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                                                                    EXHIBIT 99.2

FOR IMMEDIATE RELEASE                     CONTACT: Dennis Craven
                                                   Vice President and Controller
                                                   RFS Hotel Investors, Inc.
                                                   (901) 767-7005



             RFS HOTEL INVESTORS ANNOUNCES 2000 DIVIDEND ALLOCATION

Memphis, TN, January 25, 2001 - RFS Hotel Investors (NYSE: RFS), a hotel real
estate investment trust with a portfolio of 60 hotels, announced today that the
characterization of 2000 dividends on its common shares for income tax reporting
purposes are as follows:



              PAID        DIVIDENDS        ORDINARY      RETURN OF
             DATES        PER SHARE         INCOME        CAPITAL        GAIN (1)
             -----        ---------         ------        -------        --------
                                                             
            2/15/00        $0.3850          98.66%          1.34%          0.00%
            5/15/00        $0.3850          98.66%          1.34%          0.00%
            8/15/00        $0.3850          98.66%          1.34%          0.00%
           11/15/00        $0.3850          75.43%          1.35%         23.22%


         (1) Of this amount, 1.09% represents a capital gain and 22.13%
             represents a Sec. 1250 Recapture.

RFS Hotel Investors, Inc.'s CUSIP number is 749555J108. No part of the dividends
in 2000 represented foreign taxes.

Registered shareholders holding common stock of RFS Hotel Investors at anytime
during the year will receive an Internal Revenue Service form 1099-DIV from Sun
Trust Bank, the Company's dividend paying agent. The form will report the gross
dividends paid with respect to 2000. If your shares were held in "street name"
during 2000, the IRS form will be provided by the bank, brokerage firm, or other
nominee holding your shares. The information set forth above will be necessary
in order to properly report the Company's dividends on your federal income tax
return. The laws governing state taxation of REIT distribution may vary, and may
not be the same as those governing your federal income taxes. Because federal
and state tax laws affect individuals differently, the Company cannot advise
shareholders on how distributions should be reported on their individual tax
returns.

RFS Hotel Investors, Inc. (RFS) is a real estate investment trust (REIT) that
owns 60 hotels with approximately 8,700 rooms located in 24 states. RFS's hotel
portfolio is diversified by geography, brand and segment, Leading brands under
which RFS hotels are operated include Sheraton(R), Residence Inn by Marriott(R),
Hilton(R), Doubletree(R), Holiday Inn(R), Hampton Inn(R), and Homewood Suites by
Hilton(R). By segment, RFS receives approximately 45% of its EBITDA from full
service hotels, 30% from extended stay hotels, and 25% from limited service
hotels. Additional information can be found on the Company's web site at
www.rfshotel.com.