Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

11. Fair Value Measurements

The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of June 30, 2011 and December 31, 2010 the Company's cash equivalents were held in short-term money market mutual funds.  The fair value of money market securities is based on quoted prices in an active market.

As of June 30, 2011 and December 31, 2010, the Company held an interest rate swap instrument that is required to be measured at fair value on a recurring basis (see Note 10). The fair value of the Company's interest rate swap was determined using cash flow analysis on the expected cash flow of the contract in combination with observable market-based inputs, including interest rate curves and implied volatilities.  As part of this valuation, the Company considered the credit ratings of the counterparties to the interest rate swap to determine if a credit risk adjustment was required. Therefore, the Company has categorized the swap contract as Level 2. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the type of derivative contract it holds.

The Company's assets (liabilities) measured at fair value on a recurring basis at June 30, 2011 and December 31, 2010, were as follows (in thousands):

	Fair Value Measurements at Reporting Date Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs			Significant Unobservable Inputs		Balance as of June 30, 2011
	(Level 1)		(Level 2)			(Level 3)
Money market mutual funds	$	9,797	$	--		$	--	$	9,797
Interest rate swap	$	--	$	(1,911	)	$	--	$	(1,911	)

	Fair Value Measurements at Reporting Date Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs			Significant Unobservable Inputs		Balance as of December 31, 2010
	(Level 1)		(Level 2)			(Level 3)
Money market mutual funds	$	17,283	$	--		$	--	$	17,283
Interest rate swap	$	--	$	(1,691	)	$	--	$	(1,691	)

The remainder of the assets and liabilities held by the Company at June 30, 2011 and December 31, 2010 are not required to be measured at fair value. The carrying amount of short-term financial instruments (cash, restricted cash, trade receivables, accounts payable and accrued liabilities) approximates fair value due to the short maturity of those instruments. The concentration of credit risk on trade receivables is minimized by the diverse nature of the Company's customer base.  Management has outstanding note receivables at June 30, 2011 with various locations managed by the Company.  Interest rates associated with these note receivables are consistent with current market interest rates or are discounted in order for the imputed interest rate to resemble that of current market rates.  The carrying value of all notes receivable at June 30, 2011 approximate fair value, after taking into account the allowances recorded at June 30, 2011.  The carrying value of the Company's term mortgage loan secured by Royal Sonesta Hotel Boston approximates its fair value due to its variable interest rate.  The carrying value of the Company's term mortgage loan secured by Sonesta Bayfront Hotel Coconut Grove approximates its fair value due to the proximity to the closing date of this loan.