ESG Investor Presentation September 2021
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ESG Investor Presentation
September 2021
1
The Sanctuary Beach Resort, Monterey, CA
Table of Contents
Hersha Today 3
Hersha’s ESG Program 7
Financial Impact 9
Environmental Impact 10
Social Impact 13
Governance & Resiliency 16
Additional Resources 18
High Value Real Estate Portfolio
Our portfolio, consisting of 36 high margin, rooms-oriented hotels that can generate high absolute RevPAR,
has industry-leading operating leverage to the recovery
➢ Irreplaceable Assets in Urban Gateway Markets
➢ From Silicon Alley in Manhattan and the Seaport district in Boston, out to Seattle and Silicon Valley, many of our assets are situated in key innovation districts across
the country with significant life sciences, tech, and multifamily development demand generators
➢ Purpose-Built and Renovated to Current Tastes and Preferences
➢ Over the last few years, we have acquired and repositioned smaller, transient-oriented resort hotels proximate to our urban gateway markets, which account for
25% of our portfolio EBITDA generation
➢ More than 80% of our portfolio was purpose-built for transient guests
➢ Cluster Strategy Maximizes Revenues and Leverages Economies of Scale for Cost Efficiencies
➢ Cross-utilizing staff between our hotels lowers our overall labor costs and also leverages the extensive market knowledge of our management team across the
cluster
➢ Cluster strategy leads to increased revenue generation, customer loyalty, and the ability of our market portfolio to consistently outperform its competitive sets
➢ Lower Planned Capital Expenditures
➢ From 2017 to 2020, we allocated close to $200 million for product upgrades and ROI-generating capital projects across approximately 50% of our total room count,
which puts our portfolio in great shape through the early stages of the Lodging recovery terms of capital allocation needs as most of our hotels will not need
substantial capital infusion for the foreseeable future
3
Bi-Coastal Portfolio, Clustered for Advantage
Boston (4 hotels, 689 rooms)
The Envoy, Boston Seaport
The Boxer, Boston New York City (9 hotels, 1,450 rooms)
Courtyard by Marriott Brookline Hyatt Union Square
Mystic Marriott Hotel & Spa, CT NU Hotel, Brooklyn
Hilton Garden Inn Manhattan Midtown East
Hilton Garden Inn Tribeca
West Coast (7 hotels, 911 rooms) Holiday Inn Express Madison Square Garden
Hampton Inn Seaport
Seattle (1 hotel, 153 rooms) Gate Hotel JFK International Airport
The Pan Pacific Hotel Seattle Hilton Garden Inn JFK International Airport
Hyatt House White Plains
California (6 hotels, 758 rooms)
Courtyard by Marriott Sunnyvale
TownePlace Suites Sunnyvale
The Sanctuary Beach Resort, Monterey Philadelphia (3 hotels, 662 rooms)
The Hotel Milo, Santa Barbara The Rittenhouse
The Ambrose Hotel, Santa Monica Philadelphia Westin
Courtyard by Marriott Los Angeles Westside Hampton Inn Center City/Convention Center
Miami & Key West (5 hotels, 765 rooms) Washington, DC (5 hotels, 858 rooms)
The Cadillac Hotel & Beach Club The Ritz-Carlton, Georgetown
The Winter Haven Hotel, Miami Beach The St. Gregory, Dupont Circle
The Blue Moon Hotel, Miami Beach Hilton Garden Inn M Street
The Ritz-Carlton, Coconut Grove Hampton Inn Washington DC
Parrot Key Hotel & Villas, Key West Annapolis Waterfront Hotel
*Highlighted hotels have been awarded a third-party building certification such as LEED, EnergyStar, ISO 14001, or ISO 50001 over the past five years
4
Purpose-Built Portfolio Mix
Upper Upscale & Luxury Independent & Collections
Portfolio
Wholly-Owned Portfolio Portfolio
ADR $264 ADR $258
RevPAR $209 RevPAR $202
EBITDA Margin 28% EBITDA Margin 31%
EBITDA/Key $29,398 EBITDA/Key $30,103
Hotels 19 Hotels 15
Room Count 2,827 33 Hotels 5,334 Rooms $234 ADR Room Count 1,944
(% Total Rooms) (53%) (% Total Rooms) (36%)
Upper Midscale & Upscale
Branded Portfolio
Portfolio
ADR $204 ADR $222
RevPAR $177 RevPAR $190
EBITDA Margin 39% EBITDA Margin 32%
$194 RevPAR $28,345 $32% EBITDA
EBITDA/Key $27,158 EBITDA/Key $27,337
EBITDA/Key Margin
Hotels 14 Hotels 18
Room Count 2,507 Room Count 3,390
(% Total Rooms) (47%) (% Total Rooms) (64%)
*Figures Based on 2019 Actual Results
5
Strategically Positioned Portfolio
Newly Aligned Portfolio By Market
West Coast
✓ 15% reduction in hotel count leads to more efficient
17%
Boston
Washington, DC 8%
asset and revenue management initiatives 16%
✓ Absolute RevPAR improves ~4% to $195
NYC
✓ EBITDA/Key valuation strengthens ~4% to $28,345 South Florida 24%
13%
✓ Portfolio Margin remains above 30%, one of the
highest among the peers Philadelphia Other
13% 9%
By Destination By Segmentation
Regional
Resort Upscale/Upper
25% Upper Upscale /
Midscale
Luxury
47%
53%
Urban
75%
*Figures Based on 2019 Actual Results and Room Count 6
Environmental, Social, Governance (ESG)
Parrot Key Hotel & Villas, Key West, FL
Hersha’s ESG Program – EarthView®
EarthView® was strategically created in 2010 to positively impact our hotels’ bottom lines while simultaneously
improving the well-being of our guests, associates, communities, and our planet
Pillars of EarthView
Financial Environmental
Reductions in operating expenses; revenue generation; increases Reductions in energy usage, water usage, GHG emissions, and
in real estate value waste production
Social Governance & Resiliency
Workforce engagement, diversity, human rights; local & global Board composition; Code of Ethics & Code of Conduct; Board
community impact; health and wellness oversight of ESG risks; resiliency strategy
Organizational Management: Our full-time, in-house EarthView sustainability team reports directly to our CEO
EarthView Achievements
Ranked in Newsweek’s list of 34% of our hotels have been awarded a
America’s Most third-party building certification, such as
4-time winner of Responsible Companies in LEED, EnergyStar, ISO 14001, or ISO 50001
Lodging and Resorts #1 in GRESB 2020 Public 2020 and 2021 based on ESG over the past five years*
Leader in the Light Disclosure among U.S. practices
Award Hotel peer set
*Based on portfolio construction as of December 31, 2020
8
Financial Impact
➢ EarthView’s initiatives drive reductions in operating expenses Financial Metrics
and increase the value of our real estate
✓ Measures that increase energy and water efficiency, lead to hotels
$20 million in savings
that have higher margins, stronger net operating income since inception from
(NOI), and ultimately increased long-term valuations energy and water
efficiency projects
✓ Alleviated pressure of increasing costs: Every $1 in savings implemented across our
from EarthView initiatives flows directly to the bottom line, offsetting portfolio
margin pressures
✓ During the COVID-19 pandemic, we implemented additional 1.7 year average
energy conservation and efficiency measures that created payback period for our
near-term savings and will result in margin improvement through the efficiency investments
recovery
➢ EarthView appeals to corporate guests’ increasing requirements
$2 million in
additional energy-savings
regarding the sustainability of hotels and meeting spaces protocols implemented
✓ ~80% of all Requests for Proposals (RFPs) we receive require during low-occupancy
information on the sustainable attributes of our hotels periods in 2020
✓ Through EarthView, we offer sustainability-focused amenities and
programming that differentiate us from our peers and we appeal to
guests seeking sustainable experiences at our hotels and restaurants
9
Environmental Impact
➢ Our buildings and operations run more efficiently and sustainably
through implementing initiatives including: Environmental Metrics*
Reductions in intensity calculated
LED Lighting: More efficient than incandescent and fluorescent in alignment with the Greenhouse
lighting, installed at 95%+ of our hotels Gas Protocol methodology
Guestroom Energy Management System (EMS): Programmed to 44% reduction in
reduce energy consumption while rooms are unoccupied, saving our greenhouse gas emissions
hotels 25-30% in guestroom heating and cooling per SF 2019 vs 2010
26% reduction 2020 vs 2019*
High-Efficiency Water Fixtures: Reduce water usage by 20-30%
while maintaining guest comfort 15% reduction in energy
usage per SF 2019 vs 2010
Laundry Water-Reuse Systems: Reduce water consumption from 23% reduction 2020 vs 2019
laundry wash cycles by 70-80%
5% reduction in water
Non-Plastic Straws and Stirrers: Discontinuing the use of plastic usage per SF 2019 vs 2010
straws and stirrers at all of Hersha’s hotels avoids using over 4 24% reduction 2020 vs 2019
million pieces of plastic straws and stirrers a year
Electric Vehicle Charging Stations: Support expansion of clean 30% diversion rate in 2019
transportation infrastructure, with 22 charging stations installed 36% diversion rate in 2020
across our portfolio
*The pandemic’s impact on our business and physical occupancy in 2020 was material due to travel restrictions and stay-at-home orders. Therefore, our progress towards our 2030 environmental targets is expressed in terms of 2019 metrics vs our 2010 baseline and
separately as 2020 vs 2019 like-for-like, which considers only properties with comparable operating results 102030 Environmental Targets
GHG Emissions Energy Water Waste
100% 100% 100%
90% 90% 90%
80% 80% 80%
70% 70% 70%
60% 60% 60%
50% 50% 50%
40% 40% 40%
30% 30% 30%
20% 20% 20%
10% 10% 10%
0% 0% 0%
2010 2019 2030 Goal 2010 2019 2030 Goal 2010 2019 2030 Goal 2019 2030 Goal
Target: 60% reduction Target: 35% reduction Target: 30% reduction Target: 50% diversion
per SF by 2030 per SF by 2030 per SF by 2030 rate by 2030
*The pandemic’s impact on our business and physical occupancy in 2020 was material due to travel restrictions and stay-at-home orders. Therefore, our progress towards our 2030 environmental targets is expressed in terms of 2019 metrics vs our 2010 baseline and
separately as 2020 vs 2019 like-for-like, which considers only properties with comparable operating results 11Case Study: Electric Vehicle Charging Stations
➢ 22 electric vehicle charging stations across Hersha hotels
✓ As more drivers own electric vehicles, accessibility to charging
stations will likely influence their decisions for travel and hotel
stays
✓ Stations generate revenue from additional bookings and
electric vehicle charging
✓ Initiative supports the expansion of greater charging
infrastructure, reducing GHG emissions
✓ Plan to increase number of electric vehicle charging stations
across Hersha hotels over the next three years
➢ Global trends indicate increased ownership of electric
vehicles:
Hersha’s Charging Station Metrics
✓ Over 18.7 million electric vehicles are projected to be on the
road in the US by 2030, nearly 10% of total vehicles* 22 stations installed across Hersha hotels
5,000+ Hersha guest charging sessions annually
✓ 44 electric vehicle models are currently on the road with many
car manufacturers committed to producing more electric 8,000 gallons of gasoline saved annually
vehicles over the next three years
70,000 kg GHG emissions saved annually
*Edison Foundation Institute for Electric Innovation
12Social Impact
Diversity Metrics
➢ We believe our people are our strongest asset as engaged
associates make for a more vibrant, innovative, and motivated 39% of our workforce is made up of
women
workforce
Diversity & Inclusion is one of the core commitments of Hersha as
24% of our workforce identifies as a
member of a minority group
outlined in our Code of Conduct. To that end, we are proud
signatories of the CEO Action Pledge 24% of our workforce is under the
age of 30, while 61% is between
We provide associates with numerous opportunities for
the ages of 30 and 50
advancement and personal growth
We promote health and wellness for our guests and associates Community Metrics
through our Rest Assured™ program, service offerings, and associate 20,000+ hours volunteered in our
protocols local communities since 2015
~$600,000 raised for autism
➢ “Hearts that Serve” is one of our core values and reflects our long awareness over a 5-year period
tradition of social responsibility and community engagement
Local Impact: Our hotels and corporate office associates have
26,000+ people provided with
access to clean water for 21 years
volunteered 20,000+ hours in our local communities since 2015 since 2015
Global Impact: We engage in partnerships that help us make the
greatest impact, particularly in the areas of clean water and 568,000 new bars of sanitized
and repackaged soap sent to
sanitation developing nations since 2011
13Diversity, Equity and Inclusion
➢ We are taking action to advance diversity and inclusion within our
workspaces by establishing programs, trainings, and plans that
address the concerns and needs of all employees 39% of our workforce
39%
identifies as female 61%
➢ In the spirit of sharing and learning from each other, we are
26% of our female
workforce holds roles of Director
Female Male
signatories of the CEO Action for Diversity & Inclusion™ Pledge, the and above
largest CEO-driven business commitment to advance diversity and
inclusion in the workplace 24%
✓ We will continue to make our workplaces trusting places to have complex,
and sometimes difficult, conversations about diversity and inclusion
24% of our workforce 76%
identifies as a member of a
minority group
Minority White/Not Specified
✓ We will implement and expand unconscious bias education
✓ We will share best—and unsuccessful—practices
15% 24%
✓ We will create and share strategic inclusion and diversity plans with our
board of directors 24% of our workforce
is under age 30 61%
61% is between 30 and 50
< 30 30-50 50 >
14Case Study: EarthView Water
➢ Hersha launched a privately-labeled EarthView Water bottle sold at our hotels
to help the 1 in 10 people around the world who lack access to safe drinking
water
✓ For each bottle sold, we donate $1 to help bring water to those in need. In 2018, we
began supporting Waterboys.org, a philanthropic organization focused on bringing
clean accessible water to communities in East Africa
✓ The EarthView Water bottle is made from 100% recycled materials. We are currently
evaluating paper and aluminum material substitutes as we expand this initiative
➢ In 2020, we successfully funded the construction of a Hersha Well in Tanzania.
This well is now bringing life-sustaining water to a community of 8,000 people
Initiative Impact
26,000+ people provided with
access to clean water for 21 years
since 2015 through the sale of
EarthView Water
15Governance & Resiliency
➢ Our Code of Conduct, Code of Ethics, and proxy access are publicly Governance
available on our website and include policies on: Board Independence &
Diversity:
✓ Human & labor rights, diversity, health & safety, supplier code of conduct 6 out of 8 board members are
independent trustees; 50% minority
✓ Anti-harassment, formal grievance process, whistleblowers, non- and female board members
retaliation, business ethics
Board Structure:
Separate Board Chair and CEO;
➢ We have strong governance measures in place to ensure enhanced Lead Director is Independent
value creation and executive alignment with shareholder interests
Voting Standards:
✓ Equity is a significant component of our compensation strategy for No supermajority voting standards;
executives and senior management to ensure alignment of interests to majority voting for directors
company performance
Shareholder Rights:
Stockholder ability to amend bylaws
➢ We recognize climate phenomenon may have an impact on our
portfolio, and regularly review the prevalence of environmental risks Resiliency
✓ Our Board’s Risk Subcommittee has oversight of climate-related risks as Flood Risk NOAA FEMA Special
part of its overall responsibility for reviewing Hersha’s enterprise risk Hazard Score Flood Hazard
(1-10, 1=low risk) Areas
strategy, risk identification, and management
Average score for (1% chance of flooding
every year)
✓ We employ portfolio-wide resiliency measures by carrying all risk property portfolio is 1.3 vs.
insurance, as well as continually monitoring and implementing practical 2.8 average risk for 17% of our
cost-effective, resiliency measures at the property-level US Lodging REITs* portfolio by count**
*Morgan Stanley March 2019 Flood Risk Report; **Based on portfolio construction as of December 31, 2020 16Case Study: Rest Assured™
➢ COVID-19 response: Hersha’s proprietary Rest Assured™
program was created to highlight our focus on health and
wellness for our guests, associates, and partners
All Hersha hotels
✓ Advanced cleaning procedures align with CDC guidelines have implemented the
and utilize EPA-approved disinfectants, UV light Rest Assured program
technology, and HEPA filtration vacuums
✓ Reimagined amenities including alternative fitness
solutions, mobile check-in & check-out, and contactless
dining
✓ Ongoing feedback and data channels utilized for
measurement and strategic program evolution
➢ Hersha advantage: Our sustainability program and unique
relationship with our affiliated management company enabled
us to quickly adjust and adapt to the pandemic threat, develop
cost-savings measures, and implement cleaning and service
protocols
17Additional Resources
➢ Hersha’s Investor Presentation:
http://investors.hersha.com/Presentations
➢ Hersha’s 10K & Proxy: http://investors.hersha.com/SEC-Filings
➢ Hersha’s EarthView Sustainability Report (in alignment
with SASB for the Real Estate sector and the TCFD):
https://www.hersha.com/annual-reports/
➢ Hersha’s Code of Ethics: http://investors.hersha.com/govdocs
➢ Hersha’s Corporate Governance Compendium:
http://investors.hersha.com/govdocs
➢ Hersha’s Code of Conduct:
http://investors.hersha.com/govdocs
➢ Hersha’s Environmental Management System:
http://investors.hersha.com/govdocs
➢ Hersha’s Rest Assured Safety and Wellness Program:
https://www.hersha.com/restassured/
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