Note 13 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2025

Commitments and Contingencies Disclosure [Text Block]

13.

Commitments and Contingencies

Litigation

The Company is subject to various claims, lawsuits and legal proceedings, including routine litigation arising in the ordinary course of business, regarding the operation of its hotels, its managers and other Company matters. While it is not possible to ascertain the ultimate outcome of such matters, the Company believes that the aggregate identifiable amount of such liabilities, if any, will not have a material adverse impact on its financial condition or results of operations.

Management Agreements

The management agreements with IHM have an initial term of five years and automatically renew for two five-year periods unless IHM provides written notice to us no later than 90 days prior to the then current term’s expiration date of its intent not to renew. The IHM management agreements provide for early termination at the Company’s option upon sale of any IHM-managed hotel for no termination fee, with six months advance notice. The IHM management agreements may be terminated for cause, including the failure of the managed hotel to meet specified performance levels. Base management fees are calculated as a percentage of the hotel's gross room revenue. If certain financial thresholds are met or exceeded, an incentive management fee is calculated as 10% of the hotel's net operating income less fixed costs, base management fees and a specified return threshold. The incentive management fee is capped at 1% of gross hotel revenues for the applicable calculation.

Management fees totaled approximately $2.7 million and $2.9 million for the three months ended June 30, 2025 and 2024, respectively, and $5.0 million and $5.2 million for the six months ended June 30, 2025 and 2024, respectively.

Franchise Agreements

The fees associated with the franchise agreements are calculated as a specified percentage of the hotel's gross room revenue. Franchise and marketing fees totaled approximately $6.4 million and $6.9 million for the three months ended June 30, 2025 and 2024, respectively, and $11.9 million and $12.4 million for the six months ended June 30, 2025 and 2024, respectively. The initial term of the agreements range from 10 to 30 years with the weighted-average expiration being April 2037.

Chatham Lodging Trust 10-Q