the timing of working capital cash flows such as collecting receivables from hotel guests, paying vendors, settling with derivative counterparties, settling with related parties and settling with hotel managers.

Net Cash Flows Provided by (Used in) Investing Activities. For the six months endedJune 30, 2018, net cash flows used in investing activities were $122.3 million. These cash outflows were primarily attributable to $177.9 million for the acquisition of the Ritz-Carlton, Sarasota, $32.4 million of capital improvements made to various hotel properties and a $2.0 million investment in OpenKey, partially offset by $65.3 million of proceeds from the sale of the Tampa Renaissance and $24.7 million of insurance proceeds received related to the hurricanes. For the six months endedJune 30, 2017, net cash flows used in investing activities were $263.1 million. These cash outflows were primarily attributable to $243.7 million for the acquisitions of the Park Hyatt Beaver Creek and Hotel Yountville and $21.7 million of capital improvements made to various hotel properties, partially offset by $2.3 million of proceeds received from the liquidation of our investment in the AQUA U.S. Fund. 

Net Cash Flows Provided by (Used in) Financing Activities. For the six months endedJune 30, 2018, net cash flows provided by financing activities were $150.6 million. Cash inflows primarily consisted of borrowings on indebtedness of $575.0 million partially offset by $399.3 million for repayments of indebtedness, $15.1 million for payments of dividends and distributions and $9.4 million for payments of loan costs and exit fees. For the six months endedJune 30, 2017, net cash flows provided by financing activities were $232.3 million. Cash inflows primarily consisted of borrowings on indebtedness of $483.5 million, proceeds of $66.5 million from the issuance of common stock and $40.2 million from the issuance of convertible preferred stock. These cash inflows were partially offset by $335.5 million for repayments of indebtedness, $12.1 million for payments of dividends and distributions and $9.8 million for payments of loan costs and exit fees.

47

Seasonality

Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the summer months and some during the winter months. This seasonality pattern can cause fluctuations in our quarterly lease revenue under our percentage leases. We anticipate that our cash flows from the operations of our properties and cash on hand will be sufficient to enable us to make quarterly distributions to maintain our REIT status. To the extent that cash flows from operations and cash on hand are insufficient during any quarter due to temporary or seasonal fluctuations in lease revenue, we expect to utilize borrowings to fund distributions required to maintain our REIT status. However, we cannot make any assurances that we will make distributions in the future.

Contractual Obligations and Commitments

There have been no material changes since December 31, 2017, outside of the ordinary course of business, to contractual obligations specified in the table of contractual obligations included in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2017 10-K.

Off-Balance Sheet Arrangements

In the normal course of business, we may form or invest in partnerships or joint ventures. We evaluate each partnership and joint venture to determine whether the entity is a variable interest entity (“VIE”). If the entity is determined to be a VIE we assess whether we are the primary beneficiary and need to consolidate the entity. For further discussion see note 2 to our condensed consolidated financial statements.

We have no other off-balance sheet arrangements.

Critical Accounting Policies

Our accounting policies that are critical or most important to understanding our financial condition and results of operations and that require management to make the most difficult judgments are described in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2017 10-K. There have been no material changes in these critical accounting policies.

Non-GAAP Financial Measures

The following non-GAAP presentations of EBITDA, EBITDAre, Adjusted EBITDAre, FFO and AFFO are presented to help our investors evaluate our operating performance.

EBITDA is defined as net income (loss) before interest expense and amortization of loan costs, interest income, depreciation and amortization, income taxes, equity in (earnings) loss of unconsolidated entity and Company’s portion of EBITDA of OpenKey. In addition, we excluded impairment on real estate, (gain) loss on sale of hotel property and Company’s portion of EBITDAre of OpenKey from EBITDA to calculate EBITDAre.

We then further adjust EBITDAre to exclude certain additional items such as amortization of favorable (unfavorable) contract assets (liabilities), transaction and management conversion costs, write-off of loan costs and exit fees, legal, advisory and settlement costs, contract modification cost, software implementation costs, uninsured hurricane and wildfire related costs, other/income expense, Company’s portion of adjustments to EBITDAre of OpenKey and non-cash items such as unrealized gain/loss on investments, unrealized gain/ loss on derivatives and stock/unit-based compensation.

We present EBITDA, EBITDAre and Adjusted EBITDAre because we believe they reflect more accurately the ongoing performance of our hotel assets and other investments and provide more useful information to investors as they are indicators of our ability to meet our future debt payment requirements, working capital requirements and they provide an overall evaluation of our financial condition. EBITDA, EBITDAre and Adjusted EBITDAre as calculated by us may not be comparable to EBITDA, EBITDAre and Adjusted EBITDAre reported by other companies that do not define EBITDA, EBITDAre and Adjusted EBITDAre exactly as we define the terms. EBITDA, EBITDAre and Adjusted EBITDAre do not represent cash generated from operating activities determined in accordance with GAAP, and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as determined by GAAP as an indicator of liquidity.

Beginning on January 1, 2018, we began reporting EBITDA for real estate, or EBITDAre, as defined by NAREIT, and Adjusted EBITDAre. Previously, we reported Adjusted EBITDA. Adjusted EBITDAre is calculated in a similar manner as Adjusted EBITDA, with the exception of the adjustment for the consolidated noncontrolling interest’s pro rata share of Adjusted EBITDA. The rationale for including 100% of EBITDAre for consolidated noncontrolling interests is that the full amount of any debt of these entities is

48

reported in our consolidated balance sheet and therefore metrics using total debt to EBITDAre provide a better understanding of the Company’s leverage. This is also consistent with NAREIT’s definition of EBITDAre. All prior periods have been adjusted to conform to the current period presentation.

The following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands) (unaudited):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income (loss)	$	12,854		$	386		$	17,124		$	97
Interest income	(230		)	(165		)	(430		)	(277		)
Interest expense and amortization of loan costs	12,678			9,931			22,857			18,133
Depreciation and amortization	14,811			13,469			27,817			25,440
Income tax expense (benefit)	1,202			479			1,774			1
Equity in (earnings) loss of unconsolidated entity	62			—			65			—
Company’s portion of EBITDA of OpenKey	(62		)	—			(64		)	—
EBITDA	41,315			24,100			69,143			43,394
Impairment charges on real estate	59			—			71			—
(Gain) loss on sale of hotel property	(15,711		)	—			(15,711		)	—
EBITDAre	25,663			24,100			53,503			43,394
Amortization of favorable (unfavorable) contract assets (liabilities)	49			44			92			93
Transaction and management conversion costs	462			2,112			965			6,440
Other (income) expense	63			113			126			270
Write-off of loan costs and exit fees	4,176			—			4,178			1,963
Unrealized (gain) loss on investment in Ashford Inc.	6,024			1,563			5,496			(1,528		)
Unrealized (gain) loss on derivatives	298			100			225			998
Non-cash stock/unit-based compensation	1,442			597			4,035			(1,071		)
Legal, advisory and settlement costs	197			3			(944		)	2,948
Contract modification cost	—			5,000			—			5,000
Software implementation costs	—			79			—			79
Uninsured hurricane and wildfire related costs	(55		)	—			412			—
Company’s portion of adjustments to EBITDAre of OpenKey	2			—			2			—
Adjusted EBITDAre	$	38,321		$	33,711		$	68,090		$	58,586

49

We calculate FFO and AFFO in the following table. FFO is calculated on the basis defined by NAREIT, which is net income (loss) attributable to the Company, computed in accordance with GAAP, excluding gains or losses on sales of hotel properties and extraordinary items as defined by GAAP, plus impairment charges on real estate, depreciation and amortization of real estate assets, and after redeemable noncontrolling interests in the operating partnership. NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP. Our calculation of AFFO excludes preferred dividends, transaction and management conversion costs, write-off of loan costs and exit fees, legal, advisory and settlement costs, contract modification cost, software implementation costs, uninsured hurricane and wildfire related costs, other income/expense and non-cash items such as unrealized gain/loss on investments, unrealized gain/loss on derivatives, stock/unit-based compensation and the Company’s portion of adjustments to FFO of OpenKey. FFO and AFFO exclude amounts attributable to the portion of a partnership owned by the third party. We consider FFO and AFFO to be appropriate measures of our ongoing normalized operating performance as a REIT. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that either do not define the term in accordance with the current NAREIT definition or interpret the NAREIT definition differently than us. FFO and AFFO do not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to GAAP net income or loss as an indication of our financial performance or GAAP cash flows from operating activities as a measure of our liquidity. FFO and AFFO are also not indicative of funds available to satisfy our cash needs, including our ability to make cash distributions. However, to facilitate a clear understanding of our historical operating results, we believe that FFO and AFFO should be considered along with our net income or loss and cash flows reported in our condensed consolidated financial statements.

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The following table reconciles net income (loss) to FFO and Adjusted FFO (in thousands) (unaudited):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income (loss)	$	12,854		$	386		$	17,124		$	97
(Income) loss from consolidated entities attributable to noncontrolling interest	(89		)	(1,614		)	(47		)	(1,593		)
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	(1,235		)	343			(1,527		)	598
Preferred dividends	(1,708		)	(1,707		)	(3,415		)	(3,380		)
Net income (loss) attributable to common stockholders	9,822			(2,592		)	12,135			(4,278		)
Depreciation and amortization on real estate (1)	14,052			12,752			26,310			24,003
Impairment charges on real estate	59			—			71			—
Net income (loss) attributable to redeemable noncontrolling interests in operating partnership	1,235			(343		)	1,527			(598		)
Equity in (earnings) loss of unconsolidated entity	62			—			65			—
(Gain) loss on sale of hotel property	(15,711		)	—			(15,711		)	—
Company’s portion of FFO of OpenKey	(63		)	—			(65		)	—
FFO available to common stockholders and OP unitholders	9,456			9,817			24,332			19,127
Preferred dividends	1,708			1,707			3,415			3,380
Transaction and management conversion costs	462			2,112			965			6,440
Other (income) expense	63			113			126			270
Interest expense accretion on refundable membership club deposits	150			—			150			—
Write-off of loan costs and exit fees	4,176			—			4,178			1,963
Unrealized (gain) loss on investments	6,024			1,563			5,496			(1,528		)
Unrealized (gain) loss on derivatives	298			100			225			998
Non-cash stock/unit-based compensation	1,442			597			4,035			(1,071		)
Legal, advisory and settlement costs	197			3			(944		)	2,948
Contract modification cost	—			5,000			—			5,000
Software implementation costs	—			79			—			79
Uninsured hurricane and wildfire related costs	(55		)	—			412			—
Company’s portion of adjustments to FFO of OpenKey	2			—			2			—
Adjusted FFO available to the Company and OP unitholders	$	23,923		$	21,091		$	42,392		$	37,606

____________________

⁽¹⁾  Net of adjustment for noncontrolling interest in consolidated entities. The following table presents the amounts of the adjustments for non-controlling interest for each line item:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Depreciation and amortization on real estate	$	(759	)	$	(717	)	$	(1,507	)	$	(1,437	)

51

Hotel Properties

The following table presents certain information related to our hotel properties:

Hotel Property	Location	Service Type	Total Rooms	% Owned		Owned Rooms
Fee Simple Properties
Hilton	Washington, D.C.	Full	550	75	%	413
Marriott	Seattle, WA	Full	361	100		361
Courtyard by Marriott (1)	Philadelphia, PA	Select	499	100		499
Courtyard by Marriott (1)	San Francisco, CA	Select	410	100		410
Chicago Sofitel Magnificent Mile	Chicago, IL	Full	415	100		415
Pier House Resort	Key West, FL	Full	142	100		142
Ritz-Carlton, St. Thomas (2)	St. Thomas, USVI	Full	180	100		180
Park Hyatt Beaver Creek	Beaver Creek, CO	Full	190	100		190
Hotel Yountville	Yountville, CA	Full	80	100		80
Ritz-Carlton, Sarasota (3)	Sarasota, FL	Full	266	100		266
Ground Lease Properties
Hilton (3)	La Jolla, CA	Full	394	75	%	296
Bardessono Hotel (4)	Yountville, CA	Full	62	100		62
Total			3,549			3,314

________

⁽¹⁾  Announced plans to convert to Autograph Collection. These hotel properties will be full service upon conversion.

⁽²⁾  Due to the impact from hurricanes Irma and Maria the Ritz-Carlton, St. Thomas total rooms count was approximately 82 during the six months ended June 30, 2018. The hotel had 180 total rooms in service prior to the hurricanes.

⁽³⁾  The ground lease expires in 2067.

⁽⁴⁾  The initial ground lease expires in 2055. The ground lease contains two 25-year extension options, at our election.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Our primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments that bear interest at variable rates that fluctuate with market interest rates. To the extent that we acquire assets or conduct operations in an international jurisdiction, we will also have currency exchange risk. We may enter into certain hedging arrangements in order to manage interest rate and currency fluctuations. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates.

At June 30, 2018, our total indebtedness of $993.8 million was comprised of 100% variable-rate debt. The impact on the results of operations of a 25-basis point change in the interest rate on the outstanding balance of variable-rate debt at June 30, 2018, would be approximately $2.5 million per year.

The above amounts were determined based on the impact of hypothetical interest rates on our borrowings and assume no changes in our capital structure. The information presented above includes those exposures that existed at June 30, 2018, but it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on exposures that arise during the period, the hedging strategies at the time, and the related interest rates.

We use credit default swaps, tied to the CMBX index, to hedge financial and capital market risk. We have entered into credit default swap transactions with notional amounts totaling $50.0 million to hedge financial and capital market risk for upfront costs of $888,000, of which $269,000 has since been returned to us, and $619,000 remains held as collateral as of June 30, 2018. A credit default swap is a derivative contract that functions like an insurance policy against the credit risk of an entity or obligation. The seller of protection assumes the credit risk of the reference obligation from the buyer (us) of protection in exchange for annual premium payments. If a default or a loss, as defined in the credit default swap agreements, occurs on the underlying bonds, then the buyer of protection is protected against those losses. The only liability for us, the buyer, is the annual premium and any change in value of the underlying CMBX index (if the trade is terminated prior to maturity). For all CMBX trades completed to date, we were the buyer of protection. Credit default swaps are subject to master-netting settlement arrangements and credit support annexes. Assuming the underlying bonds pay off at par over their remaining average life, our estimated total exposure for these trades was approximately $2.3 million at June 30, 2018.

52

We hold interest rate floors with notional amounts totaling $6.9 billion and strike rates ranging from -0.25% to 1.50%. Our total exposure is capped at our initial total cost of $3.7 million. These instruments have termination dates ranging from March 2019 to July 2020.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2018 (“Evaluation Date”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms; and (ii) is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are engaged in various legal proceedings which have arisen but have not been fully adjudicated. The likelihood of loss from these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible and to probable. Based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position or results of operations. However, the final results of legal proceedings cannot be predicted with certainty and if we fail to prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position or results of operations could be materially adversely affected in future periods.

ITEM 1A. RISK FACTORS

The discussion of our business and operations should be read together with the risk factors contained in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the Securities and Exchange Commission, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner. As of June 30, 2018, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2017.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

On December 5, 2017, our board of directors reapproved the stock repurchase program pursuant to which the Board granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share having an aggregate value of up to $50 million. The Board’s authorization replaced any previous repurchase authorizations. No shares were repurchased during the three and six months ended June 30, 2018, pursuant to this authorization.

53

The following table provides the information with respect to purchases and forfeitures of our common stock during each of the months in the second quarter of 2018:

Period	Total Number of Shares Purchased	Average Price Paid Per Share			Total Number of Shares Purchased as Part of a Publicly Announced Plan	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plan
Common stock:
April 1 to April 30	14,316	$	10.46	(1)	—	$	50,000,000
May 1 to May 31	1,448	$	—	(1)	—	$	50,000,000
June 1 to June 30	—	$	—		—	$	50,000,000
Total	15,764	$	10.46		—

__________________

⁽¹⁾  There is no cost associated with the forfeiture of 1,910 and 1,448 restricted shares of our common stock in April and May, respectively.

54

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

55

ITEM 6. EXHIBITS

Exhibit	Description
3.1	Articles of Amendment and Restatement of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 29, 2016)
3.2	Articles Supplementary of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on May 18, 2015)
3.3	Articles of Amendment of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on April 29, 2016)
3.4	Amendment Number One to the Articles of Amendment and Restatement of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on December 8, 2017)
3.5	Amendment Number Two to Articles of Amendment and Restatement of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 23, 2018)
3.6	Articles Supplementary for 5.50% Series A Cumulative Convertible Preferred Stock of Braemar Hotels & Resorts Inc., as amended by a Certificate of Correction, as filed with the State Department of Assessments and Taxation Maryland on June 11, 2015 (incorporated by reference to Exhibit 3.4 to the Current Report on Form 8-K filed on April 29, 2016)
3.7	Articles Supplementary for 5.50% Series B Cumulative Convertible Preferred Stock of Braemar Hotels & Resorts Inc., accepted for record and certified by the Maryland State Department of Assessments and Taxation on December 4, 2015 (incorporated by reference to Exhibit 3.5 to the Current Report on Form 8-K filed on April 29, 2016)
3.8	Articles Supplementary for the Series C Preferred Stock of Braemar Hotels & Resorts Inc., as filed with the State Department of Assessments and Taxation of Maryland on February 1, 2016 (incorporated by reference to Exhibit 3.6 to the Current Report on Form 8-K filed on April 29, 2016)
3.9	Articles Supplementary Establishing Additional Shares of Series B Preferred Stock of Braemar Hotels & Resorts Inc., accepted for record and certified by the Maryland State Department of Assessments and Taxation on April 27, 2016 (incorporated by reference to Exhibit 3.7 to the Current Report on Form 8-K filed on April 29, 2016)
3.10	Articles Supplementary Establishing Additional Shares of Series B Preferred Stock of Braemar Hotels & Resorts Inc., accepted for record and certified by the Maryland State Department of Assessments and Taxation on March 3, 2017. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on March 7, 2017)
3.11	Third Amended and Restated Bylaws of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.11 to the Quarterly Report on Form 10-Q filed on May 9, 2018)
10.1	Fifth Amended and Restated Advisory Agreement of Braemar Hotels & Resorts Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 23, 2018)
12*	Statement Regarding Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends
31.1*	Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended
31.2*	Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 are formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements Comprehensive Income; (iii) Consolidated Statement of Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to the Consolidated Financial Statements. In accordance with Rule 402 of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933, as amended or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
101.INS	XBRL Instance Document	Submitted electronically with this report.
101.SCH	XBRL Taxonomy Extension Schema Document	Submitted electronically with this report.
101.CAL	XBRL Taxonomy Calculation Linkbase Document	Submitted electronically with this report.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Submitted electronically with this report.
101.LAB	XBRL Taxonomy Label Linkbase Document	Submitted electronically with this report.
101.PRE	XBRL Taxonomy Presentation Linkbase Document	Submitted electronically with this report.

___________________________________

* Filed herewith.

56

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BRAEMAR HOTELS & RESORTS INC.

Date:	August 9, 2018	By:	/s/ RICHARD J. STOCKTON
			Richard J. Stockton
			President and Chief Executive Officer
Date:	August 9, 2018	By:	/s/ DERIC S. EUBANKS
			Deric S. Eubanks
			Chief Financial Officer

57

EX-12

EXHIBIT 12

BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIES

STATEMENT REGARDING COMPUTATION OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

(dollars in thousands)

	Six Months Ended		Year Ended December 31,
	June 30, 2018		2017		2016		2015			2014		2013
Earnings
Income (loss) from continuing operations before provision for income taxes and noncontrolling interests	$	18,898	$	27,802	$	25,894	$	(4,428	)	$	4,635	$	(15,585	)
Amount recorded for equity in (earnings) loss of unconsolidated entity	65		—		2,587		2,927			—		—
Add:
Interest on indebtedness	20,794		34,034		37,712		35,254			37,203		32,266
Amortization of loan costs	2,063		4,903		3,169		2,575			1,828		745
Interest component of operating leases	224		442		431		353			264		227
	$	42,044	$	67,181	$	69,793	$	36,681		$	43,930	$	17,653
Fixed charges
Interest on indebtedness	$	20,794	$	34,034	$	37,712	$	35,254		$	37,203	$	32,266
Amortization of loan costs	2,063		4,903		3,169		2,575			1,828		745
Interest component of operating leases	224		442		431		353			264		227
	$	23,081	$	39,379	$	41,312	$	38,182		$	39,295	$	33,238
Preferred stock dividends
Series A Preferred Stock	$	—	$	—	$	—	$	1,867		$	—	$	—
Series B Preferred Stock	3,415		6,795		3,860		119			—		—
	$	3,415	$	6,795	$	3,860	$	1,986		$	—	$	—
Combined fixed charges and preferred stock dividends	$	26,496	$	46,174	$	45,172	$	40,168		$	39,295	$	33,238
Ratio of earnings to fixed charges	1.82		1.71		1.69					1.12
Ratio of earnings to combined fixed charges and preferred stock dividends	1.59		1.45		1.55					1.12
Deficit (Fixed charges)							$	1,501				$	15,585
Deficit (Combined fixed charges and preferred stock dividends)							$	3,487				$	15,585

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Richard J. Stockton, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Braemar Hotels & Resorts Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2018

/s/ RICHARD J. STOCKTON

Richard J. Stockton

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Deric S. Eubanks, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Braemar Hotels & Resorts Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2018

/s/ DERIC S. EUBANKS

Deric S. Eubanks

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Braemar Hotels & Resorts Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard J. Stockton, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2018

/s/ RICHARD J. STOCKTON

Richard J. Stockton

President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Braemar Hotels & Resorts Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Deric S. Eubanks, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2018

/s/ DERIC S. EUBANKS

Deric S. Eubanks

Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 07, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	Braemar Hotels & Resorts Inc.
Entity Central Index Key	0001574085
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		32,501,880

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
ASSETS
Investments in hotel properties, gross	$ 1,520,011	$ 1,403,110
Accumulated depreciation	(241,928)	(257,268)
Investments in hotel properties, net	1,278,083	1,145,842
Cash and cash equivalents	169,235	137,522
Restricted cash	83,096	47,820
Accounts receivable, net of allowance of $91 and $94, respectively	22,338	14,334
Insurance receivable	0	8,825
Inventories	1,898	1,425
Note receivable	0	8,098
Deferred costs, net	477	656
Prepaid expenses	4,325	3,670
Investment in unconsolidated entity		0
Derivative assets	1,007	594
Other assets	7,800	9,426
Intangible assets, net	27,994	22,545
Due from related party, net	588	349
Due from third-party hotel managers	5,522	4,589
Total assets	1,616,926	1,423,819
Liabilities:
Indebtedness, net	985,205	820,959
Accounts payable and accrued expenses	63,976	56,803
Dividends and distributions payable	8,572	8,146
Due to Ashford Inc.	1,100	1,703
Due to third-party hotel managers	2,299	1,709
Intangible liability, net	0	3,569
Other liabilities	21,585	1,628
Total liabilities	1,082,737	894,517
Commitments and contingencies (note 16)
5.50% Series B cumulative convertible preferred stock, $0.01 par value, 4,965,850 shares issued and outstanding at both June 30, 2018 and December 31, 2017	106,123	106,123
Redeemable noncontrolling interests in operating partnership	47,818	46,627
Equity:
Common stock, $0.01 par value, 200,000,000 shares authorized, 32,501,880 and 32,120,210 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	325	321
Additional paid-in capital	472,945	469,791
Accumulated deficit	(87,777)	(88,807)
Total stockholders’ equity of the Company	385,493	381,305
Noncontrolling interest in consolidated entities	(5,245)	(4,753)
Total equity	380,248	376,552
Total liabilities and equity	1,616,926	1,423,819
Ashford Inc.
ASSETS
Investment in unconsolidated entity	12,628	18,124
Total assets	138,145	114,810
Liabilities:
Total liabilities	90,331	78,742
Redeemable noncontrolling interests in operating partnership	4,852	5,111
Equity:
Total stockholders’ equity of the Company	41,541	30,185
Noncontrolling interest in consolidated entities	1,421	772
Total equity	42,962	30,957
Total liabilities and equity	$ 138,145	$ 114,810

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Allowance for doubtful notes receivable	$ 77	$ 94
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	32,501,880	32,120,210
Common stock, shares outstanding (in shares)	32,501,880	32,120,210
Series B Preferred Stock
Series B preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Series B preferred stock, shares issued (in shares)	4,965,850	4,965,850
Series B preferred stock, shares outstanding (in shares)	4,965,850	4,965,850

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
REVENUE
Rooms	$ 78,439	$ 79,449	$ 143,946	$ 146,867
Food and beverage	25,393	27,980	48,893	52,453
Other	17,286	8,626	30,768	13,991
Total hotel revenue	121,118	116,055	223,607	213,311
Other	0	37	0	77
Total revenue	121,118	116,092	223,607	213,388
Hotel operating expenses:
Rooms	16,652	17,613	31,570	33,410
Food and beverage	17,287	19,263	32,907	36,124
Other expenses	33,768	32,021	63,432	59,752
Management fees	4,501	4,209	8,118	7,754
Total hotel expenses	72,208	73,106	136,027	137,040
Property taxes, insurance and other	6,077	5,370	11,681	10,444
Depreciation and amortization	14,811	13,469	27,817	25,440
Impairment charges	59	0	71	0
Advisory services fee	4,880	3,143	10,124	4,008
Contract modification cost	0	5,000	0	5,000
Transaction costs	461	2,066	949	6,394
Corporate general and administrative	1,206	1,531	1,234	5,405
Total expenses	99,702	103,685	187,903	193,731
OPERATING INCOME (LOSS)	21,416	12,407	35,704	19,657
Equity in earnings (loss) of unconsolidated entity	(62)	0	(65)	0
Interest income	230	165	430	277
Gain (loss) on sale of hotel property	15,711	0	15,711	0
Other income (expense)	(63)	(113)	(126)	(270)
Interest expense and amortization of loan costs	(12,678)	(9,931)	(22,857)	(18,133)
Write-off of loan costs and exit fees	(4,176)	0	(4,178)	(1,963)
Unrealized gain (loss) on investment in Ashford Inc.	(6,024)	(1,563)	(5,496)	1,528
Unrealized gain (loss) on derivatives	(298)	(100)	(225)	(998)
INCOME (LOSS) BEFORE INCOME TAXES	14,056	865	18,898	98
Income tax (expense) benefit	(1,202)	(479)	(1,774)	(1)
NET INCOME (LOSS)	12,854	386	17,124	97
(Income) loss attributable to noncontrolling interest in consolidated entities	(89)	(1,614)	(47)	(1,593)
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	(1,235)	343	(1,527)	598
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	11,530	(885)	15,550	(898)
Preferred dividends	(1,708)	(1,707)	(3,415)	(3,380)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$ 9,822	$ (2,592)	$ 12,135	$ (4,278)
INCOME (LOSS) PER SHARE - BASIC:
Net income (loss) attributable to common stockholders (in dollars per share)	$ 0.30	$ (0.09)	$ 0.37	$ (0.16)
Weighted average common shares outstanding – basic (in shares)	32,006	31,469	31,845	29,380
INCOME (LOSS) PER SHARE - DILUTED:
Net income (loss) attributable to common stockholders (in dollars per share)	$ 0.29	$ (0.09)	$ 0.37	$ (0.16)
Weighted average common shares outstanding – diluted (in shares)	38,588	31,469	31,853	29,380
Dividends declared per common share (in dollars per share)	$ 0.16	$ 0.16	$ 0.32	$ 0.32

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Statement of Comprehensive Income [Abstract]
NET INCOME (LOSS)	$ 12,854	$ 386	$ 17,124	$ 97
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Total other comprehensive income (loss)	0	0	0	0
TOTAL COMPREHENSIVE INCOME (LOSS)	12,854	386	17,124	97
Comprehensive (income) loss attributable to noncontrolling interest in consolidated entities	(89)	(1,614)	(47)	(1,593)
Comprehensive (income) loss attributable to redeemable noncontrolling interests in operating partnership	(1,235)	343	(1,527)	598
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$ 11,530	$ (885)	$ 15,550	$ (898)

XML

Condensed Consolidated Statement of Equity - 6 months ended Jun. 30, 2018 - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Noncontrolling Interest in Consolidated Entities	5.50% Series B Cumulative Convertible Preferred Stock	Redeemable Noncontrolling Interests in Operating Partnership
Beginning balance (in shares) at Dec. 31, 2017		32,120				4,966
Beginning balance at Dec. 31, 2017	$ 376,552	$ 321	$ 469,791	$ (88,807)	$ (4,753)
Beginning balance at Dec. 31, 2017	46,627					$ 106	$ 46,627
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Purchase of common stock (in shares)		(19)
Purchase of common stock	(203)		(203)
Equity-based compensation	3,303		3,303				732
Issuance of restricted shares/units (in shares)		406
Issuance of restricted shares/units	58	$ 4	54				18
Forfeiture of restricted common shares (in shares)		(5)
Forfeiture of restricted common shares	0
Dividends declared – common stock	(10,547)			(10,547)
Dividends declared – common stock	(3,415)			(3,415)
Distributions to noncontrolling interests	(539)				(539)		(1,644)
Net income (loss)	15,550			15,550	47		1,527
Net income (loss)	15,597
Redemption value adjustment	(558)			(558)			558
Ending balance (in shares) at Jun. 30, 2018		32,502				4,966
Ending balance at Jun. 30, 2018	380,248	$ 325	$ 472,945	$ (87,777)	$ (5,245)
Ending balance at Jun. 30, 2018	$ 47,818					$ 106	$ 47,818

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Jun. 30, 2018	Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS)	$ 12,854	$ 386	$ 17,124	$ 97
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
Depreciation and amortization	14,811	13,469	27,817	25,440
Equity-based compensation			4,035	(1,071)
Bad debt expense			109	128
Amortization of loan costs			2,063	2,398
Write-off of loan costs and exit fees	4,176	0	4,178	1,963
Amortization of intangibles			92	93
Amortization of non-refundable membership initiation fees			(5)	0
Interest expense accretion on refundable membership club deposits			150	0
(Gain) loss on sale of hotel property			(15,711)	0
Impairment charges	59	0	71	0	$ 1,100
Unrealized (gain) loss on investment in Ashford Inc.	6,024	1,563	5,496	(1,528)
Realized and unrealized (gain) loss on derivatives			225	1,269
Net settlement of trading derivatives			(290)	0
Equity in (earnings) loss of unconsolidated entity	62	0	65	0
Deferred tax expense (benefit)			122	(216)
Changes in operating assets and liabilities, exclusive of the effect of hotel acquisitions and dispositions:
Accounts receivable and inventories			(4,525)	2,422
Prepaid expenses and other assets			3,249	(2,358)
Accounts payable and accrued expenses			(3,239)	92
Due to/from related party, net			(252)	56
Due to/from affiliate, net			0	(2,500)
Due to/from third-party hotel managers			2,085	5,013
Other liabilities			(3,595)	88
Net cash provided by (used in) operating activities			38,661	30,604
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from property insurance			24,663	0
Acquisition of hotel properties, net of cash and restricted cash acquired			(177,875)	(243,666)
Investment in unconsolidated entity			(2,000)	0
Proceeds from liquidation of AQUA U.S. Fund			0	2,289
Net proceeds from sale of hotel property			65,336	0
Improvements and additions to hotel properties			(32,423)	(21,740)
Net cash provided by (used in) investing activities			(122,299)	(263,117)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on indebtedness			575,000	483,500
Repayments of indebtedness			(399,312)	(335,458)
Payments of loan costs and exit fees			(9,406)	(9,832)
Payments for derivatives			(348)	(338)
Purchase of common stock			(203)	(119)
Payments for dividends and distributions			(15,122)	(12,058)
Issuance of preferred stock			0	40,169
Issuance of common stock			0	66,451
Other			18	21
Net cash provided by (used in) financing activities			150,627	232,336
Net change in cash, cash equivalents and restricted cash			66,989	(177)
Cash, cash equivalents and restricted cash at beginning of period			185,342	164,645	164,645
Cash, cash equivalents and restricted cash at end of period	252,331	164,468	252,331	164,468	185,342
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid			21,976	16,134
Income taxes paid (refund)			704	929
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Dividends and distributions declared but not paid			8,572	8,356
Capital expenditures accrued but not paid			3,658	1,498
Distributions declared but not paid to a noncontrolling interest in a consolidated entity			0	1,628
Non-cash dividends paid			58	0
Non-cash settlement of note receivable			8,098	0
Non-cash settlement of TIF loan			8,098	0
SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents at beginning of period			137,522	126,790	126,790
Restricted cash at beginning of period			47,820	37,855	37,855
Cash, cash equivalents and restricted cash at beginning of period	252,331	164,468	185,342	164,645	164,645	$ 252,331	$ 164,468
Cash and cash equivalents at end of period	169,235	129,675	169,235	129,675	137,522
Restricted cash at end of period	$ 83,096	$ 34,793	83,096	34,793	$ 47,820
Cash, cash equivalents and restricted cash at end of period						$ 252,331	$ 164,468
Ashford Trust OP
Changes in operating assets and liabilities, exclusive of the effect of hotel acquisitions and dispositions:
Due to/from affiliate, net			0	489
Ashford Inc.
Changes in operating assets and liabilities, exclusive of the effect of hotel acquisitions and dispositions:
Due to/from affiliate, net			$ (603)	$ (1,271)

XML

Organization and Description of Business

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Description of Business

Organization and Description of Business

Braemar Hotels & Resorts Inc. (formerly Ashford Hospitality Prime, Inc.), together with its subsidiaries (“Braemar”), is a Maryland corporation that invests primarily in high revenue per available room (“RevPAR”) luxury hotels and resorts. High RevPAR, for purposes of our investment strategy, means RevPAR of at least twice the then-current U.S. national average RevPAR for all hotels as determined by Smith Travel Research. Braemar has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code. Braemar conducts its business and owns substantially all of its assets through its operating partnership, Braemar Hospitality Limited Partnership (formerly Ashford Hospitality Prime Limited Partnership) (“Braemar OP”). In this report, the terms “the Company,” “we,” “us” or “our” refers to Braemar Hotels & Resorts Inc. and, as the context may require, all entities included in its condensed consolidated financial statements.

We are advised by Ashford Hospitality Advisors LLC (“Ashford LLC” or the “Advisor”) through an advisory agreement. Ashford LLC is a subsidiary of Ashford Inc. All of the hotel properties in our portfolio are currently asset-managed by Ashford LLC. We do not have any employees. All of the services that might be provided by employees are provided to us by Ashford LLC.

As of June 30, 2018, Remington Lodging & Hospitality, LLC, together with its affiliates (“Remington Lodging”), which is beneficially wholly-owned by Mr. Monty J. Bennett, Chairman of our board of directors, and Mr. Archie Bennett, Jr., Chairman Emeritus of Ashford Hospitality Trust, Inc. (“Ashford Trust”), managed three of our twelve hotel properties. Third-party management companies managed the remaining hotel properties.

The accompanying condensed consolidated financial statements include the accounts of such wholly-owned and majority owned subsidiaries of Braemar OP that as of June 30, 2018, own and operate twelve hotel properties in six states, the District of Columbia and the U.S. Virgin Islands. The portfolio includes ten wholly-owned hotel properties and two hotel properties that are owned through a partnership in which Braemar OP has a controlling interest. These hotel properties represent 3,549 total rooms, or 3,314 net rooms, excluding those attributable to our partner. As a REIT, Braemar needs to comply with limitations imposed by the Internal Revenue Code related to operating hotels. As of June 30, 2018, eleven of our twelve hotel properties were leased by wholly-owned or majority-owned subsidiaries that are treated as taxable REIT subsidiaries (“TRS”) for federal income tax purposes (collectively the TRS entities are referred to as “Braemar TRS”). One hotel property located in the U.S. Virgin Islands is owned by our U.S. Virgin Islands TRS. Braemar TRS then engages third-party or affiliated hotel management companies to operate the hotel properties under management contracts. Hotel operating results related to the hotel properties are included in the condensed consolidated statements of operations.

As of June 30, 2018, nine of the twelve hotel properties were leased by Braemar’s wholly-owned TRS and the two hotel properties majority-owned through a consolidated partnership were leased to a TRS wholly-owned by such consolidated partnership. Each leased hotel is leased under a percentage lease that provides for each lessee to pay in each calendar month the base rent plus, in each calendar quarter, percentage rent, if any, based on hotel revenues. Lease revenue from Braemar TRS is eliminated in consolidation. The hotel properties are operated under management contracts with Marriott International, Inc. (“Marriott”), Hilton Worldwide (“Hilton”), Accor Business and Leisure Management, LLC (“Accor”), Hyatt Hotels Corporation (“Hyatt”), Ritz-Carlton, Inc., a subsidiary of Marriott (“Ritz-Carlton”) and Remington Lodging, which are eligible independent contractors under the Internal Revenue Code.

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Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

Basis of Presentation and Principles of Consolidation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed consolidated financial statements include the accounts of Braemar Hotels & Resorts Inc., its majority-owned subsidiaries, and its majority-owned entities in which it has a controlling interest. All significant intercompany accounts and transactions between consolidated entities have been eliminated in these condensed consolidated financial statements. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2017 Annual Report on Form 10-K, as originally filed with the Securities and Exchange Commission (“SEC”) on March 14, 2018.

Braemar OP is considered to be a variable interest entity (“VIE”), as defined by authoritative accounting guidance. A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. All major decisions related to Braemar OP that most significantly impact its economic performance, including but not limited to operating procedures with respect to business affairs and any acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives, are subject to the approval of our wholly-owned subsidiary, Braemar OP General Partner LLC (formerly Ashford Prime OP General Partner LLC), its general partner. As such, we consolidate Braemar OP.

The following items affect reporting comparability of our historical condensed consolidated financial statements:

• historical seasonality patterns at some of our hotel properties cause fluctuations in our overall operating results. Consequently, operating results for the three and six months ended June 30, 2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018;

• on March 31, 2017, we acquired the Park Hyatt Beaver Creek and on May 11, 2017, we acquired the Hotel Yountville. The operating results of these hotel properties have been included in our results of operations as of their acquisition dates;

• on November 1, 2017, we sold the Plano Marriott Legacy Town Center;

• on April 4, 2018, we acquired the Ritz-Carlton, Sarasota. The operating results of the hotel has been included in the results of operations as of its acquisition date; and

• on June 1, 2018, we sold the Tampa Renaissance.

Use of Estimates—The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Restricted Cash—Restricted cash includes reserves for debt service, real estate taxes and insurance, as well as excess cash flow deposits and reserves for furniture, fixtures and equipment replacements of approximately 4% to 5% of property revenue for certain hotels, as required by certain management or mortgage debt agreement restrictions and provisions.

Impairment of Investments in Hotel Properties—Hotel properties are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of the hotel is measured by comparison of the carrying amount of the hotel to the estimated future undiscounted cash flows, which take into account current market conditions and our intent with respect to holding or disposing of the hotel. If our analysis indicates that the carrying value of the hotel is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the property’s net book value exceeds its estimated fair value, or fair value, less cost to sell. In evaluating the impairment of hotel properties, we make many assumptions and estimates, including projected cash flows, expected holding period and expected useful life. Fair value is determined through various valuation techniques, including internally developed discounted cash flow models, comparable market transactions and third-party appraisals, where considered necessary. Asset write-downs resulting from property damage are recorded up to the amount of the allocable property insurance deductible in the period that the property damage occurs. See note 4.

Investment in Ashford Inc.—We hold approximately 195,000 shares of Ashford Inc. common stock, which represented an approximate 9.2% ownership interest in Ashford Inc. and had a fair value of $12.6 million at June 30, 2018. This investment would typically be accounted for under the equity method of accounting, under Accounting Standard Codification (“ASC”) 323-10 - Investments - Equity Method and Joint Ventures since we exercise significant influence. However, we have elected to record our investment in Ashford Inc. using the fair value option under ASC 825-10 - Fair Value Option - Financial Assets and Financial Liabilities.

Investment in Unconsolidated Entity—Investment in unconsolidated entity, in which we have ownership interest of 8.2% at June 30, 2018, is accounted for under the equity method of accounting by recording the initial investment and our percentage of interest in the entities’ net income/loss. We review our investment in unconsolidated entity for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of our investment. Any impairment is recorded in equity in earnings (loss) in unconsolidated entity. No such impairment was recorded for the three and six months ended June 30, 2018.

Our investment in unconsolidated entity is considered to be a variable interest in the underlying entity. VIEs, as defined by authoritative accounting guidance, must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Because we do not have the power and financial responsibility to direct the unconsolidated entity’s activities and operations, we are not considered to be the primary beneficiary of this entity on an ongoing basis and therefore such entity should not be consolidated. In evaluating VIEs, our analysis involves considerable management judgment and assumptions.

Equity-Based Compensation—Stock/unit-based compensation for non-employees is accounted for at fair value based on the market price of the shares at period end in accordance with applicable authoritative accounting guidance that results in recording expense, included in “advisory services fee” and “management fees,” equal to the fair value of the award in proportion to the requisite service period satisfied during the period. Performance stock units (“PSUs”) and performance-based Long-Term Incentive Plan (“LTIP”) units granted to certain executive officers are accounted for at fair value at period end based on a Monte Carlo simulation valuation model that results in recording expense, included in “advisory services fee,” equal to the fair value of the award in proportion to the requisite service period satisfied during the period. Stock/unit grants to independent directors are recorded at fair value based on the market price of the shares at grant date, which amount is fully expensed as the grants of stock/units are fully vested on the date of grant and included in “corporate general and administrative” expense in the condensed consolidated statements of operations.

Recently Adopted Accounting Standards—In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model, which requires a company to recognize revenue to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The update replaces most existing revenue recognition guidance in U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date, which defers the effective date to fiscal periods beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect (modified) transition method. This standard, referred to as “Topic 606,” does not materially affect the amount or timing of revenue recognition for revenues from room, food and beverage, and other hotel level sales. Additionally, we have historically disposed of hotel properties for cash sales with no contingencies and no future involvement in the hotel operations. Therefore, Topic 606 does not impact the recognition of hotel sales. We adopted this standard effective January 1, 2018, under the modified retrospective method, and the adoption of this standard did not have a material impact on our condensed consolidated financial statements. See related disclosures in note 3.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in other comprehensive income the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available-for-sale (“AFS”) debt securities in combination with other deferred tax assets. ASU 2016-01 provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. It also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Certain provisions of ASU 2016-01 are eligible for early adoption. We adopted this standard effective January 1, 2018. The adoption of this standard did not have a material impact on our condensed consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments - a consensus of the Emerging Issues Task Force (“ASU 2016-15”). The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Certain issues addressed in this guidance include - debt payments or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, distributions received from equity method investments and beneficial interests in securitization transactions. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We adopted this standard effective January 1, 2018 on a prospective basis as there were no required changes as a result of adoption. The adoption of this standard did not have a material impact on our consolidated statement of cash flows.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether a transaction should be accounted for as an acquisition (or disposal) of an asset or a business. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. We adopted this standard effective January 1, 2018. Under the new standard, certain future hotel acquisitions may be considered asset acquisitions rather than business combinations, which would affect capitalization of acquisitions costs (such costs are expensed for business combinations and capitalized for asset acquisitions).

In February 2017, the FASB issued ASU 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (ASU “2017-05”), which clarifies the scope of ASC Subtopic 610-20, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets and adds guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. An entity may elect to apply ASU 2017-05 under a retrospective or modified retrospective method. We adopted this standard effective January 1, 2018, under the modified retrospective method. The adoption of this standard did not have a material impact on our condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Standards—In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases ("ASU 2018-10"). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02, including but not limited to lease residual value guarantee, rate implicit in the lease, lease term and purchase option. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases ("ASU 2018-10") and ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02, including but not limited to lease residual value guarantee, rate implicit in the lease, lease term and purchase option and etc. The amendments in ASU 2018-11 provide an optional transition method for adoption of the new standard, which will allow entities to continue to apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented in the year of adoption. ASU 2016-02 is effective for annual and interim periods for fiscal years beginning after December 15, 2018, which will require us to adopt these provisions in the first quarter of 2019 on a modified retrospective basis. The accounting for leases under which we are the lessor remains largely unchanged. While we continue evaluating our lease portfolio to assess the impact that ASU 2016-02 will have on our condensed consolidated financial statements, we expect the primary impact to our condensed consolidated financial statements upon adoption will be the recognition, on a discounted basis, of our future minimum rentals due under noncancelable leases on our condensed consolidated balance sheets resulting in the recording of ROU assets and lease obligations. We disclosed $175.4 million in undiscounted future minimum rentals due under non-cancelable leases in note 13 of our most recent 10-K. We are involving our property managers and implementing repeatable processes to manage ongoing lease data collection and analysis, and evaluating accounting policies and internal controls that will be impacted by the new standards.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The ASU sets forth an “expected credit loss” impairment model to replace the current “incurred loss” method of recognizing credit losses. The standard requires measurement and recognition of expected credit losses for most financial assets held. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for periods beginning after December 15, 2018. We are currently evaluating the impact that ASU 2016-13 will have on our consolidated financial statements and related disclosures.

In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07"). The ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees and aligns the guidance for share-based payments to non-employees with the requirements for share-based payments granted to employees. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that ASU 2018-07 will have on the condensed consolidated financial statements and related disclosures and expect that the associated compensation expense of the majority of our equity awards will be based on the grant date fair value.

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Revenue

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

On January 1, 2018, we adopted Topic 606 using the modified retrospective method. As the adoption of this standard did not have a material impact on our consolidated financial statements, no adjustments to opening retained earnings were made as of January 1, 2018. Results for reporting periods beginning after January 1, 2018, are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic 605-Revenue Recognition.

Rooms revenue represents revenues from the occupancy of our hotel rooms and is driven by the occupancy and average daily rate charged. Rooms revenue includes revenue for guest no-shows, day use, and early/late departure fees. The contracts for room stays with customers are generally short in duration and revenues are recognized as services are provided over the course of the hotel stay.

Food & Beverage (“F&B”) revenue consists of revenue from the restaurants and lounges at our hotel properties, In-room dining and mini-bars revenue, and banquet/catering revenue from group and social functions. Other F&B revenue may include revenue from audio-visual equipment/services, rental of function rooms, and other F&B related revenues. Revenue is recognized as the services or products are provided. Our hotel properties may employ third parties to provide certain services at the property, for example, audio visual services. We evaluate each of these contracts to determine if the hotel is the principal or the agent in the transaction, and record the revenues as appropriate (i.e. gross vs. net).

Other revenue consists of ancillary revenue at the property, including attrition and cancellation fees, condo management fees, resort and destination fees, health center fees, spas, golf, telecommunications, parking, entertainment and other guest services, as well as rental revenue, primarily consisting of leased retail outlets at our hotel properties, and membership initiation fees and dues, primarily from club memberships. Attrition and cancellation fees are recognized for non-cancellable deposits when the customer provides notification of cancellation within established management policy time frames. Non-refundable membership initiation fees are recognized over the expected life of an active membership. For the three and six months ended June 30, 2018, the Company recorded $3.3 million of business interruption income for the Tampa Renaissance related to a settlement for lost profits from the BP Deepwater Horizon oil spill in the Gulf of Mexico in 2010.

Taxes collected from customers and submitted to taxing authorities are not recorded in revenue. Interest income is recognized when earned. We discontinue recording interest and amortizing discounts/premiums when the contractual payment of interest and/or principal is not received when contractually due.

The following tables present our revenue disaggregated by geographical areas (in thousands):

	Three Months Ended June 30, 2018
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	23,535	$	5,649	$	2,379	$	—	$	31,563
Colorado	1	1,761		1,745		1,731		—		5,237
Florida	2	10,807		7,053		3,172		—		21,032
Illinois	1	7,783		2,569		371		—		10,723
Pennsylvania	1	8,351		1,719		303		—		10,373
Washington	1	9,050		1,701		361		—		11,112
Washington, D.C.	1	12,791		3,896		337		—		17,024
USVI	1	1,472		132		5,253		—		6,857
Sold hotel properties	1	2,889		929		3,379		—		7,197
Corporate entities	—	—		—		—		—		—
Total	13	$	78,439	$	25,393	$	17,286	$	—	$	121,118

	Three Months Ended June 30, 2017
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	19,655	$	5,435	$	2,764	$	—	$	27,854
Colorado	1	1,717		1,544		1,685		—		4,946
Florida	1	4,687		1,139		335		—		6,161
Illinois	1	7,824		2,377		185		—		10,386
Pennsylvania	1	7,781		1,298		346		—		9,425
Washington	1	8,761		2,614		293		—		11,668
Washington, D.C.	1	12,516		4,109		372		—		16,997
USVI	1	7,329		4,552		2,215		—		14,096
Sold hotel properties	2	9,179		4,912		431		—		14,522
Corporate entities	—	—		—		—		37		37
Total	13	$	79,449	$	27,980	$	8,626	$	37	$	116,092

	Six Months Ended June 30, 2018
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	42,639	$	12,954	$	5,854	$	—	$	61,447
Colorado	1	11,558		6,564		5,274		—		23,396
Florida	2	16,280		7,856		3,923		—		28,059
Illinois	1	11,202		3,820		581		—		15,603
Pennsylvania	1	14,504		2,892		600		—		17,996
Washington	1	14,552		3,365		626		—		18,543
Washington, D.C.	1	21,752		8,236		620		—		30,608
USVI	1	3,288		331		9,799		—		13,418
Sold hotel properties	1	8,171		2,875		3,491		—		14,537
Corporate entities	—	—		—		—		—		—
Total	13	$	143,946	$	48,893	$	30,768	$	—	$	223,607

	Six Months Ended June 30, 2017
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	36,579	$	11,452	$	4,164	$	—	$	52,195
Colorado	1	1,717		1,544		1,685		—		4,946
Florida	1	10,369		2,073		696		—		13,138
Illinois	1	11,297		3,590		285		—		15,172
Pennsylvania	1	12,741		2,277		529		—		15,547
Washington	1	14,174		4,443		549		—		19,166
Washington, D.C.	1	23,390		8,760		682		—		32,832
USVI	1	17,072		8,071		4,628		—		29,771
Sold hotel properties	2	19,528		10,243		773		—		30,544
Corporate entities	—	—		—		—		77		77
Total	13	$	146,867	$	52,453	$	13,991	$	77	$	213,388

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Investment in Hotel Properties, net

6 Months Ended

Jun. 30, 2018

Property, Plant and Equipment [Abstract]

Investments in Hotel Properties, net

Investments in Hotel Properties, net

Investments in hotel properties, net consisted of the following (in thousands):

	June 30, 2018			December 31, 2017
Land	$	428,567		$	344,937
Buildings and improvements	982,275			962,478
Furniture, fixtures and equipment	95,443			87,796
Construction in progress	13,726			7,899
Total cost	1,520,011			1,403,110
Accumulated depreciation	(241,928		)	(257,268		)
Investments in hotel properties, net	$	1,278,083		$	1,145,842

Impairment Charges and Insurance Recoveries

In September 2017, the Ritz-Carlton, St. Thomas located in St. Thomas, USVI, the Key West Pier House located in Key West, FL and the Tampa Renaissance located in Tampa, FL were impacted by the effects of Hurricanes Irma and Maria. The Company holds insurance policies that provide coverage for property damage and business interruption after meeting certain deductibles at all of its hotel properties. During the year ended December 31, 2017, the Company recognized impairment charges, net of anticipated insurance recoveries of $1.1 million. Additionally, the Company recognized remediation and other costs, net of anticipated insurance recoveries of $3.8 million, included primarily in other hotel operating expenses. As of December 31, 2017, the Company recorded an insurance receivable of $8.8 million, net of deductibles of $4.9 million, related to the anticipated insurance recoveries. During the year ended December 31, 2017, the Company received proceeds of $11.1 million for business interruption losses associated with lost profits, of which $4.1 million was recorded as “other” hotel revenue in our consolidated statement of operations, $3.3 million represented reimbursement of incurred expenses in excess of the deductible of $1.1 million and $3.7 million was recorded as a reduction to insurance receivable.

For the three and six months ended June 30, 2018, the Company recorded revenue from business interruption losses associated with lost profits from the hurricanes of $5.2 million and $10.1 million, respectively, which are included in “other” hotel revenue in our condensed consolidated statements of operations. The Company received proceeds of $34.0 million from our insurance carriers for property damage and business interruption from the hurricanes during the three and six months ended June 30, 2018. Additionally, during the three and six months ended June 30, 2018, the Company recorded revenue of $190,000 and $1.9 million, net of deductibles of $500,000, for business interruption losses associated with lost profits at the Bardessono Hoteland Hotel Yountville as a result of the Napa wildfires, which is included in “other” hotel revenue in our condensed consolidated statements of operations. During the three and six months ended June 30, 2018, we recorded impairment charges of $59,000 and $71,000 as a result of a change in estimate of property damage as a result of the hurricanes. As of June 30, 2018, the Company has a net liability of $10.4 million, included in “other liabilities” on the condensed consolidated balance sheet, as it has received insurance proceeds in excess of the sum of its impairment, remediation expenses and business interruption revenue recorded through June 30, 2018. The Company will not record revenue for business interruption losses associated with lost profits or gains from property damage recoveries until the amount for such recoveries is known and the amount is realizable.

Ritz-Carlton, Sarasota

On April 4, 2018, the Company acquired a 100% interest in the 266-room Ritz-Carlton, Sarasota in Sarasota, Florida for $171.7 million and a 22-acre plot of vacant land for $9.7 million. Concurrent with the closing of the acquisition, we completed the financing of a $100.0 million mortgage loan. See note 8.

The acquisition of the Ritz-Carlton, Sarasota included the hotel, a golf club, a beach club and a plot of vacant land, which are considered to be a group of dissimilar assets per ASU 2017-01. As such, we have accounted for this acquisition as a business combination. We have allocated the purchase price to the assets acquired and liabilities assumed on a preliminary basis using estimated fair value information currently available. We are in the process of evaluating the values assigned to investment in hotel property, property level working capital balances and intangibles. This valuation is considered a Level 3 valuation technique. Thus, the balances reflected below are subject to change, and any such changes could result in adjustments to the allocation. Any change to the amounts recorded within the investments in hotel properties or intangibles will also impact depreciation and amortization expense.

The following table summarizes the preliminary estimated fair value of the assets acquired in the acquisition (in thousands):

Land (1)	$	83,630
Buildings and improvements	86,316
Furniture, fixtures and equipment	13,740
Customer relationships	5,682
Refundable membership club deposits (2)	(9,960		)
Income guarantee (3)	2,000
	$	181,408
Net other assets (liabilities)	$	(3,533	)

________

⁽¹⁾  Amount includes the$9.7 million, 22-acre plot of vacant land.

⁽²⁾  Recorded within “other liabilities” on our condensed consolidated balance sheets.

⁽³⁾  Recorded within “other assets” on our condensed consolidated balance sheets.

The results of operations of the hotel property have been included in our results of operations as of the acquisition date. For both the three and six months ended June 30, 2018, we have included total revenue of $15.1 million and net loss of $719,000, in our condensed consolidated statements of operations. The unaudited pro forma results of operations as if the acquisition had occurred on January 1, 2017 are included below under “Pro Forma Financial Results.”

Pro Forma Financial Results

The following table reflects the unaudited pro forma results of operations as if the acquisitions had occurred and the applicable indebtedness was incurred on January 1, 2017, and the removal of $462,000 and $949,000 of non-recurring transaction costs directly attributable to the acquisitions for the three and six months ended June 30, 2018 (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017
Total revenue	$	121,763	$	136,590		$	243,680	$	248,128
Net income (loss)	13,617		1,390			20,842		2,037
Net income (loss) attributable to common stockholders	10,500		(1,705		)	15,437		(2,578		)
Pro Forma income per share:
Basic	$	0.32	$	(0.06	)	$	0.47	$	(0.10	)
Diluted	$	0.31	$	(0.06	)	$	0.47	$	(0.10	)
Weighted average common shares outstanding (in thousands):
Basic	32,006		31,469			31,845		29,380
Diluted	38,588		31,469			35,971		29,380

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Hotel Dispositions

6 Months Ended

Jun. 30, 2018

Discontinued Operations and Disposal Groups [Abstract]

Hotel Dispositions

Hotel Dispositions

On November 1, 2017, the Company sold the Plano Marriott Legacy Town Center for $104.0 million in cash. The sale resulted in a gain of $23.8 million for the year ended December 31, 2017.

On June 1, 2018, the Company sold the Tampa Renaissance hotel for $68.0 million in cash. The sale resulted in a gain of $15.7 million for both the three and six months ended June 30, 2018 and is included in “gain (loss) on sale of hotel property” in our condensed consolidated statements of operations.

Since the sale of the hotel property did not represent a strategic shift that has (or will have) a major effect on our operations or financial results, its results of operations were not reported as discontinued operations in our consolidated financial statements.

We included the results of operations for this hotel property through the date of disposition in net income (loss) as shown in our condensed consolidated statements of operations for the three and six months ended June 30, 2018 and 2017. The following table includes the condensed financial information from this hotel property (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Total hotel revenue	$	7,197		$	14,522		$	14,537		$	30,544
Total hotel operating expenses	(2,521		)	(9,029		)	(7,499		)	(19,082		)
Operating income (loss)	4,676			5,493			7,038			11,462
Property taxes, insurance and other	(217		)	(735		)	(486		)	(1,372		)
Depreciation and amortization	(357		)	(2,180		)	(1,294		)	(4,301		)
Impairment charges	—			—			(12		)	—
Gain (loss) on sale of hotel property	15,711			—			15,711			—
Interest expense and amortization of loan costs	(303		)	(1,115		)	(791		)	(2,137		)
Income (loss) before income taxes	19,510			1,463			20,166			3,652
(Income) loss before income taxes attributable to redeemable noncontrolling interests in operating partnership	(2,179		)	(171		)	(2,253		)	(428		)
Income (loss) before income taxes attributable to the Company	$	17,331		$	1,292		$	17,913		$	3,224

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Note Receivable

6 Months Ended

Jun. 30, 2018

Receivables [Abstract]

Note Receivable

Note Receivable

As of December 31, 2017, we held a note receivable of $8.1 million from the city of Philadelphia, Pennsylvania, which had a stated interest rate of 12.85%. The note matured in June 2018. Prior to maturity the interest income recorded on the note receivable was offset against the interest expense recorded on the TIF loan of the same amount. See note 8.

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Investment in Unconsolidated Entity

6 Months Ended

Jun. 30, 2018

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated Entity

Investment in Unconsolidated Entity

Ashford Inc.

As of June 30, 2018 and December 31, 2017, we held approximately 195,000 shares of Ashford Inc. common stock. The closing price per share of Ashford Inc. common stock on the NYSE American LLC was $64.80 and $93.00 as of June 30, 2018 and December 31, 2017, respectively. This represented an approximate 9.2% and 9.3% ownership interest in Ashford Inc. for June 30, 2018 and December 31, 2017, respectively. See notes 11 and 12.

We have elected to use the fair value option, under the applicable accounting guidance, to account for our investment in Ashford Inc. as the fair value is readily available since Ashford Inc. common stock is traded on a national exchange. The fair value of our investment in Ashford Inc. is included in “investment in Ashford Inc., at fair value” on our condensed consolidated balance sheets, and changes in market value are included in “unrealized gain (loss) on investment in Ashford Inc.” on our condensed consolidated statements of operations.

The following tables summarize the condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017, and the condensed consolidated statements of operations for the three and six months ended June 30, 2018 and 2017, of Ashford Inc. (in thousands):

Ashford Inc.

Condensed Consolidated Balance Sheets

(unaudited)

	June 30, 2018		December 31, 2017
Total assets	$	138,145	$	114,810
Total liabilities	90,331		78,742
Redeemable noncontrolling interests	4,852		5,111
Total stockholders’ equity of Ashford Inc.	41,541		30,185
Noncontrolling interests in consolidated entities	1,421		772
Total equity	42,962		30,957
Total liabilities and equity	$	138,145	$	114,810
Our investment in Ashford Inc., at fair value	$	12,628	$	18,124

Ashford Inc.

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Total revenue	$	54,811		$	19,639		$	102,979		$	32,652
Total operating expenses	(43,941		)	(18,221		)	(97,145		)	(33,370		)
Operating income (loss)	10,870			1,418			5,834			(718		)
Realized and unrealized gain (loss) on investments	—			(16		)	—			(91		)
Other	(333		)	10			(426		)	128
Income tax (expense) benefit	(1,605		)	(8,643		)	(2,311		)	(9,273		)
Net income (loss)	8,932			(7,231		)	3,097			(9,954		)
(Income) loss from consolidated entities attributable to noncontrolling interests	118			190			291			165
Net (income) loss attributable to redeemable noncontrolling interests	(90		)	332			(151		)	695
Net income (loss) attributable to Ashford Inc.	$	8,960		$	(6,709	)	$	3,237		$	(9,094	)
Our unrealized gain (loss) on investment in Ashford Inc.	$	(6,024	)	$	(1,563	)	$	(5,496	)	$	1,528

OpenKey

On March 28, 2018, the Company made a $2.0 million investment in OpenKey, which is controlled and consolidated by Ashford Inc., for an 8.2% ownership interest, which investment was approved by our Related Party Transactions Committee and the independent members of our board of directors. OpenKey is a hospitality focused mobile key platform that provides a universal smart phone app for keyless entry into hotel guest rooms. Our investment is recorded as a component of “investment in unconsolidated entity” in our condensed consolidated balance sheet and is accounted for under the equity method of accounting as we have been deemed to have significant influence over the entity under the applicable accounting guidance. As of June 30, 2018, our ownership interest had a carrying value of $1.9 million. For the three and six months ended June 30, 2018, our equity in loss of the unconsolidated entity was $62,000 and $65,000, respectively.

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Indebtedness

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Indebtedness

Indebtedness

Indebtedness consisted of the following (in thousands):

Indebtedness	Collateral	Maturity	Interest Rate	June 30, 2018			December 31, 2017
Secured revolving credit facility(3)	None	November 2019	Base Rate (2) + 1.25% to 2.50% or LIBOR(1) + 2.25% to 3.50%	$	—		$	—
TIF loan(4)	Courtyard Philadelphia	June 2018	12.85%	—			8,098
Mortgage loan(5)	Ritz-Carlton, St. Thomas	December 2018	LIBOR(1) + 4.95%	42,000			42,000
Mortgage loan(6) (7)	Courtyard Philadelphia	February 2019	LIBOR(1) + 2.58%	—			277,628
	Courtyard San Francisco
	Marriott Seattle Waterfront
	Tampa Renaissance
Mortgage loan(6)	Sofitel Chicago Magnificent Mile	March 2019	LIBOR(1) + 2.55%	—			80,000
Mortgage loan(8)	Pier House Resort	March 2019	LIBOR(1) + 2.25%	70,000			70,000
Mortgage loan(9)	Park Hyatt Beaver Creek	April 2019	LIBOR(1) + 2.75%	67,500			67,500
Mortgage loan(10)	Capital Hilton	November 2019	LIBOR(1) + 2.65%	188,326			190,010
	Hilton La Jolla Torrey Pines
Mortgage loan(6)	Courtyard Philadelphia	June 2020	LIBOR(1) + 2.16%	435,000			—
	Courtyard San Francisco
	Marriott Seattle Waterfront
	Sofitel Chicago Magnificent Mile
Mortgage loan	Hotel Yountville	May 2022	LIBOR(1) + 2.55%	51,000			51,000
Mortgage loan	Bardessono Hotel	August 2022	LIBOR(1) + 2.55%	40,000			40,000
Mortgage loan	Ritz-Carlton, Sarasota	April 2023	LIBOR(1) + 2.65%	100,000			—
				993,826			826,236
Deferred loan costs, net				(8,621		)	(5,277		)
Indebtedness, net				$	985,205		$	820,959

__________________

⁽¹⁾  LIBOR rates were 2.090% and 1.564% at June 30, 2018 and December 31, 2017, respectively.

⁽²⁾  Base Rate, as defined in the secured revolving credit facility agreement, is the greater of (i) the prime rate set by Bank of America, (ii) federal funds rate + 0.5%, or (iii) LIBOR + 1.0%.

⁽³⁾  Our borrowing capacity under our secured revolving credit facility is $100.0 million. We have an option, subject to lender approval, to further increase the borrowing capacity to an aggregate of $250.0 million. We may use up to $15.0 million for standby letters of credit. The secured revolving credit facility has twoone-year extension options subject to advance notice, satisfaction of certain conditions and a 0.25% extension fee.

⁽⁴⁾  The TIF loan matured on June 30, 2018. See note 6.

⁽⁵⁾  This mortgage loan has threeone-year extension options, subject to satisfaction of certain conditions, of which the first was exercised in December 2017.

⁽⁶⁾  On May 23, 2018, we refinanced two mortgage loans totaling $357.6 million with a new $435.0 million mortgage loan with a two-year initial term and fiveone-year extension options subject to the satisfaction of certain conditions. The new mortgage loan is interest only and bears interest at a rate of LIBOR + 2.16%.

⁽⁷⁾  A portion of this mortgage loan at December 31, 2017 relates to the Tampa Renaissance, which was sold on June 1, 2018. See note 5.

⁽⁸⁾  This mortgage loan has threeone-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in March 2018.

⁽⁹⁾  This mortgage loan has threeone-year extension options, subject to satisfaction of certain conditions.

⁽¹⁰⁾  This mortgage loan has twoone-year extension options, subject to satisfaction of certain conditions.

⁽¹¹⁾  The Ritz-Carlton, Sarasota property was acquired on April 4, 2018. The new mortgage loan is a five-year interest-only loan and bears interest at a rate of LIBOR + 2.65%.

On March 31, 2017, in connection with the acquisition of the Park Hyatt Beaver Creek, we completed the financing of a $67.5 million mortgage loan. This mortgage loan is interest only and provides for a floating interest rate of LIBOR + 2.75%. The stated maturity date of the mortgage loan is April 2019, with threeone-year extension options, subject to the satisfaction of certain conditions. The mortgage loan is secured by the Park Hyatt Beaver Creek.

On May 11, 2017, in connection with the acquisition of the Hotel Yountville, we completed the financing of a $51.0 million mortgage loan. This mortgage loan is interest only and provides for a floating interest rate of LIBOR + 2.55%. The stated maturity date of the mortgage loan is May 2022. The mortgage loan is secured by the Hotel Yountville.

On August 18, 2017, we refinanced our existing $40.0 million mortgage loan with a final maturity date in December 2020 with a new $40.0 million mortgage loan that is interest only, provides for a floating interest rate of LIBOR + 2.55% and has a stated maturity date of August 2022. The mortgage loan is secured by the Bardessono Hotel.

On April 4, 2018, in connection with the acquisition of the 266 -room Ritz-Carlton, Sarasota in Sarasota, Florida, the Company completed the financing of a $100.0 million mortgage loan. This mortgage loan provides for a floating interest rate of LIBOR + 2.65%. The mortgage loan is interest only until July 1, 2021 and then amortizes 1% annually for the remaining term. The stated maturity is April 2023.

On May 23, 2018, the Company refinanced two mortgage loans totaling $357.6 million with a new $435.0 million mortgage loan with a two-year initial term and fiveone-year extension options subject to the satisfaction of certain conditions. As a result of the refinance the Tampa Renaissance became unencumbered. The new mortgage loan is interest only and bears interest at a rate of LIBOR + 2.16%. The loan is secured by four hotels: Seattle Marriott Waterfront, San Francisco Courtyard Downtown, Philadelphia Courtyard Downtown and Sofitel Chicago Magnificent Mile.

We are required to maintain certain financial ratios under our secured revolving credit facility. If we violate covenants in any debt agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. Violations of certain debt covenants may result in our inability to borrow unused amounts under our line of credit, even if repayment of some or all of our borrowings is not required. The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group. As of June 30, 2018, we were in compliance in all material respects with all covenants or other requirements set forth in our debt agreements as amended.

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Income (Loss) Per Share

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Income (Loss) Per Share

Income (Loss) Per Share

The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income (loss) attributable to common stockholders - basic and diluted:
Net income (loss) attributable to the Company	$	11,530		$	(885	)	$	15,550		$	(898	)
Less: Dividends on preferred stock	(1,708		)	(1,707		)	(3,415		)	(3,380		)
Less: Dividends on common stock	(5,122		)	(5,036		)	(10,238		)	(10,069		)
Less: Dividends on unvested performance stock units	(72		)	(86		)	(144		)	(153		)
Less: Dividends on unvested restricted shares	(78		)	(75		)	(165		)	(125		)
Less: Net (income) loss allocated to unvested restricted shares	(70		)	—			(24		)	—
Undistributed net income (loss) allocated to common stockholders	4,480			(7,789		)	1,564			(14,625		)
Add back: Dividends on common stock	5,122			5,036			10,238			10,069
Distributed and undistributed net income (loss) - basic	$	9,602		$	(2,753	)	$	11,802		$	(4,556	)
Dividends on preferred stock	1,708			—			—			—
Distributed and undistributed net income (loss) - diluted	$	11,310		$	(2,753	)	$	11,802		$	(4,556	)
Weighted average common shares outstanding:
Weighted average common shares outstanding – basic	32,006			31,469			31,845			29,380
Effect of assumed conversion of preferred stock	6,569			—			—			—
Incentive fee shares	13			—			8			—
Weighted average common shares outstanding – diluted	38,588			31,469			31,853			29,380
Income (loss) per share - basic:
Net income (loss) allocated to common stockholders per share	$	0.30		$	(0.09	)	$	0.37		$	(0.16	)
Income (loss) per share - diluted:
Net income (loss) allocated to common stockholders per share	$	0.29		$	(0.09	)	$	0.37		$	(0.16	)

Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect the adjustments for the following items (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017
Net income (loss) allocated to common stockholders is not adjusted for:
Income (loss) allocated to unvested restricted shares	$	148	$	75		$	189	$	125
Income (loss) allocated to unvested performance stock units	72		86			144		153
Income (loss) attributable to redeemable noncontrolling interests in operating partnership	1,235		(343		)	1,527		(598		)
Dividends on preferred stock	—		1,707			3,415		3,380
Total	$	1,455	$	1,525		$	5,275	$	3,060
Weighted average diluted shares are not adjusted for:
Effect of unvested restricted shares	41		113			45		82
Effect of unvested performance stock units	—		—			8		—
Effect of assumed conversion of operating partnership units	4,114		4,290			4,119		4,256
Effect of assumed conversion of preferred stock	—		6,560			6,569		5,555
Effect of incentive fee shares	—		124			—		153
Total	4,155		11,087			10,741		10,046

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Derivative Instruments

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

Interest Rate Derivatives—We are exposed to risks arising from our business operations, economic conditions and financial markets. To manage these risks, we primarily use interest rate derivatives to hedge our debt and our cash flows. The interest rate derivatives include interest rate caps and interest rate floors, which are subject to master netting settlement arrangements. All derivatives are recorded at fair value.

During the six months endedJune 30, 2018 and 2017, we entered into interest rate caps as summarized in the table below:

	Six Months Ended June 30,
	2018			2017
Notional amount (in thousands)	$	685,000		$	619,500
Strike rate minimum	2.43		%	3.00		%
Strike rate maximum	7.80		%	5.35		%
Effective date range	February 2018 - May 2018			January 2017 - May 2017
Maturity date range	March 2019 - June 2020			March 2018 - May 2019
Total cost of interest rate cap (in thousands)	$	348		$	338

_______________

No instruments were designated as cash flow hedges

As of June 30, 2018, we held interest rate instruments as summarized in the table below:

Interest rate caps (1)
Notional amount (in thousands)	$	1,393,200
Strike rate minimum	2.43		%
Strike rate maximum	11.61		%
Effective date range	January 2017 - May 2018
Maturity date range	November 2018 - June 2020
Aggregate principal balance on corresponding mortgage loans (in thousands)	$	993,826
Interest rate floors (1) (2)
Notional amount (in thousands)	$	6,850,000
Strike rate minimum	(0.25		)%
Strike rate maximum	1.50		%
Maturity date range	March 2019 - July 2020

_______________

⁽¹⁾  No instruments were designated as cash flow hedges

⁽²⁾  Cash collateral is posted by us as well as our counterparties. We offset the fair value of the derivative and the obligation/right to return/reclaim cash collateral.

Credit Default Swap Derivatives—We use credit default swaps, tied to the CMBX index, to hedge financial and capital market risk. A credit default swap is a derivative contract that functions like an insurance policy against the credit risk of an entity or obligation. The seller of protection assumes the credit risk of the reference obligation from the buyer (us) of protection in exchange for annual premium payments. If a default or a loss, as defined in the credit default swap agreements, occurs on the underlying bonds, then the buyer of protection is protected against those losses. The only liability for us, the buyer, is the annual premium and any change in value of the underlying CMBX index (if the trade is terminated prior to maturity). For all CMBX trades completed to date, we were the buyer of protection. Credit default swaps are subject to master-netting settlement arrangements and credit support annexes. As of June 30, 2018, we held a credit default swap with a notional amount of $50.0 million, an effective date of August 2017 and an expected maturity date of October 2026. Assuming the underlying bonds pay off at par over their remaining average life, our estimated total exposure for these trades was approximately $2.3 million as of June 30, 2018. Cash collateral is posted by us as well as our counterparties. We offset the fair value of the derivative and the obligation/right to return/reclaim cash collateral. The change in market value of credit default swaps is settled net through posting cash collateral or reclaiming cash collateral between us and our counterparties when such change in market value is over $250,000.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair Value Hierarchy—Our financial instruments measured at fair value either on a recurring or a non-recurring basis are classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs in the market place as discussed below:

• Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets.

• Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

• Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.

The fair value of interest rate caps is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rates of the caps. The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves (LIBOR forward curves) and volatilities (the Level 2 inputs). We also incorporate credit valuation adjustments (the Level 3 inputs) to appropriately reflect both our own non-performance risk and the respective counterparty’s non-performance risk.

Fair value of credit default swaps are obtained from a third party who publishes various information including the index composition and price data (Level 2 inputs). The fair value of credit default swaps does not contain credit-risk-related adjustments as the change in fair value is settled net through posting cash collateral or reclaiming cash collateral between us and our counterparty.

The fair value of interest rate floors is calculated using a third-party discounted cash flow model based on future cash flows that are expected to be received over the remaining life of the floor. These expected future cash flows are probability-weighted projections based on the contract terms, accounting for both the magnitude and likelihood of potential payments, which are both computed using the appropriate LIBOR forward curve and market implied volatilities as of the valuation date (Level 2 inputs).

The fair value of options on futures contracts is determined based on the last reported settlement price as of the measurement date (Level 1 inputs). These exchange-traded options are centrally cleared, and a clearinghouse stands in between all trades to ensure that the obligations involved in the trades are satisfied.

When a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when the valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counter-parties, which we consider significant (10% or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy. Transfers of inputs between levels are determined at the end of each reporting period. In determining the fair values of our derivatives at June 30, 2018, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 2.090% to 2.848% for the remaining term of our derivatives. Credit spreads (Level 3 inputs) used in determining the fair values of hedge and non-hedge designated derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands):

	Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting(1)		Total
June 30, 2018
Assets
Derivative assets:
Interest rate derivatives - floors	$	—	$	33	$	—	$	41	$	74
Interest rate derivatives - caps	—		92		—		—		92
Credit default swaps	—		222		—		619		841
	—		347		—		660		1,007		(2)
Non-derivative assets:
Investment in Ashford Inc.	12,628		—		—		—		12,628
Total	$	12,628	$	347	$	—	$	660	$	13,635

	Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting(1)		Total
December 31, 2017
Assets
Derivative assets:
Interest rate derivatives - floors	$	—	$	118	$	—	$	12	$	130
Interest rate derivatives - caps	—		4		—		—		4
Credit default swaps	—		102		—		358		460
	—		224		—		370		594		(2)
Non-derivative assets:
Investment in Ashford Inc.	18,124		—		—		—		18,124
Total	$	18,124	$	224	$	—	$	370	$	18,718

__________________

⁽¹⁾  Represents net cash collateral posted between us and our counterparties.

⁽²⁾  Reported as “derivative assets” in our condensed consolidated balance sheets.

Effect of Fair Value Measured Assets and Liabilities on Condensed Consolidated Statements of Operations

The following table summarizes the effect of fair value measured assets and liabilities on the condensed consolidated statements of operations (in thousands):

	Gain (Loss) Recognized in Income
	Three Months Ended June 30,								Six Months Ended June 30,
	2018				2017				2018				2017
Assets
Derivative assets:
Interest rate derivatives - floors	$	(57	)		$	(135	)		$	(84	)		$	(894	)
Interest rate derivatives - caps	(256		)		(61		)		(261		)		(317		)
Credit default swaps	15			(1)	—				120			(1)	—
Options on futures contracts	—				(19		)		—				(58		)
Non-derivative assets:
Investment in Ashford Inc.	(6,024		)		(1,563		)		(5,496		)		1,528
Total	$	(6,322	)		$	(1,778	)		$	(5,721	)		$	259
Total combined
Interest rate derivatives - floors	$	(57	)		$	(135	)		$	(84	)		$	(894	)
Interest rate derivatives - caps	(256		)		(61		)		(261		)		(317		)
Credit default swaps	15				—				120				—
Options on futures contracts	—				96				—				213
Unrealized gain (loss) on derivatives	(298		)		(100		)		(225		)		(998		)
Realized gain (loss) on options on futures contracts	—				(115		)	(2)	—				(271		)	(2)
Unrealized gain (loss) on investment in Ashford Inc.	(6,024		)		(1,563		)		(5,496		)		1,528
Net	$	(6,322	)		$	(1,778	)		$	(5,721	)		$	259

_______________

⁽¹⁾  Excludes costs of $63 and $126 associated with credit default swaps for the three and six months endedJune 30, 2018 included in “other income (expense)” in our condensed consolidated statements of operations.

⁽²⁾  Included in “other income (expense)” in our condensed consolidated statements of operations.

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Summary of Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2018

Investments, All Other Investments [Abstract]

Summary of Fair Value of Financial Instruments

Summary of Fair Value of Financial Instruments

Determining the estimated fair values of certain financial instruments such as notes receivable and indebtedness requires considerable judgment to interpret market data. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled.

The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):

	June 30, 2018				December 31, 2017
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets and liabilities measured at fair value:
Investment in Ashford Inc.	$	12,628	$	12,628	$	18,124	$	18,124
Derivative assets	1,007		1,007		594		594
Financial assets not measured at fair value:
Cash and cash equivalents	$	169,235	$	169,235	$	137,522	$	137,522
Restricted cash	83,096		83,096		47,820		47,820
Accounts receivable, net	22,338		22,338		14,334		14,334
Insurance receivable	—		—		8,825		8,825
Note receivable	—		—		8,098		8,020 to 8,864
Due from related party, net	588		588		349		349
Due from third-party hotel managers	5,522		5,522		4,589		4,589
Financial liabilities not measured at fair value:
Indebtedness	$	993,826	$942,117 to $1,041,287		$	826,236	$ 780,243 to $ 862,372
Accounts payable and accrued expenses	63,976		63,976		56,803		56,803
Dividends and distributions payable	8,572		8,572		8,146		8,146
Due to Ashford Inc.	1,100		1,100		1,703		1,703
Due to third-party hotel managers	2,299		2,299		1,709		1,709

Cash, cash equivalents and restricted cash. These financial assets have maturities of less than 90 days and most bear interest at market rates. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.

Accounts receivable, net, insurance receivable, due from related party, net, accounts payable and accrued expenses, dividends and distributions payable, due to Ashford Inc. and due to/from third-party hotel managers. The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique.

Note receivable. Fair value of the note receivable was determined by using similar loans with similar collateral. Since there is very little to no trading activity, we relied on our internal analysis of what we believe a willing buyer would pay for this note at December 31, 2017. We estimated the fair value of the note receivable to be approximately 1.0% lower to 9.5% higher than the carrying value of $8.1 million at December 31, 2017. This is considered a Level 2 valuation technique.

Investment in Ashford Inc. Fair value of the investment in Ashford Inc. is based on the quoted closing price on the balance sheet date. This is considered a Level 1 valuation technique.

Derivative assets. Fair value of interest rate derivatives is determined using the net present value of expected cash flows of each derivative based on the market-based interest rate curve and adjusted for credit spreads of us and our counterparties. Fair value of credit default swaps are obtained from a third party who publishes the CMBX index composition and price data. Fair values of interest rate floors are calculated using a third-party discounted cash flow model based on future cash flows that are expected to be received over the remaining life of the floor. See notes 10 and 11 for a complete description of the methodology and assumptions utilized in determining fair values.

Indebtedness. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. The current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied, and adjusted for the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral. We estimated the fair value of the total indebtedness to be approximately 94.8% to 104.8% of the carrying value of $993.8 million at June 30, 2018, and approximately 94.4% to 104.4% of the carrying value of $826.2 million at December 31, 2017. This is considered a Level 2 valuation technique.

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Redeemable Noncontrolling Interests in Operating Partnership

6 Months Ended

Jun. 30, 2018

Noncontrolling Interest [Abstract]

Redeemable Noncontrolling Interests in Operating Partnership

Redeemable Noncontrolling Interests in Operating Partnership

Redeemable noncontrolling interests in the operating partnership represents the limited partners’ proportionate share of equity and their allocable share of equity in earnings/losses of Braemar OP, which is an allocation of net income/loss attributable to the common unitholders based on the weighted average ownership percentage of these limited partners’ common units of limited partnership interest in the operating partnership (“common units”) and units issued under our Long-Term Incentive Plan (the “LTIP units”) that are vested. Each common unit may be redeemed, by the holder, for either cash or, at our sole discretion, up to one share of our REIT common stock, which is either (i) issued pursuant to an effective registration statement; (ii) included in an effective registration statement providing for the resale of such common stock; or (iii) issued subject to a registration rights agreement.

LTIP units, which are issued to certain executives and employees of Ashford LLC as compensation, generally have vesting periods of three years. Additionally, certain independent members of the board of directors have elected to receive LTIP units as part of their compensation, which are fully vested upon grant. Upon reaching economic parity with common units, each vested LTIP unit can be converted by the holder into one common unit which can then be redeemed for cash or, at our election, settled in our common stock. An LTIP unit will achieve parity with the common units upon the sale or deemed sale of all or substantially all of the assets of our operating partnership at a time when our stock is trading at a level in excess of the price it was trading on the date of the LTIP issuance. More specifically, LTIP units will achieve full economic parity with common units in connection with (i) the actual sale of all or substantially all of the assets of our operating partnership or (ii) the hypothetical sale of such assets, which results from a capital account revaluation, as defined in the partnership agreement, for our operating partnership.

The compensation committee of the board of directors of the Company approves performance-based LTIP units to certain executive officers from time to time. The award agreements provide for the grant of a target number of performance-based LTIP units that will be settled in common units of Braemar OP, if and when the applicable vesting criteria have been achieved following the end of the performance and service period. The target number of performance-based LTIP units may be adjusted from 0% to 200% based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s Compensation Committee on the grant date. As of June 30, 2018, there are approximately 804,000 performance-based LTIP units, representing 200% of the target, outstanding. The performance criteria for the performance-based LTIP units are based on market conditions under the relevant literature, and the performance-based LTIP units were granted to non-employees.

As of June 30, 2018, we have issued a total of 1.9 million LTIP units (including performance-based LTIP units), net of forfeitures, all of which, other than approximately 295,000 LTIP units and 1.2 million performance based LTIP units issued from March 2015 to March 2018 had reached full economic parity with, and are convertible into, common units.

The following table presents compensation expense for performance LTIP units and LTIP units (in thousands):

		Three Months Ended June 30,						Six Months Ended June 30,
Type	Line Item	2018		2017				2018		2017
Performance LTIP units	Advisory services fee	$	286	$	(57	)	(1)	$	294	$	(1,104	)	(1)
LTIP units	Advisory services fee	$	302	$	130			$	438	$	173
LTIP units	Corporate, general and administrative	$	—	$	64			$	—	$	64

____________________________________

⁽¹⁾  The credit to compensation expense is a result of lower fair values as compared to prior periods.

The unamortized fair value of performance-based LTIP units of $2.1 million at June 30, 2018 will be expensed over a period of 2.5 years, subject to future mark to market adjustments. The fair value of the unrecognized cost of LTIP units of $2.4 million at June 30, 2018, will be amortized over a period of 2.7 years, subject to future mark to market adjustments.

During the three and six months ended June 30, 2017, approximately 1,000 and 6,000 common units, with an aggregate redemption fair value of $15,000 and $82,000, were redeemed by the holders and, at our election, we issued shares of our common stock to satisfy the redemption. During the three and six months ended June 30, 2018, no common units were redeemed.

The following table presents the redeemable noncontrolling interests in Braemar OP (in thousands) and the corresponding approximate ownership percentage of our operating partnership:

	June 30, 2018			December 31, 2017
Redeemable noncontrolling interests in Braemar OP	$	47,818		$	46,627
Adjustments to redeemable noncontrolling interests (1)	558			—
Ownership percentage of operating partnership	11.17		%	11.43		%

____________________________________

⁽¹⁾  to reflect the excess of the redemption value over the accumulated historical costs^. 

We allocated net income (loss) to the redeemable noncontrolling interests and declared aggregate cash distributions to the holders of common units and holders of LTIP units, which are recorded as a reduction of redeemable noncontrolling interests in operating partnership, as illustrated in the table below (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
Allocated net income (loss) to the redeemable noncontrolling interests	$	(1,235	)	$	343	$	(1,527	)	$	598
Aggregate distributions to holders of common units, LTIP units and performance LTIP units	$	822		$	859	$	1,644		$	1,649

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Equity and Stock-Based Compensation

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Equity and Stock-Based Compensation

Equity and Stock-Based Compensation

Dividends—The following table summarizes the common stock dividends declared during the period (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Common stock dividends declared	$	5,200	$	5,112	$	10,403	$	10,195

Performance Stock Units—The compensation committee of the board of directors of the Company approves grants of PSUs to certain executive officers from time to time. The award agreements provide for the grant of a target number of PSUs that will be settled in shares of common stock of the Company, if and when the applicable vesting criteria have been achieved following the end of the performance and service period, generally, three years from the issuance date. The target number of PSUs may be adjusted from 0% to 200% based on achievement of a specified relative total stockholder return based on the formula determined by the Company’s Compensation Committee on the grant date. The performance criteria for the PSUs are based on market conditions under the relevant literature, and the PSUs were granted to non-employees. At June 30, 2018, the outstanding PSUs had a fair value of $3.1 million.

The following table summarizes the compensation expense for PSUs (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
Line Item	2018		2017			2018		2017
Advisory services fee	$	292	$	(8	)	$	1,869	$	(808	)

During the six months ended June 30, 2018, approximately $1.6 million of the compensation expense was related to the accelerated vesting of PSUs granted to one of our executive officers upon his passing, in accordance with the terms of the awards. These amounts are included in “advisory services fee” on our condensed consolidated statements of operations.

As of June 30, 2018, we had unamortized compensation expense of $2.6 million related to PSUs which is expected to be recognized over a period of 2.5 years, subject to future mark to market adjustments.

Restricted Stock Units—We incur stock-based compensation expense in connection with restricted stock units awarded to employees of Ashford LLC, included in “advisory services fee,” on our condensed consolidated statements of operations, employees of Remington Lodging, included in “management fees” on our condensed consolidated statements of operations and common stock issued to our independent directors, which immediately vests, and is included in “corporate general and administrative” expense on our condensed consolidated statements of operations.

At June 30, 2018, the outstanding restricted shares had a fair value of $5.6 million. At June 30, 2018, the unamortized cost of the unvested shares of restricted stock was $4.9 million, which will be expensed over a period of 3.3 years, subject to future mark to market adjustments, and have vesting dates between March 2019 and November 2021.

The following table summarizes the stock-based compensation expense for restricted stock units (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Line Item	2018		2017		2018		2017
Advisory services fee	$	498	$	271	$	1,323	$	389
Management fees	64		34		111		34
Corporate general and administrative	—		163		—		181
	$	562	$	468	$	1,434	$	604

During the six months ended June 30, 2018, approximately $640,000 of the compensation expense was related to the accelerated vesting of equity awards granted to one of our executive officers upon his passing, in accordance with the terms of the awards.

Stock Repurchases—On December 5, 2017, our board of directors reapproved the stock repurchase program pursuant to which the board of directors granted a repurchase authorization to acquire shares of the Company’s common stock, par value $0.01 per share having an aggregate value of up to $50 million. The board of directors’ authorization replaced any previous repurchase authorizations.

No shares were repurchased during the three and six months ended June 30, 2018 and 2017, pursuant to this authorization. As of June 30, 2018, we have purchased a cumulative 4.3 million shares of our common stock, for approximately $63.2 million, since the program’s inception on November 4, 2014.

At-the-Market Equity Distribution Program—On December 11, 2017, the Company established an “at-the-market” equity distribution program pursuant to which it may, from time to time, sell shares of its Common Stock having an aggregate offering price of up to $50 million. As of June 30, 2018, no shares of our common stock have been sold under this program.

Noncontrolling Interest in Consolidated Entities—A partner had noncontrolling ownership interests of 25% in two hotel properties with a total carrying value of $(5.2) million and $(4.8) million at June 30, 2018 and December 31, 2017, respectively.

The following table summarizes the (income) loss allocated to noncontrolling interests in consolidated entities (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
(Income) loss allocated to noncontrolling interests	$	(89	)	$	(1,614	)	$	(47	)	$	(1,593	)

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5.5% Series B Cumulative Convertible Preferred Stock

6 Months Ended

Jun. 30, 2018

Temporary Equity Disclosure [Abstract]

5.5% Series B Cumulative Convertible Preferred Stock

5.5% Series B Cumulative Convertible Preferred Stock

Each share of our 5.5% Series B Cumulative Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) is convertible at any time, at the option of the holder, into a number of whole shares of common stock at an initial conversion price of $18.90 (which represents an initial conversion rate of 1.3228 shares of our common stock, subject to certain adjustments). The Series B Convertible Preferred Stock is also subject to conversion upon certain events constituting a change of control. Holders of the Series B Convertible Preferred Stock have no voting rights, subject to certain exceptions.

The Company may, at its option, cause the Series B Convertible Preferred Stock to be converted in whole or in part, on a pro-rata basis, into fully paid and nonassessable shares of the Company’s common stock at the conversion price, provided that the “Closing Bid Price” (as defined in the Articles Supplementary) of the Company’s common stock shall have equaled or exceeded 110% of the conversion price for the immediately preceding 45 consecutive trading days ending three days prior to the date of notice of conversion. In the event of such mandatory conversion, the Company shall pay holders of the Series B Convertible Preferred Stock any additional dividend payment to make the holder whole on dividends expected to be received through June 11, 2019, in an amount equal to the net present value, where the discount rate is the dividend rate on the Series B Convertible Preferred Stock, of the difference between (i) the annual dividend payments the holders of Series B Convertible Preferred Stock would have received in cash from the date of the mandatory conversion to June 11, 2019, and (ii) the common stock quarterly dividend payments the holders of Series B Convertible Preferred Stock would have received over the same time period had such holders held common stock.

On March 7, 2017, we closed an offering of approximately 2.0 million shares of our Series B Convertible Preferred Stock at $20.19 per share for gross proceeds of $39.9 million. The net proceeds to us, after underwriting discounts and offering expenses were approximately $38.2 million. Dividends on the Series B Convertible Preferred Stock accrue at a rate of 5.50% on the liquidation preference of $25.00 per share. On March 31, 2017, the underwriters partially exercised their over-allotment option and purchased an additional 100,000 shares of the Series B Convertible Preferred Stock, which closed on April 5, 2017. The net proceeds from the partial exercise of the over-allotment option after underwriting discounts were approximately $1.9 million.

At June 30, 2018, we had 5.0 million outstanding shares of Series B Convertible Preferred Stock that do not meet the requirements for permanent equity classification prescribed by the authoritative guidance because of certain cash redemption features that are outside our control. As such, the Series B Convertible Preferred Stock is classified outside of permanent equity.

The Series B Convertible Preferred Stock dividend for all issued and outstanding shares is set at $1.375 per annum per share.

The following table summarizes dividends declared (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Series B convertible preferred stock	$	1,708	$	1,707	$	3,415	$	3,380

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Restricted Cash—Under certain management and debt agreements for our hotel properties existing at June 30, 2018, escrow payments are required for insurance, real estate taxes and debt service. In addition, for certain properties based on the terms of the underlying debt and management agreements, we escrow 4% to 5% of gross revenues for capital improvements.

Management Fees—Under management agreements for our hotel properties existing at June 30, 2018, we pay a) monthly property management fees equal to the greater of $13,000 (increased annually based on consumer price index adjustments) or 3% of gross revenues, or in some cases 2% to 7% of gross revenues, as well as annual incentive management fees, if applicable, b) project management fees of up to 4% of project costs, c) market service fees including purchasing, design and construction management not to exceed 16.5% of project management budget cumulatively, including project management fees, and d) other general fees at current market rates as approved by our independent directors, if required. These management agreements expire from December 2019 through December 2065, with renewal options. If we terminate a management agreement prior to its expiration, we may be liable for estimated management fees through the remaining term, liquidated damages or, in certain circumstances, we may substitute a new management agreement.

Income Taxes—We and our subsidiaries file income tax returns in the federal jurisdiction and various states. Tax years 2014 through 2017 remain subject to potential examination by certain federal and state taxing authorities.

Litigation—We are engaged in various legal proceedings which have arisen but have not been fully adjudicated. The likelihood of loss from these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible and to probable. Based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position or results of operations. However, the final results of legal proceedings cannot be predicted with certainty and if we fail to prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position or results of operations could be materially adversely affected in future periods.

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Segment Reporting

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

We operate in one business segment within the hotel lodging industry: direct hotel investments. Direct hotel investments refer to owning hotel properties through either acquisition or new development. We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments have similar economic characteristics and exhibit similar long-term financial performance. As of June 30, 2018 and December 31, 2017, all of our hotel properties were in the U.S. and its territories.

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Related Party Transactions

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Ashford LLC, a subsidiary of Ashford Inc., acts as our advisor, and as a result, we pay advisory fees to Ashford LLC. We are required to pay Ashford LLC a monthly base fee that is 1/12th of 0.70% of our total market capitalization plus the Key Money Asset Management Fee (defined in our advisory agreement as the aggregate gross asset value of all key money assets multiplied by 1/12th of 0.70%), subject to a minimum monthly base fee, as payment for managing our day-to-day operations in accordance with our investment guidelines. Total market capitalization includes the aggregate principal amount of our consolidated indebtedness (including our proportionate share of debt of any entity that is not consolidated but excluding our joint venture partners’ proportionate share of consolidated debt). We are also required to pay Ashford LLC an incentive fee that is measured annually. Each year that our annual total stockholder return exceeds the average annual total stockholder return for our peer group, we will pay Ashford LLC an incentive fee over the following three years, subject to the Fixed Charge Coverage Ratio (“FCCR”) Condition, as defined in the advisory agreement, which relates to the ratio of adjusted EBITDA to fixed charges. We also reimburse Ashford LLC for certain reimbursable overhead and internal audit, risk management advisory and asset management services, as specified in the advisory agreement. We also record equity-based compensation expense for equity grants of common stock and LTIP units awarded to our officers and employees of Ashford LLC in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period.

The following table summarizes the advisory services fees incurred (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Advisory services fee
Base advisory fee	$	2,313	$	2,276	$	4,420	$	4,279
Reimbursable expenses (1)	499		532		919		1,079
Equity-based compensation (2)	1,377		335		3,924		(1,350		)
Incentive fee	691		—		861		—
Total	$	4,880	$	3,143	$	10,124	$	4,008

________

⁽¹⁾  Reimbursable expenses include overhead, internal audit, risk management advisory and asset management services.

⁽²⁾  Equity-based compensation is associated with equity grants of Braemar’s common stock, PSUs, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC.

In connection with the acquisition of the Bardessono Hotel in 2015 and Ashford Inc.’s engagement to provide hotel advisory services to us, Ashford Inc. agreed to provide $2.0 million of key money consideration in the form of furniture, fixtures and equipment to be used by Braemar. This arrangement is accounted for as a lease, in accordance with the applicable accounting guidance. As such, a portion of the base advisory fee is allocated to lease expense equal to the estimated fair value of the lease payments that would have been made. Lease expense of $84,000 and $168,000 was recognized for the three and six months ended June 30, 2018, respectively, and was included in “other” hotel expense in the consolidated statements of operations. For the three and six months ended June 30, 2017, this expense was $84,000 and $168,000.

Certain employees of Remington Lodging, who perform work on behalf of Braemar, were granted approximately 22,000 and 21,000 shares of restricted stock under the Braemar Stock Plan in 2017 and 2018, respectively. These share grants were accounted for under the applicable accounting guidance related to share-based payments granted to non-employees and are recorded as a component of “management fees” in our condensed consolidated statements of operations. For the three and six months ended June 30, 2018, expense related to such grants was $64,000 and $111,000, respectively. For both the three and six months ended June 30, 2017, expense related to such grants was $34,000. The unamortized fair value of these grants was $429,000 as of June 30, 2018, which will be amortized over a period of 2.7 years.

In accordance with our advisory agreement, our advisor, or entities in which our advisor has an interest, have a right to provide products or services to our hotel properties, provided such transactions are evaluated and approved by our independent directors. The following tables summarize the entities in which our advisor has an interest with which we or our hotel properties contracted for products and services, the amounts paid by us for those services and the applicable classification on our condensed consolidated financial statements (in thousands):

		Three Months Ended June 30, 2018
Company	Product or Service	Transaction Amount		Investments in Hotel Properties, net (1)		Indebtedness, net (2)			Other Hotel Expenses		Corporate General and Administrative
OpenKey	Mobile key app	$	4	$	—	$	—		$	4	$	—
Pure Rooms	“Allergy friendly” premium rooms	10		—		—			10		—
RED Leisure	Watersports activities and travel/transportation services	180		—		—			180		—
Lismore Capital	Mortgage placement services	999		—		(999		)	—		—
Ashford LLC	Insurance claims services	31		—		—			—		31

________

⁽¹⁾  Recorded in furniture, fixtures and equipment and depreciated over the estimated useful life.

⁽²⁾  Recorded as deferred loan costs, which are included in “indebtedness, net” on our consolidated balance sheets and amortized over the initial term of the applicable loan agreement.

		Six Months Ended June 30, 2018
Company	Product or Service	Transaction Amount		Investments in Hotel Properties, net (1)		Indebtedness, net (2)			Other Hotel Expenses		Corporate General and Administrative
OpenKey	Mobile key app	$	12	$	—	$	—		$	12	$	—
Pure Rooms	“Allergy friendly” premium rooms	19		—		—			19		—
RED Leisure	Watersports activities and travel/transportation services	360		—		—			360		—
Lismore Capital	Mortgage placement services	999		—		(999		)	—		—
Ashford LLC	Insurance claims services	69		—		—			—		69

________

⁽¹⁾  Recorded in furniture, fixtures and equipment and depreciated over the estimated useful life.

⁽²⁾  Recorded as deferred loan costs, which are included in “indebtedness, net” on our consolidated balance sheets and amortized over the initial term of the applicable loan agreement.

The following table summarizes the due to Ashford Inc. (in thousands):

		June 30, 2018		December 31, 2017
Company	Product or Service	Due to Ashford Inc.
Ashford LLC	Advisory services	$	1,065	$	1,654
Ashford LLC	Insurance claims services	32		—
OpenKey	Mobile key app	3		4
Pure Rooms	“Allergy friendly” premium rooms	—		45
		$	1,100	$	1,703

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed consolidated financial statements include the accounts of Braemar Hotels & Resorts Inc., its majority-owned subsidiaries, and its majority-owned entities in which it has a controlling interest. All significant intercompany accounts and transactions between consolidated entities have been eliminated in these condensed consolidated financial statements. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP in the accompanying unaudited condensed consolidated financial statements. We believe the disclosures made herein are adequate to prevent the information presented from being misleading. However, the financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2017 Annual Report on Form 10-K, as originally filed with the Securities and Exchange Commission (“SEC”) on March 14, 2018.

Braemar OP is considered to be a variable interest entity (“VIE”), as defined by authoritative accounting guidance. A VIE must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. All major decisions related to Braemar OP that most significantly impact its economic performance, including but not limited to operating procedures with respect to business affairs and any acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives, are subject to the approval of our wholly-owned subsidiary, Braemar OP General Partner LLC (formerly Ashford Prime OP General Partner LLC), its general partner. As such, we consolidate Braemar OP.

The following items affect reporting comparability of our historical condensed consolidated financial statements:

• historical seasonality patterns at some of our hotel properties cause fluctuations in our overall operating results. Consequently, operating results for the three and six months ended June 30, 2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018;

• on March 31, 2017, we acquired the Park Hyatt Beaver Creek and on May 11, 2017, we acquired the Hotel Yountville. The operating results of these hotel properties have been included in our results of operations as of their acquisition dates;

• on November 1, 2017, we sold the Plano Marriott Legacy Town Center;

• on April 4, 2018, we acquired the Ritz-Carlton, Sarasota. The operating results of the hotel has been included in the results of operations as of its acquisition date; and

• on June 1, 2018, we sold the Tampa Renaissance.

Use of Estimates

Use of Estimates—The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Restricted Cash

Restricted Cash—Restricted cash includes reserves for debt service, real estate taxes and insurance, as well as excess cash flow deposits and reserves for furniture, fixtures and equipment replacements of approximately 4% to 5% of property revenue for certain hotels, as required by certain management or mortgage debt agreement restrictions and provisions.

Impairment of Investments in Hotel Properties

Impairment of Investments in Hotel Properties—Hotel properties are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of the hotel is measured by comparison of the carrying amount of the hotel to the estimated future undiscounted cash flows, which take into account current market conditions and our intent with respect to holding or disposing of the hotel. If our analysis indicates that the carrying value of the hotel is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the property’s net book value exceeds its estimated fair value, or fair value, less cost to sell. In evaluating the impairment of hotel properties, we make many assumptions and estimates, including projected cash flows, expected holding period and expected useful life. Fair value is determined through various valuation techniques, including internally developed discounted cash flow models, comparable market transactions and third-party appraisals, where considered necessary. Asset write-downs resulting from property damage are recorded up to the amount of the allocable property insurance deductible in the period that the property damage occurs. See note 4.

Investment in Ashford Inc.

Investment in Ashford Inc.—We hold approximately 195,000 shares of Ashford Inc. common stock, which represented an approximate 9.2% ownership interest in Ashford Inc. and had a fair value of $12.6 million at June 30, 2018. This investment would typically be accounted for under the equity method of accounting, under Accounting Standard Codification (“ASC”) 323-10 - Investments - Equity Method and Joint Ventures since we exercise significant influence. However, we have elected to record our investment in Ashford Inc. using the fair value option under ASC 825-10 - Fair Value Option - Financial Assets and Financial Liabilities.

Investment in Unconsolidated Entity

Investment in Unconsolidated Entity—Investment in unconsolidated entity, in which we have ownership interest of 8.2% at June 30, 2018, is accounted for under the equity method of accounting by recording the initial investment and our percentage of interest in the entities’ net income/loss. We review our investment in unconsolidated entity for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. An investment is impaired when its estimated fair value is less than the carrying amount of our investment. Any impairment is recorded in equity in earnings (loss) in unconsolidated entity. No such impairment was recorded for the three and six months ended June 30, 2018.

Our investment in unconsolidated entity is considered to be a variable interest in the underlying entity. VIEs, as defined by authoritative accounting guidance, must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Because we do not have the power and financial responsibility to direct the unconsolidated entity’s activities and operations, we are not considered to be the primary beneficiary of this entity on an ongoing basis and therefore such entity should not be consolidated. In evaluating VIEs, our analysis involves considerable management judgment and assumptions.

Equity-Based Compensation

Equity-Based Compensation—Stock/unit-based compensation for non-employees is accounted for at fair value based on the market price of the shares at period end in accordance with applicable authoritative accounting guidance that results in recording expense, included in “advisory services fee” and “management fees,” equal to the fair value of the award in proportion to the requisite service period satisfied during the period. Performance stock units (“PSUs”) and performance-based Long-Term Incentive Plan (“LTIP”) units granted to certain executive officers are accounted for at fair value at period end based on a Monte Carlo simulation valuation model that results in recording expense, included in “advisory services fee,” equal to the fair value of the award in proportion to the requisite service period satisfied during the period. Stock/unit grants to independent directors are recorded at fair value based on the market price of the shares at grant date, which amount is fully expensed as the grants of stock/units are fully vested on the date of grant and included in “corporate general and administrative” expense in the condensed consolidated statements of operations.

Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards—In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model, which requires a company to recognize revenue to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The update replaces most existing revenue recognition guidance in U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date, which defers the effective date to fiscal periods beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect (modified) transition method. This standard, referred to as “Topic 606,” does not materially affect the amount or timing of revenue recognition for revenues from room, food and beverage, and other hotel level sales. Additionally, we have historically disposed of hotel properties for cash sales with no contingencies and no future involvement in the hotel operations. Therefore, Topic 606 does not impact the recognition of hotel sales. We adopted this standard effective January 1, 2018, under the modified retrospective method, and the adoption of this standard did not have a material impact on our condensed consolidated financial statements. See related disclosures in note 3.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in other comprehensive income the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available-for-sale (“AFS”) debt securities in combination with other deferred tax assets. ASU 2016-01 provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. It also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Certain provisions of ASU 2016-01 are eligible for early adoption. We adopted this standard effective January 1, 2018. The adoption of this standard did not have a material impact on our condensed consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments - a consensus of the Emerging Issues Task Force (“ASU 2016-15”). The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Certain issues addressed in this guidance include - debt payments or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, distributions received from equity method investments and beneficial interests in securitization transactions. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We adopted this standard effective January 1, 2018 on a prospective basis as there were no required changes as a result of adoption. The adoption of this standard did not have a material impact on our consolidated statement of cash flows.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether a transaction should be accounted for as an acquisition (or disposal) of an asset or a business. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. We adopted this standard effective January 1, 2018. Under the new standard, certain future hotel acquisitions may be considered asset acquisitions rather than business combinations, which would affect capitalization of acquisitions costs (such costs are expensed for business combinations and capitalized for asset acquisitions).

In February 2017, the FASB issued ASU 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (ASU “2017-05”), which clarifies the scope of ASC Subtopic 610-20, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets and adds guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. An entity may elect to apply ASU 2017-05 under a retrospective or modified retrospective method. We adopted this standard effective January 1, 2018, under the modified retrospective method. The adoption of this standard did not have a material impact on our condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Standards—In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases ("ASU 2018-10"). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02, including but not limited to lease residual value guarantee, rate implicit in the lease, lease term and purchase option. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases ("ASU 2018-10") and ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”). The amendments in ASU 2018-10 affect only narrow aspects of the guidance issued in the amendments in ASU 2016-02, including but not limited to lease residual value guarantee, rate implicit in the lease, lease term and purchase option and etc. The amendments in ASU 2018-11 provide an optional transition method for adoption of the new standard, which will allow entities to continue to apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented in the year of adoption. ASU 2016-02 is effective for annual and interim periods for fiscal years beginning after December 15, 2018, which will require us to adopt these provisions in the first quarter of 2019 on a modified retrospective basis. The accounting for leases under which we are the lessor remains largely unchanged. While we continue evaluating our lease portfolio to assess the impact that ASU 2016-02 will have on our condensed consolidated financial statements, we expect the primary impact to our condensed consolidated financial statements upon adoption will be the recognition, on a discounted basis, of our future minimum rentals due under noncancelable leases on our condensed consolidated balance sheets resulting in the recording of ROU assets and lease obligations. We disclosed $175.4 million in undiscounted future minimum rentals due under non-cancelable leases in note 13 of our most recent 10-K. We are involving our property managers and implementing repeatable processes to manage ongoing lease data collection and analysis, and evaluating accounting policies and internal controls that will be impacted by the new standards.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The ASU sets forth an “expected credit loss” impairment model to replace the current “incurred loss” method of recognizing credit losses. The standard requires measurement and recognition of expected credit losses for most financial assets held. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for periods beginning after December 15, 2018. We are currently evaluating the impact that ASU 2016-13 will have on our consolidated financial statements and related disclosures.

In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07"). The ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees and aligns the guidance for share-based payments to non-employees with the requirements for share-based payments granted to employees. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that ASU 2018-07 will have on the condensed consolidated financial statements and related disclosures and expect that the associated compensation expense of the majority of our equity awards will be based on the grant date fair value.

Revenue Recognition

Rooms revenue represents revenues from the occupancy of our hotel rooms and is driven by the occupancy and average daily rate charged. Rooms revenue includes revenue for guest no-shows, day use, and early/late departure fees. The contracts for room stays with customers are generally short in duration and revenues are recognized as services are provided over the course of the hotel stay.

Food & Beverage (“F&B”) revenue consists of revenue from the restaurants and lounges at our hotel properties, In-room dining and mini-bars revenue, and banquet/catering revenue from group and social functions. Other F&B revenue may include revenue from audio-visual equipment/services, rental of function rooms, and other F&B related revenues. Revenue is recognized as the services or products are provided. Our hotel properties may employ third parties to provide certain services at the property, for example, audio visual services. We evaluate each of these contracts to determine if the hotel is the principal or the agent in the transaction, and record the revenues as appropriate (i.e. gross vs. net).

Other revenue consists of ancillary revenue at the property, including attrition and cancellation fees, condo management fees, resort and destination fees, health center fees, spas, golf, telecommunications, parking, entertainment and other guest services, as well as rental revenue, primarily consisting of leased retail outlets at our hotel properties, and membership initiation fees and dues, primarily from club memberships. Attrition and cancellation fees are recognized for non-cancellable deposits when the customer provides notification of cancellation within established management policy time frames. Non-refundable membership initiation fees are recognized over the expected life of an active membership. For the three and six months ended June 30, 2018, the Company recorded $3.3 million of business interruption income for the Tampa Renaissance related to a settlement for lost profits from the BP Deepwater Horizon oil spill in the Gulf of Mexico in 2010.

Taxes collected from customers and submitted to taxing authorities are not recorded in revenue. Interest income is recognized when earned. We discontinue recording interest and amortizing discounts/premiums when the contractual payment of interest and/or principal is not received when contractually due.

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Revenue (Tables)

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following tables present our revenue disaggregated by geographical areas (in thousands):

	Three Months Ended June 30, 2018
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	23,535	$	5,649	$	2,379	$	—	$	31,563
Colorado	1	1,761		1,745		1,731		—		5,237
Florida	2	10,807		7,053		3,172		—		21,032
Illinois	1	7,783		2,569		371		—		10,723
Pennsylvania	1	8,351		1,719		303		—		10,373
Washington	1	9,050		1,701		361		—		11,112
Washington, D.C.	1	12,791		3,896		337		—		17,024
USVI	1	1,472		132		5,253		—		6,857
Sold hotel properties	1	2,889		929		3,379		—		7,197
Corporate entities	—	—		—		—		—		—
Total	13	$	78,439	$	25,393	$	17,286	$	—	$	121,118

	Three Months Ended June 30, 2017
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	19,655	$	5,435	$	2,764	$	—	$	27,854
Colorado	1	1,717		1,544		1,685		—		4,946
Florida	1	4,687		1,139		335		—		6,161
Illinois	1	7,824		2,377		185		—		10,386
Pennsylvania	1	7,781		1,298		346		—		9,425
Washington	1	8,761		2,614		293		—		11,668
Washington, D.C.	1	12,516		4,109		372		—		16,997
USVI	1	7,329		4,552		2,215		—		14,096
Sold hotel properties	2	9,179		4,912		431		—		14,522
Corporate entities	—	—		—		—		37		37
Total	13	$	79,449	$	27,980	$	8,626	$	37	$	116,092

	Six Months Ended June 30, 2018
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	42,639	$	12,954	$	5,854	$	—	$	61,447
Colorado	1	11,558		6,564		5,274		—		23,396
Florida	2	16,280		7,856		3,923		—		28,059
Illinois	1	11,202		3,820		581		—		15,603
Pennsylvania	1	14,504		2,892		600		—		17,996
Washington	1	14,552		3,365		626		—		18,543
Washington, D.C.	1	21,752		8,236		620		—		30,608
USVI	1	3,288		331		9,799		—		13,418
Sold hotel properties	1	8,171		2,875		3,491		—		14,537
Corporate entities	—	—		—		—		—		—
Total	13	$	143,946	$	48,893	$	30,768	$	—	$	223,607

	Six Months Ended June 30, 2017
Primary Geographical Market	Number of Hotels	Rooms		Food and Beverage		Other Hotel		Other		Total
California	4	$	36,579	$	11,452	$	4,164	$	—	$	52,195
Colorado	1	1,717		1,544		1,685		—		4,946
Florida	1	10,369		2,073		696		—		13,138
Illinois	1	11,297		3,590		285		—		15,172
Pennsylvania	1	12,741		2,277		529		—		15,547
Washington	1	14,174		4,443		549		—		19,166
Washington, D.C.	1	23,390		8,760		682		—		32,832
USVI	1	17,072		8,071		4,628		—		29,771
Sold hotel properties	2	19,528		10,243		773		—		30,544
Corporate entities	—	—		—		—		77		77
Total	13	$	146,867	$	52,453	$	13,991	$	77	$	213,388

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Investment in Hotel Properties, net (Tables)

6 Months Ended

Jun. 30, 2018

Property, Plant and Equipment [Abstract]

Schedule of Investment in Hotel Properties

Investments in hotel properties, net consisted of the following (in thousands):

	June 30, 2018			December 31, 2017
Land	$	428,567		$	344,937
Buildings and improvements	982,275			962,478
Furniture, fixtures and equipment	95,443			87,796
Construction in progress	13,726			7,899
Total cost	1,520,011			1,403,110
Accumulated depreciation	(241,928		)	(257,268		)
Investments in hotel properties, net	$	1,278,083		$	1,145,842

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table summarizes the preliminary estimated fair value of the assets acquired in the acquisition (in thousands):

Land (1)	$	83,630
Buildings and improvements	86,316
Furniture, fixtures and equipment	13,740
Customer relationships	5,682
Refundable membership club deposits (2)	(9,960		)
Income guarantee (3)	2,000
	$	181,408
Net other assets (liabilities)	$	(3,533	)

________

⁽¹⁾  Amount includes the$9.7 million, 22-acre plot of vacant land.

⁽²⁾  Recorded within “other liabilities” on our condensed consolidated balance sheets.

⁽³⁾  Recorded within “other assets” on our condensed consolidated balance sheets.

Business Acquisition, Pro Forma Information

The following table reflects the unaudited pro forma results of operations as if the acquisitions had occurred and the applicable indebtedness was incurred on January 1, 2017, and the removal of $462,000 and $949,000 of non-recurring transaction costs directly attributable to the acquisitions for the three and six months ended June 30, 2018 (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017
Total revenue	$	121,763	$	136,590		$	243,680	$	248,128
Net income (loss)	13,617		1,390			20,842		2,037
Net income (loss) attributable to common stockholders	10,500		(1,705		)	15,437		(2,578		)
Pro Forma income per share:
Basic	$	0.32	$	(0.06	)	$	0.47	$	(0.10	)
Diluted	$	0.31	$	(0.06	)	$	0.47	$	(0.10	)
Weighted average common shares outstanding (in thousands):
Basic	32,006		31,469			31,845		29,380
Diluted	38,588		31,469			35,971		29,380

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Hotel Dispositions (Tables)

6 Months Ended

Jun. 30, 2018

Discontinued Operations and Disposal Groups [Abstract]

Condensed financial information from hotel property

The following table includes the condensed financial information from this hotel property (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Total hotel revenue	$	7,197		$	14,522		$	14,537		$	30,544
Total hotel operating expenses	(2,521		)	(9,029		)	(7,499		)	(19,082		)
Operating income (loss)	4,676			5,493			7,038			11,462
Property taxes, insurance and other	(217		)	(735		)	(486		)	(1,372		)
Depreciation and amortization	(357		)	(2,180		)	(1,294		)	(4,301		)
Impairment charges	—			—			(12		)	—
Gain (loss) on sale of hotel property	15,711			—			15,711			—
Interest expense and amortization of loan costs	(303		)	(1,115		)	(791		)	(2,137		)
Income (loss) before income taxes	19,510			1,463			20,166			3,652
(Income) loss before income taxes attributable to redeemable noncontrolling interests in operating partnership	(2,179		)	(171		)	(2,253		)	(428		)
Income (loss) before income taxes attributable to the Company	$	17,331		$	1,292		$	17,913		$	3,224

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Investment in Unconsolidated Entity (Tables)

6 Months Ended

Jun. 30, 2018

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

Ashford Inc.

Condensed Consolidated Balance Sheets

(unaudited)

	June 30, 2018		December 31, 2017
Total assets	$	138,145	$	114,810
Total liabilities	90,331		78,742
Redeemable noncontrolling interests	4,852		5,111
Total stockholders’ equity of Ashford Inc.	41,541		30,185
Noncontrolling interests in consolidated entities	1,421		772
Total equity	42,962		30,957
Total liabilities and equity	$	138,145	$	114,810
Our investment in Ashford Inc., at fair value	$	12,628	$	18,124

Ashford Inc.

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Total revenue	$	54,811		$	19,639		$	102,979		$	32,652
Total operating expenses	(43,941		)	(18,221		)	(97,145		)	(33,370		)
Operating income (loss)	10,870			1,418			5,834			(718		)
Realized and unrealized gain (loss) on investments	—			(16		)	—			(91		)
Other	(333		)	10			(426		)	128
Income tax (expense) benefit	(1,605		)	(8,643		)	(2,311		)	(9,273		)
Net income (loss)	8,932			(7,231		)	3,097			(9,954		)
(Income) loss from consolidated entities attributable to noncontrolling interests	118			190			291			165
Net (income) loss attributable to redeemable noncontrolling interests	(90		)	332			(151		)	695
Net income (loss) attributable to Ashford Inc.	$	8,960		$	(6,709	)	$	3,237		$	(9,094	)
Our unrealized gain (loss) on investment in Ashford Inc.	$	(6,024	)	$	(1,563	)	$	(5,496	)	$	1,528

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Indebtedness (Tables)

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Indebtedness

Indebtedness consisted of the following (in thousands):

Indebtedness	Collateral	Maturity	Interest Rate	June 30, 2018			December 31, 2017
Secured revolving credit facility(3)	None	November 2019	Base Rate (2) + 1.25% to 2.50% or LIBOR(1) + 2.25% to 3.50%	$	—		$	—
TIF loan(4)	Courtyard Philadelphia	June 2018	12.85%	—			8,098
Mortgage loan(5)	Ritz-Carlton, St. Thomas	December 2018	LIBOR(1) + 4.95%	42,000			42,000
Mortgage loan(6) (7)	Courtyard Philadelphia	February 2019	LIBOR(1) + 2.58%	—			277,628
	Courtyard San Francisco
	Marriott Seattle Waterfront
	Tampa Renaissance
Mortgage loan(6)	Sofitel Chicago Magnificent Mile	March 2019	LIBOR(1) + 2.55%	—			80,000
Mortgage loan(8)	Pier House Resort	March 2019	LIBOR(1) + 2.25%	70,000			70,000
Mortgage loan(9)	Park Hyatt Beaver Creek	April 2019	LIBOR(1) + 2.75%	67,500			67,500
Mortgage loan(10)	Capital Hilton	November 2019	LIBOR(1) + 2.65%	188,326			190,010
	Hilton La Jolla Torrey Pines
Mortgage loan(6)	Courtyard Philadelphia	June 2020	LIBOR(1) + 2.16%	435,000			—
	Courtyard San Francisco
	Marriott Seattle Waterfront
	Sofitel Chicago Magnificent Mile
Mortgage loan	Hotel Yountville	May 2022	LIBOR(1) + 2.55%	51,000			51,000
Mortgage loan	Bardessono Hotel	August 2022	LIBOR(1) + 2.55%	40,000			40,000
Mortgage loan	Ritz-Carlton, Sarasota	April 2023	LIBOR(1) + 2.65%	100,000			—
				993,826			826,236
Deferred loan costs, net				(8,621		)	(5,277		)
Indebtedness, net				$	985,205		$	820,959

__________________

⁽¹⁾  LIBOR rates were 2.090% and 1.564% at June 30, 2018 and December 31, 2017, respectively.

⁽²⁾  Base Rate, as defined in the secured revolving credit facility agreement, is the greater of (i) the prime rate set by Bank of America, (ii) federal funds rate + 0.5%, or (iii) LIBOR + 1.0%.

⁽³⁾  Our borrowing capacity under our secured revolving credit facility is $100.0 million. We have an option, subject to lender approval, to further increase the borrowing capacity to an aggregate of $250.0 million. We may use up to $15.0 million for standby letters of credit. The secured revolving credit facility has twoone-year extension options subject to advance notice, satisfaction of certain conditions and a 0.25% extension fee.

⁽⁴⁾  The TIF loan matured on June 30, 2018. See note 6.

⁽⁵⁾  This mortgage loan has threeone-year extension options, subject to satisfaction of certain conditions, of which the first was exercised in December 2017.

⁽⁶⁾  On May 23, 2018, we refinanced two mortgage loans totaling $357.6 million with a new $435.0 million mortgage loan with a two-year initial term and fiveone-year extension options subject to the satisfaction of certain conditions. The new mortgage loan is interest only and bears interest at a rate of LIBOR + 2.16%.

⁽⁷⁾  A portion of this mortgage loan at December 31, 2017 relates to the Tampa Renaissance, which was sold on June 1, 2018. See note 5.

⁽⁸⁾  This mortgage loan has threeone-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in March 2018.

⁽⁹⁾  This mortgage loan has threeone-year extension options, subject to satisfaction of certain conditions.

⁽¹⁰⁾  This mortgage loan has twoone-year extension options, subject to satisfaction of certain conditions.

⁽¹¹⁾  The Ritz-Carlton, Sarasota property was acquired on April 4, 2018. The new mortgage loan is a five-year interest-only loan and bears interest at a rate of LIBOR + 2.65%.

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Income (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Summary of amounts used in calculating basic and diluted earnings (loss) per share

The following table reconciles the amounts used in calculating basic and diluted income (loss) per share (in thousands, except per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income (loss) attributable to common stockholders - basic and diluted:
Net income (loss) attributable to the Company	$	11,530		$	(885	)	$	15,550		$	(898	)
Less: Dividends on preferred stock	(1,708		)	(1,707		)	(3,415		)	(3,380		)
Less: Dividends on common stock	(5,122		)	(5,036		)	(10,238		)	(10,069		)
Less: Dividends on unvested performance stock units	(72		)	(86		)	(144		)	(153		)
Less: Dividends on unvested restricted shares	(78		)	(75		)	(165		)	(125		)
Less: Net (income) loss allocated to unvested restricted shares	(70		)	—			(24		)	—
Undistributed net income (loss) allocated to common stockholders	4,480			(7,789		)	1,564			(14,625		)
Add back: Dividends on common stock	5,122			5,036			10,238			10,069
Distributed and undistributed net income (loss) - basic	$	9,602		$	(2,753	)	$	11,802		$	(4,556	)
Dividends on preferred stock	1,708			—			—			—
Distributed and undistributed net income (loss) - diluted	$	11,310		$	(2,753	)	$	11,802		$	(4,556	)
Weighted average common shares outstanding:
Weighted average common shares outstanding – basic	32,006			31,469			31,845			29,380
Effect of assumed conversion of preferred stock	6,569			—			—			—
Incentive fee shares	13			—			8			—
Weighted average common shares outstanding – diluted	38,588			31,469			31,853			29,380
Income (loss) per share - basic:
Net income (loss) allocated to common stockholders per share	$	0.30		$	(0.09	)	$	0.37		$	(0.16	)
Income (loss) per share - diluted:
Net income (loss) allocated to common stockholders per share	$	0.29		$	(0.09	)	$	0.37		$	(0.16	)

Summary of computation of diluted income per share

Due to their anti-dilutive effect, the computation of diluted income (loss) per share does not reflect the adjustments for the following items (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017
Net income (loss) allocated to common stockholders is not adjusted for:
Income (loss) allocated to unvested restricted shares	$	148	$	75		$	189	$	125
Income (loss) allocated to unvested performance stock units	72		86			144		153
Income (loss) attributable to redeemable noncontrolling interests in operating partnership	1,235		(343		)	1,527		(598		)
Dividends on preferred stock	—		1,707			3,415		3,380
Total	$	1,455	$	1,525		$	5,275	$	3,060
Weighted average diluted shares are not adjusted for:
Effect of unvested restricted shares	41		113			45		82
Effect of unvested performance stock units	—		—			8		—
Effect of assumed conversion of operating partnership units	4,114		4,290			4,119		4,256
Effect of assumed conversion of preferred stock	—		6,560			6,569		5,555
Effect of incentive fee shares	—		124			—		153
Total	4,155		11,087			10,741		10,046

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments

During the six months endedJune 30, 2018 and 2017, we entered into interest rate caps as summarized in the table below:

	Six Months Ended June 30,
	2018			2017
Notional amount (in thousands)	$	685,000		$	619,500
Strike rate minimum	2.43		%	3.00		%
Strike rate maximum	7.80		%	5.35		%
Effective date range	February 2018 - May 2018			January 2017 - May 2017
Maturity date range	March 2019 - June 2020			March 2018 - May 2019
Total cost of interest rate cap (in thousands)	$	348		$	338

_______________

No instruments were designated as cash flow hedges

As of June 30, 2018, we held interest rate instruments as summarized in the table below:

Interest rate caps (1)
Notional amount (in thousands)	$	1,393,200
Strike rate minimum	2.43		%
Strike rate maximum	11.61		%
Effective date range	January 2017 - May 2018
Maturity date range	November 2018 - June 2020
Aggregate principal balance on corresponding mortgage loans (in thousands)	$	993,826
Interest rate floors (1) (2)
Notional amount (in thousands)	$	6,850,000
Strike rate minimum	(0.25		)%
Strike rate maximum	1.50		%
Maturity date range	March 2019 - July 2020

_______________

⁽¹⁾  No instruments were designated as cash flow hedges

⁽²⁾  Cash collateral is posted by us as well as our counterparties. We offset the fair value of the derivative and the obligation/right to return/reclaim cash collateral.

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands):

	Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting(1)		Total
June 30, 2018
Assets
Derivative assets:
Interest rate derivatives - floors	$	—	$	33	$	—	$	41	$	74
Interest rate derivatives - caps	—		92		—		—		92
Credit default swaps	—		222		—		619		841
	—		347		—		660		1,007		(2)
Non-derivative assets:
Investment in Ashford Inc.	12,628		—		—		—		12,628
Total	$	12,628	$	347	$	—	$	660	$	13,635

	Quoted Market Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting(1)		Total
December 31, 2017
Assets
Derivative assets:
Interest rate derivatives - floors	$	—	$	118	$	—	$	12	$	130
Interest rate derivatives - caps	—		4		—		—		4
Credit default swaps	—		102		—		358		460
	—		224		—		370		594		(2)
Non-derivative assets:
Investment in Ashford Inc.	18,124		—		—		—		18,124
Total	$	18,124	$	224	$	—	$	370	$	18,718

__________________

⁽¹⁾  Represents net cash collateral posted between us and our counterparties.

⁽²⁾  Reported as “derivative assets” in our condensed consolidated balance sheets.

Effect of Fair Value Measured Assets and Liabilities on Consolidated Statements of Operations

The following table summarizes the effect of fair value measured assets and liabilities on the condensed consolidated statements of operations (in thousands):

	Gain (Loss) Recognized in Income
	Three Months Ended June 30,								Six Months Ended June 30,
	2018				2017				2018				2017
Assets
Derivative assets:
Interest rate derivatives - floors	$	(57	)		$	(135	)		$	(84	)		$	(894	)
Interest rate derivatives - caps	(256		)		(61		)		(261		)		(317		)
Credit default swaps	15			(1)	—				120			(1)	—
Options on futures contracts	—				(19		)		—				(58		)
Non-derivative assets:
Investment in Ashford Inc.	(6,024		)		(1,563		)		(5,496		)		1,528
Total	$	(6,322	)		$	(1,778	)		$	(5,721	)		$	259
Total combined
Interest rate derivatives - floors	$	(57	)		$	(135	)		$	(84	)		$	(894	)
Interest rate derivatives - caps	(256		)		(61		)		(261		)		(317		)
Credit default swaps	15				—				120				—
Options on futures contracts	—				96				—				213
Unrealized gain (loss) on derivatives	(298		)		(100		)		(225		)		(998		)
Realized gain (loss) on options on futures contracts	—				(115		)	(2)	—				(271		)	(2)
Unrealized gain (loss) on investment in Ashford Inc.	(6,024		)		(1,563		)		(5,496		)		1,528
Net	$	(6,322	)		$	(1,778	)		$	(5,721	)		$	259

_______________

⁽¹⁾  Excludes costs of $63 and $126 associated with credit default swaps for the three and six months endedJune 30, 2018 included in “other income (expense)” in our condensed consolidated statements of operations.

⁽²⁾  Included in “other income (expense)” in our condensed consolidated statements of operations.

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Summary of Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2018

Investments, All Other Investments [Abstract]

Schedule of Carrying Amounts and Estimated Fair Values of Financial Instruments

The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):

	June 30, 2018				December 31, 2017
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets and liabilities measured at fair value:
Investment in Ashford Inc.	$	12,628	$	12,628	$	18,124	$	18,124
Derivative assets	1,007		1,007		594		594
Financial assets not measured at fair value:
Cash and cash equivalents	$	169,235	$	169,235	$	137,522	$	137,522
Restricted cash	83,096		83,096		47,820		47,820
Accounts receivable, net	22,338		22,338		14,334		14,334
Insurance receivable	—		—		8,825		8,825
Note receivable	—		—		8,098		8,020 to 8,864
Due from related party, net	588		588		349		349
Due from third-party hotel managers	5,522		5,522		4,589		4,589
Financial liabilities not measured at fair value:
Indebtedness	$	993,826	$942,117 to $1,041,287		$	826,236	$ 780,243 to $ 862,372
Accounts payable and accrued expenses	63,976		63,976		56,803		56,803
Dividends and distributions payable	8,572		8,572		8,146		8,146
Due to Ashford Inc.	1,100		1,100		1,703		1,703
Due to third-party hotel managers	2,299		2,299		1,709		1,709

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Redeemable Noncontrolling Interests in Operating Partnership (Tables)

6 Months Ended

Jun. 30, 2018

Noncontrolling Interest [Abstract]

Schedule of Share-based Compensation

The following table presents compensation expense for performance LTIP units and LTIP units (in thousands):

		Three Months Ended June 30,						Six Months Ended June 30,
Type	Line Item	2018		2017				2018		2017
Performance LTIP units	Advisory services fee	$	286	$	(57	)	(1)	$	294	$	(1,104	)	(1)
LTIP units	Advisory services fee	$	302	$	130			$	438	$	173
LTIP units	Corporate, general and administrative	$	—	$	64			$	—	$	64

Redeemable Noncontrolling Interest

The following table presents the redeemable noncontrolling interests in Braemar OP (in thousands) and the corresponding approximate ownership percentage of our operating partnership:

	June 30, 2018			December 31, 2017
Redeemable noncontrolling interests in Braemar OP	$	47,818		$	46,627
Adjustments to redeemable noncontrolling interests (1)	558			—
Ownership percentage of operating partnership	11.17		%	11.43		%

____________________________________

⁽¹⁾  to reflect the excess of the redemption value over the accumulated historical costs^. 

We allocated net income (loss) to the redeemable noncontrolling interests and declared aggregate cash distributions to the holders of common units and holders of LTIP units, which are recorded as a reduction of redeemable noncontrolling interests in operating partnership, as illustrated in the table below (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
Allocated net income (loss) to the redeemable noncontrolling interests	$	(1,235	)	$	343	$	(1,527	)	$	598
Aggregate distributions to holders of common units, LTIP units and performance LTIP units	$	822		$	859	$	1,644		$	1,649

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Equity and Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Dividends

The following table summarizes the common stock dividends declared during the period (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Common stock dividends declared	$	5,200	$	5,112	$	10,403	$	10,195

Schedule of Compensation Cost

The following table summarizes the stock-based compensation expense for restricted stock units (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Line Item	2018		2017		2018		2017
Advisory services fee	$	498	$	271	$	1,323	$	389
Management fees	64		34		111		34
Corporate general and administrative	—		163		—		181
	$	562	$	468	$	1,434	$	604

The following table summarizes the compensation expense for PSUs (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
Line Item	2018		2017			2018		2017
Advisory services fee	$	292	$	(8	)	$	1,869	$	(808	)

Schedule of Noncontrolling Interest in Consolidated Entities

The following table summarizes the (income) loss allocated to noncontrolling interests in consolidated entities (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
(Income) loss allocated to noncontrolling interests	$	(89	)	$	(1,614	)	$	(47	)	$	(1,593	)

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5.5% Series B Cumulative Convertible Preferred Stock 1 (Tables)

6 Months Ended

Jun. 30, 2018

Temporary Equity Disclosure [Abstract]

Schedule of Dividends Declared

The following table summarizes dividends declared (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Series B convertible preferred stock	$	1,708	$	1,707	$	3,415	$	3,380

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Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

The following table summarizes the advisory services fees incurred (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Advisory services fee
Base advisory fee	$	2,313	$	2,276	$	4,420	$	4,279
Reimbursable expenses (1)	499		532		919		1,079
Equity-based compensation (2)	1,377		335		3,924		(1,350		)
Incentive fee	691		—		861		—
Total	$	4,880	$	3,143	$	10,124	$	4,008

________

⁽¹⁾  Reimbursable expenses include overhead, internal audit, risk management advisory and asset management services.

⁽²⁾  Equity-based compensation is associated with equity grants of Braemar’s common stock, PSUs, LTIP units and Performance LTIP units awarded to officers and employees of Ashford LLC.

The following tables summarize the entities in which our advisor has an interest with which we or our hotel properties contracted for products and services, the amounts paid by us for those services and the applicable classification on our condensed consolidated financial statements (in thousands):

		Three Months Ended June 30, 2018
Company	Product or Service	Transaction Amount		Investments in Hotel Properties, net (1)		Indebtedness, net (2)			Other Hotel Expenses		Corporate General and Administrative
OpenKey	Mobile key app	$	4	$	—	$	—		$	4	$	—
Pure Rooms	“Allergy friendly” premium rooms	10		—		—			10		—
RED Leisure	Watersports activities and travel/transportation services	180		—		—			180		—
Lismore Capital	Mortgage placement services	999		—		(999		)	—		—
Ashford LLC	Insurance claims services	31		—		—			—		31

________

⁽¹⁾  Recorded in furniture, fixtures and equipment and depreciated over the estimated useful life.

⁽²⁾  Recorded as deferred loan costs, which are included in “indebtedness, net” on our consolidated balance sheets and amortized over the initial term of the applicable loan agreement.

		Six Months Ended June 30, 2018
Company	Product or Service	Transaction Amount		Investments in Hotel Properties, net (1)		Indebtedness, net (2)			Other Hotel Expenses		Corporate General and Administrative
OpenKey	Mobile key app	$	12	$	—	$	—		$	12	$	—
Pure Rooms	“Allergy friendly” premium rooms	19		—		—			19		—
RED Leisure	Watersports activities and travel/transportation services	360		—		—			360		—
Lismore Capital	Mortgage placement services	999		—		(999		)	—		—
Ashford LLC	Insurance claims services	69		—		—			—		69

________

⁽¹⁾  Recorded in furniture, fixtures and equipment and depreciated over the estimated useful life.

⁽²⁾  Recorded as deferred loan costs, which are included in “indebtedness, net” on our consolidated balance sheets and amortized over the initial term of the applicable loan agreement.

The following table summarizes the due to Ashford Inc. (in thousands):

		June 30, 2018		December 31, 2017
Company	Product or Service	Due to Ashford Inc.
Ashford LLC	Advisory services	$	1,065	$	1,654
Ashford LLC	Insurance claims services	32		—
OpenKey	Mobile key app	3		4
Pure Rooms	“Allergy friendly” premium rooms	—		45
		$	1,100	$	1,703

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Organization and Description of Business (Details)	Jun. 30, 2018 hotel state
Real Estate Properties [Line Items]
Number of hotel properties managed by related party	3
Number of hotels	12
Number of states in which entity operates | state	6
Number of rooms	3,549
Number of rooms owned, net of partnership interest	3,314
Wholly Owned Properties
Real Estate Properties [Line Items]
Number of hotels	10
Consolidated Properties
Real Estate Properties [Line Items]
Number of hotels	2
Leased by Wholly-Owned or Majority-Owned Taxable REIT Subsidiaries
Real Estate Properties [Line Items]
Number of hotels	11
US Virgin Islands Taxable REIT Subsidiary
Real Estate Properties [Line Items]
Number of hotels	1
Leased by Ashford Prime Wholly-Owned Taxable REIT Subsidiary
Real Estate Properties [Line Items]
Number of hotels	9

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Significant Accounting Policies (Details) - USD ($) shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Significant Accounting Policies [Line Items]
Ownership percentage	8.20%		8.20%
Investment in unconsolidated entity					$ 0
Impairment of unconsolidated entities	$ 0	$ 0	$ 0	$ 0
Undiscounted future minimum rentals due under non-cancelable leases					$ 175,400,000
Ashford Inc.
Significant Accounting Policies [Line Items]
Investment owned (in shares)	195		195		195
Ownership percentage	9.20%		9.20%		9.30%
Investment in unconsolidated entity	$ 12,628,000		$ 12,628,000		$ 18,124,000
Minimum | Restricted Cash
Significant Accounting Policies [Line Items]
Replacement reserve escrow as percentage of property revenue			4.00%
Maximum | Restricted Cash
Significant Accounting Policies [Line Items]
Replacement reserve escrow as percentage of property revenue			5.00%

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Revenue (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($) hotel	Jun. 30, 2017 USD ($) hotel	Jun. 30, 2018 USD ($) hotel	Jun. 30, 2017 USD ($) hotel
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	12		12
Revenue	$ 121,118	$ 116,092	$ 223,607	$ 213,388
California
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	4	4	4	4
Revenue	$ 31,563	$ 27,854	$ 61,447	$ 52,195
Colorado
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	1	1	1	1
Revenue	$ 5,237	$ 4,946	$ 23,396	$ 4,946
Florida
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	2	1	2	1
Revenue	$ 21,032	$ 6,161	$ 28,059	$ 13,138
Illinois
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	1	1	1	1
Revenue	$ 10,723	$ 10,386	$ 15,603	$ 15,172
Pennsylvania
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	1	1	1	1
Revenue	$ 10,373	$ 9,425	$ 17,996	$ 15,547
Washington
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	1	1	1	1
Revenue	$ 11,112	$ 11,668	$ 18,543	$ 19,166
Washington, D.C.
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	1	1	1	1
Revenue	$ 17,024	$ 16,997	$ 30,608	$ 32,832
USVI
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	1	1	1	1
Revenue	$ 6,857	$ 14,096	$ 13,418	$ 29,771
Sold hotel properties
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	1	2	1	2
Revenue	$ 7,197	$ 14,522	$ 14,537	$ 30,544
Corporate entities
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	0	0	0	0
Revenue	$ 0	$ 37	$ 0	$ 77
Total
Disaggregation of Revenue [Line Items]
Number of hotels | hotel	13	13	13	13
Rooms
Disaggregation of Revenue [Line Items]
Revenue	$ 78,439	$ 79,449	$ 143,946	$ 146,867
Rooms | California
Disaggregation of Revenue [Line Items]
Revenue	23,535	19,655	42,639	36,579
Rooms | Colorado
Disaggregation of Revenue [Line Items]
Revenue	1,761	1,717	11,558	1,717
Rooms | Florida
Disaggregation of Revenue [Line Items]
Revenue	10,807	4,687	16,280	10,369
Rooms | Illinois
Disaggregation of Revenue [Line Items]
Revenue	7,783	7,824	11,202	11,297
Rooms | Pennsylvania
Disaggregation of Revenue [Line Items]
Revenue	8,351	7,781	14,504	12,741
Rooms | Washington
Disaggregation of Revenue [Line Items]
Revenue	9,050	8,761	14,552	14,174
Rooms | Washington, D.C.
Disaggregation of Revenue [Line Items]
Revenue	12,791	12,516	21,752	23,390
Rooms | USVI
Disaggregation of Revenue [Line Items]
Revenue	1,472	7,329	3,288	17,072
Rooms | Sold hotel properties
Disaggregation of Revenue [Line Items]
Revenue	2,889	9,179	8,171	19,528
Rooms | Corporate entities
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Food and Beverage
Disaggregation of Revenue [Line Items]
Revenue	25,393	27,980	48,893	52,453
Food and Beverage | California
Disaggregation of Revenue [Line Items]
Revenue	5,649	5,435	12,954	11,452
Food and Beverage | Colorado
Disaggregation of Revenue [Line Items]
Revenue	1,745	1,544	6,564	1,544
Food and Beverage | Florida
Disaggregation of Revenue [Line Items]
Revenue	7,053	1,139	7,856	2,073
Food and Beverage | Illinois
Disaggregation of Revenue [Line Items]
Revenue	2,569	2,377	3,820	3,590
Food and Beverage | Pennsylvania
Disaggregation of Revenue [Line Items]
Revenue	1,719	1,298	2,892	2,277
Food and Beverage | Washington
Disaggregation of Revenue [Line Items]
Revenue	1,701	2,614	3,365	4,443
Food and Beverage | Washington, D.C.
Disaggregation of Revenue [Line Items]
Revenue	3,896	4,109	8,236	8,760
Food and Beverage | USVI
Disaggregation of Revenue [Line Items]
Revenue	132	4,552	331	8,071
Food and Beverage | Sold hotel properties
Disaggregation of Revenue [Line Items]
Revenue	929	4,912	2,875	10,243
Food and Beverage | Corporate entities
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Other Hotel
Disaggregation of Revenue [Line Items]
Revenue	17,286	8,626	30,768	13,991
Other Hotel | California
Disaggregation of Revenue [Line Items]
Revenue	2,379	2,764	5,854	4,164
Other Hotel | Colorado
Disaggregation of Revenue [Line Items]
Revenue	1,731	1,685	5,274	1,685
Other Hotel | Florida
Disaggregation of Revenue [Line Items]
Revenue	3,172	335	3,923	696
Other Hotel | Illinois
Disaggregation of Revenue [Line Items]
Revenue	371	185	581	285
Other Hotel | Pennsylvania
Disaggregation of Revenue [Line Items]
Revenue	303	346	600	529
Other Hotel | Washington
Disaggregation of Revenue [Line Items]
Revenue	361	293	626	549
Other Hotel | Washington, D.C.
Disaggregation of Revenue [Line Items]
Revenue	337	372	620	682
Other Hotel | USVI
Disaggregation of Revenue [Line Items]
Revenue	5,253	2,215	9,799	4,628
Other Hotel | Sold hotel properties
Disaggregation of Revenue [Line Items]
Revenue	3,379	431	3,491	773
Other Hotel | Corporate entities
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Other
Disaggregation of Revenue [Line Items]
Revenue	0	37	0	77
Other | California
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Other | Colorado
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Other | Florida
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Other | Illinois
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Other | Pennsylvania
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Other | Washington
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Other | Washington, D.C.
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Other | USVI
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Other | Sold hotel properties
Disaggregation of Revenue [Line Items]
Revenue	0	0	0	0
Other | Corporate entities
Disaggregation of Revenue [Line Items]
Revenue	0	$ 37	0	$ 77
Renaissance Tampa
Disaggregation of Revenue [Line Items]
Revenue from business interruption losses	$ 3,300		$ 3,300

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Investment in Hotel Properties, net (Investments in Hotel Properties, Net) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Property, Plant and Equipment [Abstract]
Land	$ 428,567	$ 344,937
Buildings and improvements	982,275	962,478
Furniture, fixtures and equipment	95,443	87,796
Construction in progress	13,726	7,899
Total cost	1,520,011	1,403,110
Accumulated depreciation	(241,928)	(257,268)
Investments in hotel properties, net	$ 1,278,083	$ 1,145,842

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Investment in Hotel Properties, net (Impairment Charges and Insurance Recoveries) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Impairment charges	$ 59	$ 0	$ 71	$ 0	$ 1,100
Remediation and other costs					3,800
Insurance receivable	0		0		8,825
Insurance deductible					4,900
Proceeds for business interruption losses					11,100
Deductible					1,100
Reduction to insurance receivable					3,700
Reimbursement of incurred expense					3,300
Proceeds from insurance carriers	34,000		34,000
Liability for excess of the sum of its impairment, remediation expenses and business interruption revenue recorded	10,400		10,400
Bardessono Hotel and Hotel Yountville
Property, Plant and Equipment [Line Items]
Insurance deductible			500
Revenue from business interruption losses	190		1,900
Other Hotel Revenue
Property, Plant and Equipment [Line Items]
Proceeds for business interruption losses					$ 4,100
Revenue from business interruption losses	$ 5,200		$ 10,100

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Investment in Hotel Properties, net (Acquisition) (Details) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
	Apr. 04, 2018 USD ($) a room	Jun. 30, 2018 USD ($) hotel $ / shares shares	Jun. 30, 2017 USD ($) $ / shares shares	Jun. 30, 2018 USD ($) hotel $ / shares shares	Jun. 30, 2017 USD ($) $ / shares shares	Dec. 31, 2017 USD ($)	Aug. 18, 2017 USD ($)
Business Acquisition [Line Items]
Number of rooms | hotel		3,549		3,549
Preliminary and final allocations
Land	$ 83,630
Buildings and improvements	86,316
Furniture, fixtures and equipment	13,740
Customer relationships	5,682
Refundable membership club deposits (2)	(9,960)
Income guarantee (3)	2,000
Assets acquired, liabilities assumed, net	181,408
Net other assets (liabilities)	$ (3,533)
Transaction costs		$ 461	$ 2,066	$ 949	$ 6,394
Pro Forma Financial Results
Indebtedness, gross		993,826		993,826		$ 826,236
Mortgages | Mortgage Loan 10
Business Acquisition [Line Items]
Number of rooms | room	266
Pro Forma Financial Results
Indebtedness, gross		100,000		100,000			$ 0
Ritz-Carlton Sarasota, Florida
Business Acquisition [Line Items]
Ownership interest acquired	100.00%
Number of rooms | room	266
Consideration transferred	$ 171,700
Preliminary and final allocations
Total revenue		15,100		15,100
Earnings (loss)		719		719
Transaction costs		462		949
Pro Forma Financial Results
Total revenue		121,763	136,590	243,680	248,128
Net income (loss)		13,617	1,390	20,842	2,037
Net income (loss) attributable to common stockholders		$ 10,500	$ (1,705)	$ 15,437	$ (2,578)
Basic (in dollars per share) | $ / shares		$ 0.32	$ (0.06)	$ 0.47	$ (0.10)
Diluted (in dollars per share) | $ / shares		$ 0.31	$ (0.06)	$ 0.47	$ (0.10)
Basic (in shares) | shares		32,006	31,469	31,845	29,380
Diluted (in shares) | shares		38,588	31,469	35,971	29,380
22 Acre Plot of Vacant Land
Business Acquisition [Line Items]
Consideration transferred	$ 9,700
Area of Land | a	22

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Hotel Dispositions (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Jun. 01, 2018	Nov. 01, 2017
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain (loss) on sale of hotel property	$ 15,711	$ 0	$ 15,711	$ 0	$ 23,800
Plano Marriott Legacy Town Center | Disposal Group, Disposed of by Sale, Not Discontinued Operations
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Consideration for disposal							$ 104,000
Renaissance Tampa | Disposal Group, Disposed of by Sale, Not Discontinued Operations
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Consideration for disposal						$ 68,000
Gain (loss) on sale of hotel property	15,711	0	15,711	0
Total hotel revenue	7,197	14,522	14,537	30,544
Total hotel operating expenses	(2,521)	(9,029)	(7,499)	(19,082)
Operating income (loss)	4,676	5,493	7,038	11,462
Property taxes, insurance and other	(217)	(735)	(486)	(1,372)
Depreciation and amortization	(357)	(2,180)	(1,294)	(4,301)
Impairment charges	0	0	(12)	0
Interest expense and amortization of loan costs	(303)	(1,115)	(791)	(2,137)
Income (loss) before income taxes	19,510	1,463	20,166	3,652
(Income) loss before income taxes attributable to redeemable noncontrolling interests in operating partnership	(2,179)	(171)	(2,253)	(428)
Income (loss) before income taxes attributable to the Company	$ 17,331	$ 1,292	$ 17,913	$ 3,224

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Note Receivable (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Note receivable	$ 0	$ 8,098
Philadelphia Note
Accounts, Notes, Loans and Financing Receivable [Line Items]
Note receivable		$ 8,100
Interest rate		12.85%

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Investment in Unconsolidated Entity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 28, 2018	Dec. 31, 2017
Schedule of Equity Method Investments [Line Items]
Ownership percentage	8.20%		8.20%
Total assets	$ 1,616,926		$ 1,616,926			$ 1,423,819
Total liabilities	1,082,737		1,082,737			894,517
Redeemable noncontrolling interests in operating partnership	47,818		47,818			46,627
Total stockholders’ equity of Ashford Inc.	385,493		385,493			381,305
Noncontrolling interest in consolidated entities	(5,245)		(5,245)			(4,753)
Total equity	380,248		380,248			376,552
Total liabilities and equity	1,616,926		1,616,926			1,423,819
Investment in unconsolidated entity						$ 0
Total revenue	121,118	$ 116,092	223,607	$ 213,388
Total operating expenses	(99,702)	(103,685)	(187,903)	(193,731)
OPERATING INCOME (LOSS)	21,416	12,407	35,704	19,657
Income tax (expense) benefit	(1,202)	(479)	(1,774)	(1)
NET INCOME (LOSS)	12,854	386	17,124	97
Net (income) loss attributable to redeemable noncontrolling interests	(1,235)	343	(1,527)	598
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	11,530	(885)	15,550	(898)
Our unrealized gain (loss) on investment in Ashford Inc.	(6,024)	(1,563)	(5,496)	1,528
Equity in earnings (loss) of unconsolidated entity	$ (62)	0	$ (65)	0
Ashford Inc.
Schedule of Equity Method Investments [Line Items]
Investment owned (in shares)	195		195			195
Share price (in dollars per share)	$ 64.80		$ 64.80			$ 93.0
Ownership percentage	9.20%		9.20%			9.30%
Total assets	$ 138,145		$ 138,145			$ 114,810
Total liabilities	90,331		90,331			78,742
Redeemable noncontrolling interests in operating partnership	4,852		4,852			5,111
Total stockholders’ equity of Ashford Inc.	41,541		41,541			30,185
Noncontrolling interest in consolidated entities	1,421		1,421			772
Total equity	42,962		42,962			30,957
Total liabilities and equity	138,145		138,145			114,810
Investment in unconsolidated entity	12,628		12,628			$ 18,124
Total revenue	54,811	19,639	102,979	32,652
Total operating expenses	(43,941)	(18,221)	(97,145)	(33,370)
OPERATING INCOME (LOSS)	10,870	1,418	5,834	(718)
Realized and unrealized gain (loss) on investments	0	(16)	0	(91)
Other	(333)	10	(426)	128
Income tax (expense) benefit	(1,605)	(8,643)	(2,311)	(9,273)
NET INCOME (LOSS)	8,932	(7,231)	3,097	(9,954)
(Income) loss from consolidated entities attributable to noncontrolling interests	118	190	291	165
Net (income) loss attributable to redeemable noncontrolling interests	(90)	332	(151)	695
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	8,960	$ (6,709)	3,237	$ (9,094)
OpenKey
Schedule of Equity Method Investments [Line Items]
Ownership percentage					8.20%
Investment in unconsolidated entity	$ 1,935		$ 1,935		$ 2,000

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Indebtedness (Details)				6 Months Ended
	May 23, 2018 USD ($) loan	Aug. 18, 2017 USD ($)	Mar. 31, 2017	Jun. 30, 2018 USD ($) hotel extension	Apr. 04, 2018 room	Dec. 31, 2017 USD ($)	Jun. 30, 2017 USD ($) extension	May 11, 2017 USD ($)	Jan. 18, 2017 USD ($)
Debt Instrument [Line Items]
Indebtedness, gross				$ 993,826,000		$ 826,236,000
Deferred loan costs, net				(8,621,000)		(5,277,000)
Indebtedness, net				$ 985,205,000		$ 820,959,000
LIBOR rate				2.09%		1.564%
Number of rooms | hotel				3,549
Mortgages
Debt Instrument [Line Items]
Number of loans | loan	2
Repayment of debt	$ 357,600,000
Line of Credit | Letter of Credit
Debt Instrument [Line Items]
Borrowing capacity				$ 15,000,000.0
Line of Credit | Senior Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Indebtedness, gross				0		$ 0
Borrowing capacity				100,000,000.0
Further possible expansion				$ 250,000,000.0
Extension fee				0.25%
Number of extension options | extension				2
Term of extension options				1 year
Line of Credit | Senior Revolving Credit Facility [Member] | LIBOR | Minimum
Debt Instrument [Line Items]
Basis spread on variable rate				2.25%
Line of Credit | Senior Revolving Credit Facility [Member] | LIBOR | Maximum
Debt Instrument [Line Items]
Basis spread on variable rate				3.50%
Line of Credit | Senior Revolving Credit Facility [Member] | Base Rate | Minimum
Debt Instrument [Line Items]
Basis spread on variable rate				1.25%
Line of Credit | Senior Revolving Credit Facility [Member] | Base Rate | Maximum
Debt Instrument [Line Items]
Basis spread on variable rate				2.50%
Mortgages | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				1.00%
Mortgages | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate				0.50%
Mortgages | TIF Loan
Debt Instrument [Line Items]
Interest rate				12.85%
Indebtedness, gross				$ 0		8,098,000
Mortgages | Mortgage Loan 1
Debt Instrument [Line Items]
Basis spread on variable rate				4.95%
Indebtedness, gross				$ 42,000,000		42,000,000
Number of extension options | extension				3
Term of extension options				1 year
Mortgages | Mortgage Loan 2
Debt Instrument [Line Items]
Basis spread on variable rate				2.58%
Indebtedness, gross				$ 0					$ 277,628,000
Mortgages | Mortgage Loan 3
Debt Instrument [Line Items]
Basis spread on variable rate				2.55%
Indebtedness, gross				$ 0		80,000,000
Mortgages | Mortgage Loan 4
Debt Instrument [Line Items]
Basis spread on variable rate				2.25%
Indebtedness, gross				$ 70,000,000		70,000,000
Number of extension options | extension				3
Term of extension options				1 year
Mortgages | Mortgage Loan 5
Debt Instrument [Line Items]
Basis spread on variable rate				2.75%
Indebtedness, gross				$ 67,500,000		67,500,000	$ 67,500,000
Number of extension options | extension				3
Term of extension options				1 year
Mortgages | Mortgage Loan 5 | Park Hyatt Beaver Creek
Debt Instrument [Line Items]
Basis spread on variable rate			2.75%
Number of extension options | extension							3
Term of extension options			1 year
Mortgages | Mortgage Loan 6
Debt Instrument [Line Items]
Basis spread on variable rate				2.65%
Indebtedness, gross				$ 188,326,000		190,010,000
Number of extension options | extension				2
Term of extension options				1 year
Mortgages | Mortgage Loan 7
Debt Instrument [Line Items]
Basis spread on variable rate				2.16%
Indebtedness, gross				$ 435,000,000		$ 0
Number of extension options | extension				5
Term of extension options				1 year
Term of debt				2 years
Number of hotels used as collateral | hotel				4
Mortgages | Mortgage Loan 7 | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				2.55%
Mortgages | Mortgage Loan 8
Debt Instrument [Line Items]
Basis spread on variable rate				2.55%
Indebtedness, gross		$ 40,000,000		$ 51,000,000				$ 51,000,000
Mortgages | Mortgage Loan 8 | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate		2.55%
Mortgages | Mortgage Loan 9
Debt Instrument [Line Items]
Basis spread on variable rate				2.55%
Indebtedness, gross		$ 40,000,000		$ 40,000,000
Mortgages | Mortgage Loan 10
Debt Instrument [Line Items]
Basis spread on variable rate				2.65%
Indebtedness, gross		$ 0		$ 100,000,000
Term of debt				5 years
Number of rooms | room					266
Annual amortization				1.00%
Mortgages | Mortgage Loan 10 | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				2.65%

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Income (Loss) Per Share (Reconciliation) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net income (loss) attributable to common stockholders - basic and diluted:
Net income (loss) attributable to the Company	$ 11,530	$ (885)	$ 15,550	$ (898)
Less: Dividends on preferred stock	(1,708)	(1,707)	(3,415)	(3,380)
Undistributed net income (loss) allocated to common stockholders	4,480	(7,789)	1,564	(14,625)
Distributed and undistributed net income (loss) - basic	9,602	(2,753)	11,802	(4,556)
Dividends on preferred stock	1,708	0	0	0
Distributed and undistributed net income (loss) - diluted	$ 11,310	$ (2,753)	$ 11,802	$ (4,556)
Weighted average common shares outstanding:
Weighted average common shares outstanding – basic (in shares)	32,006	31,469	31,845	29,380
Effect of assumed conversion of preferred stock (in shares)	6,569	0	0	0
Incentive fee shares (in shares)	13	0	8	0
Weighted average common shares outstanding – diluted (in shares)	38,588	31,469	31,853	29,380
Income (loss) per share - basic:
Net income (loss) allocated to common stockholders per share (in dollars per share)	$ 0.30	$ (0.09)	$ 0.37	$ (0.16)
Income (loss) per share - diluted:
Net income (loss) allocated to common stockholders per share (in dollars per share)	$ 0.29	$ (0.09)	$ 0.37	$ (0.16)
Performance Shares
Net income (loss) attributable to common stockholders - basic and diluted:
Dividends	$ (72)	$ (86)	$ (144)	$ (153)
Restricted Stock
Net income (loss) attributable to common stockholders - basic and diluted:
Dividends	(78)	(75)	(165)	(125)
Less: Net (income) loss allocated to unvested restricted shares	(70)	0	(24)	0
Common Stock
Net income (loss) attributable to common stockholders - basic and diluted:
Dividends	$ (5,122)	$ (5,036)	$ (10,238)	$ (10,069)

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Income (Loss) Per Share (Antidilutive) (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net income (loss) allocated to common stockholders is not adjusted for:
Dividends on preferred stock	$ 1,708	$ 0	$ 0	$ 0
Total	$ 1,455	$ 1,525	$ 5,275	$ 3,060
Weighted average diluted shares are not adjusted for:
Antidilutive securities excluded (in shares)	4,155	11,087	10,741	10,046
Restricted Stock
Net income (loss) allocated to common stockholders is not adjusted for:
Income (loss) allocated to unvested shares	$ 148	$ 75	$ 189	$ 125
Weighted average diluted shares are not adjusted for:
Antidilutive securities excluded (in shares)	41	113	45	82
Performance Shares
Net income (loss) allocated to common stockholders is not adjusted for:
Income (loss) allocated to unvested shares	$ 72	$ 86	$ 144	$ 153
Weighted average diluted shares are not adjusted for:
Antidilutive securities excluded (in shares)	0	0	8	0
Operating Partnership Units
Net income (loss) allocated to common stockholders is not adjusted for:
Income (loss) attributable to redeemable noncontrolling interests in operating partnership	$ 1,235	$ (343)	$ 1,527	$ (598)
Weighted average diluted shares are not adjusted for:
Antidilutive securities excluded (in shares)	4,114	4,290	4,119	4,256
Preferred Stock
Net income (loss) allocated to common stockholders is not adjusted for:
Dividends on preferred stock	$ 0	$ 1,707	$ 3,415	$ 3,380
Weighted average diluted shares are not adjusted for:
Antidilutive securities excluded (in shares)	0	6,560	6,569	5,555
Incentive Fee Shares [Member]
Weighted average diluted shares are not adjusted for:
Antidilutive securities excluded (in shares)	0	124	0	153

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Derivative Instruments (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Derivative [Line Items]
Aggregate principal balance on corresponding mortgage loans (in thousands)	$ 993,826		$ 826,236
Interest Rate Cap
Derivative [Line Items]
Notional amount	$ 1,393,200
Interest Rate Cap | Minimum
Derivative [Line Items]
Strike rate	2.43%
Interest Rate Cap | Maximum
Derivative [Line Items]
Strike rate	11.61%
Interest Rate Cap | Not Designated as Hedging Instrument
Derivative [Line Items]
Notional amount	$ 685,000	$ 619,500
Cost of derivative	$ 348	$ 338
Interest Rate Cap | Not Designated as Hedging Instrument | Minimum
Derivative [Line Items]
Strike rate	2.43%	3.00%
Interest Rate Cap | Not Designated as Hedging Instrument | Maximum
Derivative [Line Items]
Strike rate	7.80%	5.35%
Interest Rate Floor
Derivative [Line Items]
Notional amount	$ 6,850,000
Interest Rate Floor | Minimum
Derivative [Line Items]
Strike rate floor	(0.25%)
Interest Rate Floor | Maximum
Derivative [Line Items]
Strike rate	1.50%
Credit Default Swap
Derivative [Line Items]
Notional amount	$ 50,000
Maximum exposure	2,300
Change in market value threshold for settlement	$ 250

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Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Significance of current credit spreads to level 3 input considerations	10.00%		10.00%
LIBOR rate	2.09%		2.09%		1.564%
Derivative assets	$ 1,007		$ 1,007		$ 594
Investment in unconsolidated entity					0
Counterparty and Cash Collateral Netting	660		660		370
Total	13,635		13,635		18,718
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	(6,322)	$ (1,778)	(5,721)	$ 259
Ashford Inc.
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in unconsolidated entity	12,628		12,628		18,124
Effect of Fair Value Hedges on Results of Operations [Abstract]
Unrealized gain (loss) on investment in Ashford Inc.	(6,024)	(1,563)	(5,496)	1,528
Investment in Affiliate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Non-derivative assets	12,628		12,628		18,124
Non-Derivative Assets
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	(6,322)	(1,778)	(5,721)	259
Non-Derivative Assets | Ashford Inc.
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	(6,024)	(1,563)	(5,496)	1,528
Derivative
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	(298)	(100)	(225)	(998)
Interest Rate Floor
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	74		74		130
Counterparty and Cash Collateral Netting	41		41		12
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	(57)	(135)	(84)	(894)
Interest Rate Floor | Derivative Financial Instruments, Assets
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	(57)	(135)	(84)	(894)
Interest Rate Cap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	92		92		4
Counterparty and Cash Collateral Netting	0		0		0
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	(256)	(61)	(261)	(317)
Interest Rate Cap | Derivative Financial Instruments, Assets
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	(256)	(61)	(261)	(317)
Credit Default Swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	841		841
Counterparty and Cash Collateral Netting	619		619
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	15	0	120	0
Credit Default Swap | Derivative Financial Instruments, Assets
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	15	0	120	0
Derivative cost	63		126
Future
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets					460
Counterparty and Cash Collateral Netting					358
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	0	96	0	213
Future | Other Income (Expense)
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	0	(115)	0	(271)
Future | Derivative Financial Instruments, Assets
Effect of Fair Value Hedges on Results of Operations [Abstract]
Gain (loss) recognized in income	0	$ (19)	0	$ (58)
Quoted Market Prices (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0		0
Total	12,628		12,628		18,124
Quoted Market Prices (Level 1) | Investment in Affiliate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Non-derivative assets	12,628		12,628		18,124
Quoted Market Prices (Level 1) | Interest Rate Floor
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0		0
Quoted Market Prices (Level 1) | Interest Rate Cap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0		0
Quoted Market Prices (Level 1) | Credit Default Swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0
Quoted Market Prices (Level 1) | Future
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets					0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	347		347		224
Total	347		347		224
Significant Other Observable Inputs (Level 2) | Investment in Affiliate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Non-derivative assets	0		0		0
Significant Other Observable Inputs (Level 2) | Interest Rate Floor
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	33		33		118
Significant Other Observable Inputs (Level 2) | Interest Rate Cap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	92		92		4
Significant Other Observable Inputs (Level 2) | Credit Default Swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	222		222
Significant Other Observable Inputs (Level 2) | Future
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets					102
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0		0
Total	0		0		0
Significant Unobservable Inputs (Level 3) | Investment in Affiliate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Non-derivative assets	0		0		0
Significant Unobservable Inputs (Level 3) | Interest Rate Floor
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0		0
Significant Unobservable Inputs (Level 3) | Interest Rate Cap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	0		0		0
Significant Unobservable Inputs (Level 3) | Credit Default Swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	$ 0		$ 0
Significant Unobservable Inputs (Level 3) | Future
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets					$ 0
LIBOR | Maximum | Significant Other Observable Inputs (Level 2) | Derivative Financial Instruments, Assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Forward interest rate			2.848%

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Summary of Fair Value of Financial Instruments (Carrying Amounts and Estimated Fair Values of Financial Instruments) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Financial assets and liabilities measured at fair value:
Investment in unconsolidated entity		$ 0
Derivative assets	$ 1,007	594
Derivative assets, Estimated fair value	1,007	594
Financial assets not measured at fair value:
Cash and cash equivalents, Carrying value	169,235	137,522	$ 129,675	$ 126,790
Cash and cash equivalents, Estimated fair value	169,235	137,522
Restricted cash, Carrying value	83,096	47,820	$ 34,793	$ 37,855
Restricted cash, Estimated fair value	83,096	47,820
Accounts receivable, Carrying value	22,338	14,334
Accounts receivable, Estimated fair value	22,338	14,334
Insurance receivable, Carrying value	0	8,825
Insurance receivable, Estimated fair value	0	8,825
Note receivable. Carrying value	0	8,098
Notes receivable, Estimated fair value	0
Due from related party, net, Carrying value	588	349
Due from related party, net, Estimated fair value	588	349
Due from third-party hotel managers, Carrying value	5,522	4,589
Due from third-party hotel managers, Estimated fair value	5,522	4,589
Financial liabilities not measured at fair value:
Indebtedness, Carrying value	993,826	826,236
Accounts payable and accrued expenses, Carrying value	63,976	56,803
Accounts payable and accrued expenses, Estimated fair value	63,976	56,803
Dividends and distributions payable, Carrying value	8,572	8,146
Dividends and distributions payable, Estimated fair value	8,572	8,146
Due to affiliate, net, Carrying Value	1,100	1,703
Due to third-party hotel managers, Carrying value	2,299	1,709
Due to third-party hotel managers, Estimated fair value	2,299	1,709
Minimum
Financial assets not measured at fair value:
Notes receivable, Estimated fair value		8,020
Financial liabilities not measured at fair value:
Indebtedness, Estimated fair value	942,117	780,243
Maximum
Financial assets not measured at fair value:
Notes receivable, Estimated fair value		8,864
Financial liabilities not measured at fair value:
Indebtedness, Estimated fair value	1,041,287	862,372
Ashford Inc.
Financial liabilities not measured at fair value:
Due to Affiliate, Fair Value Disclosure	1,100	1,703
Ashford Inc.
Financial assets and liabilities measured at fair value:
Investment in unconsolidated entity	$ 12,628	$ 18,124

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Summary of Fair Value of Financial Instruments - Narrative (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Maximum maturity term of financial assets	90 days
Note receivable	$ 0	$ 8,098
Indebtedness, Carrying value	$ 993,826	$ 826,236
Minimum
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes receivable fair value variance from carrying value (as a percent)		(1.00%)
Total indebtedness fair value variance from carrying value (as a percent)	94.80%	94.40%
Maximum
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notes receivable fair value variance from carrying value (as a percent)		9.50%
Total indebtedness fair value variance from carrying value (as a percent)	104.80%	104.40%

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Redeemable Noncontrolling Interests in Operating Partnership (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Noncontrolling Interest [Line Items]
Redeemable noncontrolling interests in operating partnership	$ 47,818		$ 47,818		$ 46,627
Redemption value adjustment			$ (558)
Noncontrolling interest in a consolidated entity	25.00%		25.00%		25.00%
Net (income) loss attributable to redeemable noncontrolling interests in operating partnership	$ (1,235)	$ 343	$ (1,527)	$ 598
Cash distributions declared	$ 822	859	1,644	1,649
Braemar OP
Noncontrolling Interest [Line Items]
Redemption value adjustment			$ 558	0
Noncontrolling interest in a consolidated entity	11.17%		11.17%		11.43%
Performance Long Term Incentive Plan Units
Noncontrolling Interest [Line Items]
Other than options (in shares)	804		804
Compensation not yet recognized	$ 2,100		$ 2,100
Period for recognition			2 years 6 months
Units which have not reached full economic parity with the common units (in shares)	1,200		1,200
Performance Long Term Incentive Plan Units | Advisory services
Noncontrolling Interest [Line Items]
Equity-based compensation expense	$ 286	(57)	$ 294	(1,104)
Performance Long Term Incentive Plan Units | Minimum
Noncontrolling Interest [Line Items]
Award performance target			0.00%
Performance Long Term Incentive Plan Units | Maximum
Noncontrolling Interest [Line Items]
Award performance target			200.00%
Long Term Incentive Plan Units
Noncontrolling Interest [Line Items]
Award vesting period			3 years
Other than options (in shares)	1,900		1,900
Compensation not yet recognized	$ 2,400		$ 2,400
Period for recognition			2 years 8 months 12 days
Units which have not reached full economic parity with the common units (in shares)	295		295
Long Term Incentive Plan Units | Advisory services
Noncontrolling Interest [Line Items]
Equity-based compensation expense	$ 302	130	$ 438	173
Long Term Incentive Plan Units | Corporate General and Administrative Expense
Noncontrolling Interest [Line Items]
Equity-based compensation expense	$ 0	$ 64	$ 0	$ 64
Operating Partnership Units
Noncontrolling Interest [Line Items]
Common units redeemed (in shares)		1		6
Redemption/conversion of operating partnership units		$ 15		$ 82

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Equity and Stock-Based Compensation (Details)	3 Months Ended		6 Months Ended		44 Months Ended
	Jun. 30, 2018 USD ($) hotel $ / shares shares	Jun. 30, 2017 USD ($) shares	Jun. 30, 2018 USD ($) hotel $ / shares shares	Jun. 30, 2017 USD ($) shares	Jun. 30, 2018 USD ($) hotel $ / shares shares	Dec. 31, 2017 USD ($) hotel $ / shares	Dec. 11, 2017 USD ($)	Dec. 05, 2017 USD ($) $ / shares
Class of Stock [Line Items]
Dividends declared - common stock			$ 10,547,000
Common stock, par value (in dollars per share) | $ / shares	$ 0.01		$ 0.01		$ 0.01	$ 0.01
Value of stock repurchased during period			$ 203,000
At-the-market equity distribution program, authorized amount							$ 50,000,000
At-the-market equity distribution program, shares sold (in shares) | shares	0		0		0
Noncontrolling interest in a consolidated entity	25.00%		25.00%		25.00%	25.00%
Number of hotel properties with JV interests | hotel	2		2		2	2
Noncontrolling interest in consolidated entities	$ (5,245,000)		$ (5,245,000)		$ (5,245,000)	$ (4,753,000)
(Income) loss attributable to noncontrolling interest in consolidated entities	$ (89,000)	$ (1,614,000)	$ (47,000)	$ (1,593,000)
Stock Repurchase Program
Class of Stock [Line Items]
Share repurchase program authorized amount								$ 50,000,000
Common stock, par value (in dollars per share) | $ / shares								$ 0.01
Shares of stock repurchased during period (in shares) | shares	0	0	0	0	4,300,000
Value of stock repurchased during period					$ 63,200,000
Performance Shares
Class of Stock [Line Items]
Award service period			3 years
Other than options intrinsic value	$ 3,100,000		$ 3,100,000		3,100,000
Compensation not yet recognized	2,600,000		$ 2,600,000		2,600,000
Period for recognition			2 years 6 months
Performance Shares | Advisory services
Class of Stock [Line Items]
Equity-based compensation expense	292,000	$ (8,000)	$ 1,869,000	$ (808,000)
Performance Shares | Executive Officer
Class of Stock [Line Items]
Equity-based compensation expense			1,600,000
Restricted Stock
Class of Stock [Line Items]
Other than options intrinsic value	5,600,000		5,600,000		5,600,000
Equity-based compensation expense	562,000	468,000	1,434,000	604,000
Compensation not yet recognized	4,900,000		$ 4,900,000		$ 4,900,000
Period for recognition			3 years 3 months 18 days
Restricted Stock | Advisory services
Class of Stock [Line Items]
Equity-based compensation expense	498,000	271,000	$ 1,323,000	389,000
Restricted Stock | Management Fees
Class of Stock [Line Items]
Equity-based compensation expense	64,000	34,000	111,000	34,000
Restricted Stock | Corporate General and Administrative Expense
Class of Stock [Line Items]
Equity-based compensation expense	0	163,000	0	181,000
Restricted Stock | Executive Officer
Class of Stock [Line Items]
Equity-based compensation expense			$ 640,000
Minimum | Performance Shares
Class of Stock [Line Items]
Award performance target			0.00%
Maximum | Performance Shares
Class of Stock [Line Items]
Award performance target			200.00%
Common Stock
Class of Stock [Line Items]
Dividends declared - common stock	$ 5,200,000	$ 5,112,000	$ 10,403,000	$ 10,195,000

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5.5% Series B Cumulative Convertible Preferred Stock (Details) $ / shares in Units, $ in Thousands			3 Months Ended		6 Months Ended
	Apr. 05, 2017 USD ($) shares	Mar. 07, 2017 USD ($) $ / shares shares	Jun. 30, 2018 USD ($) $ / shares shares	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) day $ / shares shares	Jun. 30, 2017 USD ($)	Dec. 31, 2017 shares
Class of Stock [Line Items]
Preferred dividends | $			$ 1,708	$ 1,707	$ 3,415	$ 3,380
Series B Preferred Stock
Class of Stock [Line Items]
Preferred stock dividend rate		5.50%			5.50%
Initial conversion price (in dollars per share) | $ / shares			$ 18.90		$ 18.90
Preferred stock conversion rate					1.3228
Consecutive trading days | day					45
Days ending prior to notice of conversion					3 days
Issuance of common stock (in shares) | shares		2,000,000
Issuance of preferred stock (in dollars per share) | $ / shares		$ 20.19
Proceeds from issuance of preferred stock | $		$ 39,900
Proceeds from issuance of stock, net of discounts and expenses | $		$ 38,200
Liquidation preference per share (in dollars per share) | $ / shares		$ 25.00
Series B preferred stock, shares outstanding (in shares) | shares			4,965,850		4,965,850		4,965,850
Annual preferred stock dividend (in dollars per share) | $ / shares					$ 1.375
Series B Preferred Stock | Over-Allotment Option
Class of Stock [Line Items]
Issuance of common stock (in shares) | shares	100,000
Proceeds from issuance of stock, net of discounts and expenses | $	$ 1,900
Series B Preferred Stock | Minimum
Class of Stock [Line Items]
Percent of conversion price			110.00%		110.00%

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Commitments and Contingencies - Narrative (Details)	6 Months Ended
	Jun. 30, 2018 USD ($)
Restricted Cash | Minimum
Commitments and Contingencies [Line Items]
Replacement reserve escrow as percentage of property revenue	4.00%
Restricted Cash | Maximum
Commitments and Contingencies [Line Items]
Replacement reserve escrow as percentage of property revenue	5.00%
Management Fees
Commitments and Contingencies [Line Items]
Maximum percentage of project budget to be paid as market service fees	16.50%
Management Fees | Minimum
Commitments and Contingencies [Line Items]
Property management fee, percent	2.00%
Management Fees | Maximum
Commitments and Contingencies [Line Items]
Property management fee, percent	7.00%
Management Fees
Commitments and Contingencies [Line Items]
Portion of project management fees to project costs	4.00%
Management Fees | Minimum
Commitments and Contingencies [Line Items]
Monthly property management fee	$ 13,000
Property management fee, percent	3.00%

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Segment Reporting (Details)	6 Months Ended
	Jun. 30, 2018 segment
Segment Reporting [Abstract]
Number of operating segments	1

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Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Dec. 31, 2015
Related Party Transaction [Line Items]
Term of agreement					3 years
Advisory services fee	$ 4,880	$ 3,143	$ 10,124	$ 4,008
Lease expense		84	84	168
Due to Ashford Inc.	1,100		1,100		$ 1,703
Restricted Stock
Related Party Transaction [Line Items]
Equity-based compensation expense	562	468	1,434	604
Compensation not yet recognized	4,900		$ 4,900
Period for recognition			3 years 3 months 18 days
Restricted Stock | Management Fees
Related Party Transaction [Line Items]
Equity-based compensation expense	64	34	$ 111	34
Affiliated Entity | Restricted Stock
Related Party Transaction [Line Items]
Units issued (in shares)			21,000		22,000
Ashford Inc.
Related Party Transaction [Line Items]
Key money consideration						$ 2,000
Remington Lodging | Restricted Stock
Related Party Transaction [Line Items]
Compensation not yet recognized	429		$ 429
Period for recognition			2 years 8 months 12 days
OpenKey | Mobile key app
Related Party Transaction [Line Items]
Amount of transaction	4		$ 12
Due to Ashford Inc.	3		3		$ 4
Pure Rooms | “Allergy friendly” premium rooms
Related Party Transaction [Line Items]
Amount of transaction	10		19
Due to Ashford Inc.	0		0		45
RED Leisure [Member] | Watersports activities and travel/transportation services
Related Party Transaction [Line Items]
Amount of transaction	180		360
Lismore Capital [Member] | Mortgage placement services
Related Party Transaction [Line Items]
Amount of transaction	999		999
Ashford LLC | Insurance claims services
Related Party Transaction [Line Items]
Amount of transaction	31		69
Due to Ashford Inc.	32		32		0
Ashford LLC | Advisory services
Related Party Transaction [Line Items]
Due to Ashford Inc.	1,065		1,065		$ 1,654
Ashford LLC | Affiliated Entity
Related Party Transaction [Line Items]
Advisory services fee	4,880	3,143	10,124	4,008
Ashford LLC | Affiliated Entity | Base advisory fee
Related Party Transaction [Line Items]
Advisory services fee	2,313	2,276	4,420	4,279
Ashford LLC | Affiliated Entity | Reimbursable expenses
Related Party Transaction [Line Items]
Advisory services fee	499	532	919	1,079
Ashford LLC | Affiliated Entity | Equity-based compensation
Related Party Transaction [Line Items]
Advisory services fee	1,377	335	3,924	(1,350)
Ashford LLC | Affiliated Entity | Incentive fee
Related Party Transaction [Line Items]
Advisory services fee	$ 691	$ 0	$ 861	$ 0
Maximum
Related Party Transaction [Line Items]
Advisory agreement, asset multiplier	0.70%		0.70%