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Nov. 6, 2019, 4:34 p.m. EST


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(EDGAR Online via COMTEX) -- 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., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Braemar Hospitality 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, which we refer to as "Ashford Trust OP." "Ashford Inc." refers to Ashford Inc., a Maryland corporation and, as the context may require, its consolidated subsidiaries. "Ashford LLC" or our "advisor" refers to Ashford Hospitality Advisors LLC, a Delaware limited liability company and a subsidiary of Ashford Inc. and "Premier" refers to Premier Project Management LLC, a Maryland limited liability company and a subsidiary of Ashford LLC. "Remington Lodging" refers to Remington Lodging & Hospitality, LLC, a Delaware limited liability company, which (together with its affiliates) is 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, 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(R), Hilton Worldwide(R), Sofitel(R), Hyatt(R) and Accor(R). 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.

Such forward-looking statements are based on our beliefs, assumptions and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events and factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans, and other objectives may vary materially from those expressed in our forward-looking statements. You should carefully consider this risk when you make an investment decision concerning our securities. Additionally, the following factors could cause actual results to vary from our forward-looking statements:

general and economic business conditions affecting the lodging and travel industry;

general volatility of the capital markets and the market price of our common and preferred stock;

changes in our business or investment strategy;

availability, terms and deployment of capital;

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

availability of qualified personnel to our advisor;

changes in our industry and the market in which we operate, interest rates, or local economic conditions;

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the degree and nature of our competition;

the impact of the divestiture of our shares of Ashford Inc., including the shares sold through the stock purchase agreement with Ashford LLC and the pro-rata distribution of shares of Ashford Inc. common stock to Company Record Holders;

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

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

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

legislative and regulatory changes, including changes to the Internal Revenue Code of 1986, as amended (the "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 2018 10-K, 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

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into an additional approximate 3,991,191 shares of Ashford Inc. common stock, which if exercised as of November 6, 2019 would have increased the Bennetts' ownership interest in Ashford Inc. to 70.1%. The 18,758,600 Series D Convertible Preferred Stock owned by Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. include 360,000 shares owned by trusts.

        Revenues     $ 29,834
        Expenses      (10,461 )
        Net Earnings $ 19,373

Additional Developments

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one-year extension options, subject to the satisfaction of certain conditions. The mortgage loan is secured by the Ritz-Carlton St. Thomas. On August 13, 2019, we invested an additional $176,000 in OpenKey, which investment was approved by the independent members of our board of directors. On September 25, 2019, Ashford Inc. announced the formation of Ashford Securities LLC ("Ashford Securities") to raise capital in order to grow its existing and future platforms. In conjunction with the formation of Ashford Securities, Braemar has entered into a contribution agreement with Ashford Inc. pursuant to which Braemar has agreed to contribute, with Ashford Trust, up to $15 million to fund the operations of Ashford Securities.

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Key Indicators of Operating Performance

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.

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        Three Months Ended September 30, 2019 Compared to Three Months Ended
        September 30, 2018
        The following table summarizes changes in key line items from our condensed
        consolidated statements of operations for the three months ended September 30,
        2019 and 2018 (in thousands except percentages):
                                                         Three Months Ended
                                                            September 30,            Favorable (Unfavorable)
                                                         2019           2018          $ Change       % Change
        Rooms                                        $  76,808       $  74,358     $     2,450           3.3  %
        Food and beverage                               26,422          21,171           5,251          24.8
        Other                                           15,652          13,317           2,335          17.5
        Total hotel revenue                            118,882         108,846          10,036           9.2
        Other                                                2               -               2
        Total revenue                                  118,884         108,846          10,038           9.2
        Hotel operating expenses:
        Rooms                                           18,265          16,624          (1,641 )        (9.9 )
        Food and beverage                               20,721          16,171          (4,550 )       (28.1 )
        Other expenses                                  36,201          32,058          (4,143 )       (12.9 )
        Management fees                                  3,960           3,963               3           0.1
        Total hotel expenses                            79,147          68,816         (10,331 )       (15.0 )
        Property taxes, insurance and other              7,690           6,835            (855 )       (12.5 )
        Depreciation and amortization                   16,831          14,474          (2,357 )       (16.3 )
        Advisory services fee                            5,158           5,733             575          10.0
        Corporate general and administrative             1,575           1,765             190          10.8
        Total expenses                                 110,401          97,623         (12,778 )       (13.1 )
        Gain (loss) on disposition of assets and
        sale of hotel property                          (1,163 )             -           1,163
        Operating income (loss)                          7,320          11,223          (3,903 )       (34.8 )
        Equity in earnings (loss) of unconsolidated
        entity                                             (48 )           (81 )            33          40.7
        Interest income                                    249             540            (291 )       (53.9 )
        Other income (expense)                            (114 )           (64 )           (50 )       (78.1 )
        Interest expense and amortization of loan
        costs                                          (13,646 )       (13,084 )          (562 )        (4.3 )
        Write-off of loan costs and exit fees             (335 )             -            (335 )
        Unrealized gain (loss) on investment in
        Ashford Inc.                                    (1,471 )         2,158          (3,629 )      (168.2 )
        Unrealized gain (loss) on derivatives             (754 )          (578 )          (176 )       (30.4 )
        . . .

Nov 06, 2019

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