Adverse global market and economic conditions and dislocations in the markets could cause us to recognize impairment losses, which could materially and adversely affect our business, financial condition and results of operations.
We continually monitor events or changes in circumstances that could indicate that the carrying values of our hotel properties may not be recoverable. When events or changes in circumstances indicate that the carrying value may not be recoverable, we assess the recoverability by determining whether the carrying value of the hotel properties will be recovered through the estimated undiscounted future cash flows which take into account current market conditions and our intent with respect to holding or disposing of the respective hotel property. If the estimated undiscounted future cash flows do not exceed the carrying value, we will recognize an impairment loss for the amount by which the carrying value exceeds the fair value. The resulting impairment loss could materially and adversely affect our business, financial condition and results of operations.
Competition from other lodging industry participants in the markets in which we operate could adversely affect occupancy levels and/or ADRs, which could have a material and adverse effect on us.
We face significant competition from owners and operators of other hotels and other lodging industry participants. In addition, we face competition from non-traditional accommodations for travelers, such as online room sharing services. We compete based on a number of factors, including location, quality of accommodations, convenience, brand affiliation, room rates, service levels, amenities, customer service, and the availability of lodging and event space. Our competitors may have an operating model that enables them to offer accommodations at lower rates than we can, which could result in our competitors increasing their occupancy at our expense and adversely affecting our ADRs. Given the importance of occupancy and ADR at focused-service and compact full-service hotels, this competition could adversely affect our ability to attract prospective guests, which could materially and adversely affect our business, financial condition and results of operations.
At December 31, 2018, we had approximately $2.2 billion of debt outstanding, which could materially and adversely affect our operating performance and put us at a competitive disadvantage.
Required repayments of debt and related interest may materially and adversely affect our operating performance. At December 31, 2018, we had approximately $2.2 billion of outstanding debt. After taking into consideration the effect of interest rate swaps, $192.0 million of our borrowings are subject to variable rates. Increases in interest rates on our existing or future variable rate debt would increase our interest expense, which could adversely affect our cash flows and our ability to pay distributions to shareholders.
Our organizational documents contain no limitations on the amount of debt that we may incur, and our board of trustees may change our financing policy at any time without shareholder notice or approval. As a result, we may be able to incur substantial additional debt, including secured debt, in the future.
Because we anticipate that our operating cash flow will be adequate to repay only a portion of our debt at maturity, we expect that we will be required to repay debt through debt refinancings and/or offerings of our securities. The amount of our outstanding debt may adversely affect our ability to refinance our debt.
If we are unable to refinance our debt on acceptable terms, or at all, we may be forced to dispose of one or more of our hotels on disadvantageous terms, which may result in losses to us and may adversely affect the cash available for distributions to our shareholders. In addition, if the prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, our interest expense would increase, which would adversely affect our future operating results and liquidity.
Our outstanding debt, and any additional debt borrowed in the future, may subject us to many risks, including the risk that:
our cash flows from operations may be insufficient to make required payments of principal and interest;
we may be required to use a substantial portion of our cash flows to pay principal and interest, which would reduce the cash available for distributions to our shareholders;
we may be at a competitive disadvantage compared to our competitors that have less debt;
we may be vulnerable to economic volatility, particularly if growth were to slow or stall and reduce our flexibility to respond to difficult market, industry, or economic conditions;