EX-99.1 3 dex991.htm PRESS RELEASE Press Release

EXHIBIT 99.1

 

For Immediate Release

Contact:

David Bulger (Company)

   Jerry Daly or Carol McCune

CFO, Treasurer and EVP

   Daly Gray (Media)

(561) 227-1302

   (703) 435-6293

 

Innkeepers USA Trust Announces Second Quarter Earnings

 

PALM BEACH, Fla., August 12, 2003—Innkeepers USA Trust (NYSE: KPA), a hotel real estate investment trust (REIT) and a leading owner of upscale, extended-stay hotel properties throughout the United States, today announced results for the three months and the six months ended June 30, 2003.

 

    

2Q

2003*

    

2Q

2002*

    

%

Change

     Six Mos.
2003*
     Six Mos.
2002*
     %
Change
  

Net loss applicable to common shareholders

    $ (4,603 )   $ (5,045 )   8.8 %   $ (9,653 )   $ (11,512 )   16.1 %

Diluted loss per share

    $ (0.12 )   $ (0.14 )   14.3 %   $ (0.26 )   $ (0.33 )   21.2 %

Net cash provided by operating activities

    $ 15,189     $ 15,515     (2.1 )%   $ 24,473     $ 27,257     (10.2 )%
                                              

Total revenue

    $ 17,415     $ 16,879     3.2 %   $ 34,169     $ 33,152     3.1 %
                                              

Deferred percentage lease revenue

    $ 4,429     $ 7,234     (38.8 )%   $ 7,892     $ 12,922     (38.9 )%

Funds from operations (FFO)**

    $ 3,765     $ 3,998     (5.8 )%   $ 7,015     $ 7,132     (1.6 )%

Diluted FFO per share**

    $ 0.10     $ 0.11     (9.1 )%   $ 0.18     $ 0.20     (10.0 )%

Earnings before interest expense, taxes,
depreciation and amortization, (EBITDA)**

    $ 12,383     $ 12,570     (1.5 )%   $ 24,140     $ 24,382     (1.0 )%
                                              

 

*    In thousands, except per share and percentage change data

 

**    FFO, FFO per share and EBITDA are not generally accepted accounting principles (GAAP) financial measures within the meaning of Securities and Exchange Commission rules and regulations and are discussed in further detail on page 6.

- more -

 

Innkeepers USA Trust

Page 2

 

Operating Results

 

The improvement in net loss applicable to common shareholders and net loss per share for the second quarter 2003, compared to the second quarter 2002, was due principally to lower depreciation recognized in the 2003 second quarter as certain hotel property assets became fully depreciated during 2002. FFO, FFO per share and EBITDA were essentially flat compared to the second quarter 2002 due to base rent (as opposed to percentage lease rent) being recognized in both periods in compliance with Securities and Exchange Commission’s Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB 101).

 

Revenue per available room (RevPAR) for the 66 hotels opened during the second quarter 2002 and 2003 declined 11.8 percent for the second quarter to $64.17. Occupancy decreased 6.9 percent to 71.5 percent, and average daily rate (ADR) decreased 5.3 percent to $89.75 for the second quarter.

 

“Lodging demand during the second quarter continued to be soft, particularly in the business traveler segment,” said Jeffrey H. Fisher, Innkeepers chief executive officer and president. “In the second quarter, we continued to suffer from the effects of the global economic slowdown, low consumer confidence, effects of the Iraqi war and severe acute respiratory syndrome (SARS). However, our operators have noticed a pickup in demand in July, particularly in the leisure segment, and we are encouraged about the prospects for the remainder of the year. This increased demand in July was reflected in a noticeably improved decline in RevPAR of 4.8 percent for the

 

- more -

Innkeepers USA Trust

Page 3

 

company’s comparable hotels, and a decline of 1.0 percent for the portfolio excluding the eight Silicon Valley hotels.”

 

The RevPAR decrease of 11.8 percent for the 2003 second quarter reflects a 29.1 percent decline in RevPAR at the company’s eight Silicon Valley, California, properties, as a result of the soft local economy and cancellations due to concerns about SARS. The eight Silicon Valley hotels accounted for 17 percent and 21 percent of the company’s percentage lease revenues for the 12 months ended June 30, 2003 and 2002, respectively. Excluding Silicon Valley, the remainder of Innkeepers’ portfolio reported a RevPAR decrease of 7.7 percent for the second quarter of 2003.

 

Outlook

 

“Due to the continuing lack of clarity about the economy, the future performance of our hotels and the timing of an eventual recovery in hotel demand, we suspended our practice of providing quarterly and full-year earnings and dividend guidance last quarter,” Fisher said. “It is still extremely difficult to predict our future results with any degree of precision due to the global economy and global uncertainties. Therefore, we believe it is prudent to continue to abstain from providing earnings and dividend guidance.

 

“Nonetheless, we feel that our affiliation with the top brands, i.e., Marriott and Hilton, and our locations in major metropolitan centers position us to benefit from an economic rebound when it does occur and business transient travel increases toward historical levels.”

 

- more -

Innkeepers USA Trust

Page 4

 

Fisher noted that the company paid a $0.03 per common share dividend in the second quarter and will continue to evaluate common share dividend levels on a quarterly basis. “We intend to pay quarterly dividends on our Series A convertible preferred shares in 2003 at the annual rate that we have in the past, $2.15624 per share, and to pay a quarterly distribution on the Series B partnership units at an annual rate of $1.10,” he said.

 

Balance Sheet

 

David Bulger, Innkeepers’ chief financial officer, treasurer and executive vice president, said that the company’s capital structure remains solid and conservatively leveraged. “Our debt-to-investment in hotel properties at cost ratio is a low 26 percent at June 30, 2003, with all of our debt due 2007 and beyond. Our weighted average interest rate on our total debt is 7.5 percent, and 96 percent of our total debt is at a fixed rate. We have $0 outstanding on our $135 million unsecured line of credit, which matures in July 2004.”

 

Capital Expenditures

 

Bulger noted that the company had spent $12 million on selective capital maintenance projects in the first six months of 2003. “Our ongoing capital expenditure program will help ensure that our properties remain competitive in our markets.”

 

Acquisitions

 

During the quarter, the company acquired the 203-room Quality Inn Beach Block Hotel in Atlantic City, N.J. The 16-story property is within one block of Atlantic City’s Boardwalk and beaches and is a short walking distance to the Trump’s Taj Mahal, Resorts International and

 

- more -

Innkeepers USA Trust

Page 5

 

Bally’s casinos and the Atlantic City Convention Center. The hotel will undergo an extensive renovation and repositioning program and will be converted to the Courtyard by Marriott brand. The total cost for the purchase and repositioning to a Courtyard will approximate $18 million.

 

“About one-third of the U.S. population lives within a three-hour drive of Atlantic City,” Fisher said. “Following the conversion to the Courtyard brand, it will be the only premium-branded, non-casino property in Atlantic City, which we believe will give us a strong competitive advantage. With Innkeepers financial strength and flexibility, we continue to seek growth opportunities both through acquisitions, selective repositioning and new construction.”

 

Innkeepers Hospitality Performance

 

Innkeepers Hospitality, which leased 61 of the company’s 68 hotels at June 30, 2003, reported that its net loss for the second quarter and first six months ended June 30, 2003, was approximately $136,000 and $1.5 million, respectively, compared to net income of $604,000 and $18,000 in 2002. Gross margin and gross operating profit (GOP) for the second quarter were 77 percent and 46 percent, respectively, which were flat and compressed 2.0 percentage points, respectively, from the 2002 second quarter. Innkeepers Hospitality has informed the company that it will continue to abstain from giving RevPAR and earnings guidance until IH gains more confidence in its ability to predict the timing and effect of an economic recovery and return of the transient business traveler. Innkeepers Hospitality has paid and is current on all percentage rent obligations to the company.

 

- more -

Innkeepers USA Trust

Page 6

 

Innkeepers USA Trust is a hotel real estate investment trust (REIT) and a leading owner of upscale, extended-stay hotel properties throughout the United States. The company owns 68 hotels with a total of 8,399 suites or rooms in 23 states and focuses on acquiring and/or developing Residence Inns by Marriott and other upscale extended-stay hotels and the rebranding and repositioning of other hotel properties.

 

For more information about Innkeepers USA Trust, visit the company’s web site at www.innkeepersusa.com. To listen to a web cast of the company’s 2003 second quarter conference call on August 5, 2003, at 2 p.m. Eastern time, go to the web site and click on Conference Calls. Interested parties may listen to an archived web cast of the conference call on the web site, or may dial (800) 405-2236, pass code 545541, to hear a telephone replay. The archived web cast and telephone replay will be available through Tuesday, August 12, 2003.

 

Included in this press release are certain non-GAAP financial measures within the meaning of Securities Exchange Commission rules and regulations that are different from measures calculated and presented in accordance with GAAP. These non-GAAP financial measures are funds from operations (FFO), FFO per share and net income (loss) (computed in accordance with GAAP) before interest expense, income taxes, depreciation and amortization and common and preferred minority interests (EBITDA). The following explains why we believe these measures help provide investors with a more complete understanding of our financial and operating performance.

 

FFO As Defined by NAREIT

The National Association of Real Estate Investment Trusts (NAREIT) adopted the definition of FFO in order to promote an industry standard measure of REIT financial and operating performance. Management believes that the presentation of FFO (defined below) provides useful information to investors regarding the company’s financial condition and results of operations, particularly in reference to the company’s ability to service debt, fund capital expenditures and pay cash dividends. FFO, as defined, adds back historical cost depreciation which assumes the value of real estate assets diminishes predictably over a certain period of time. In fact, real estate asset values increase or decrease with market conditions.

 

- more -

Innkeepers USA Trust

Page 7

 

Consequently, FFO may be a useful measure in evaluating operating performance by disregarding historical cost depreciation. Additionally, FFO per share targets are used to determine a significant portion of the incentive compensation of the company’s senior management.

 

NAREIT defines FFO as net income (loss) (computed in accordance with GAAP, excluding gains (losses) from sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. The company calculates FFO in compliance with the NAREIT definition.

 

EBITDA

EBITDA is defined as net income (loss) (computed in accordance with GAAP) before interest expense, income taxes, depreciation and amortization, and common and preferred minority interests. Management believes that the presentation of EBITDA provides useful information to investors regarding the company’s financial condition and results of operations, particularly in reference to the company’s ability to service debt, fund capital expenditures and pay cash dividends. EBITDA is also a significant factor in management’s evaluation of the company, hotel level performance, investment opportunities, dispositions and financing transactions.

 

FFO, FFO per share and EBITDA, as presented, may not be comparable to FFO, FFO per share and EBITDA as calculated by other real estate companies. These measures do not reflect certain expenses that we incurred and will incur, such as depreciation and interest (although we show such expenses in the reconciliation of these measures to their most directly comparable GAAP measures). None of these measures should be considered as an alternative to net income, cash flow from operations, or any other financial and operating performance measure prescribed by GAAP, and they only should be used in conjunction with GAAP measures.

 

The company believes that its FFO, FFO per share and EBITDA computation methodologies comply with the SEC’s new rules regarding the presentation of non-GAAP financial information. The company may review its computation methodologies if and when further guidance on the new SEC rules becomes available.

 

Cautionary statements set forth in reports filed by the company from time to time with the Securities and Exchange Commission discuss important factors impacting, or that could impact, the company and its results or forecasted results. These factors include, without limitation, (i) risks that war, terrorism or similar activities, widespread health alerts, disruption in oil imports or changes in domestic or international political environments, have affected and may continue

 

- more -

Innkeepers USA Trust

Page 8

 

to negatively affect the travel industry and the company, and the negative effects of such events that may occur in the future cannot be fully anticipated, (ii) the relative strength and performance of businesses and industries that are important demand generators in the company’s key markets (e.g., technology, automotive, aerospace), (iii) international, national, regional and local economic conditions that will, among other things, affect demand for the company’s hotel rooms and the availability and terms of financing, (iv) the company’s ability to maintain its properties in competitive condition, (v) the company’s ability to acquire or develop additional properties and risks that potential acquisitions or developments may not perform in accordance with expectations, (vi) changes in travel patterns or the prevailing means of commerce (i.e., e-commerce), and (vii) the complex tax rules that the company must satisfy to qualify as a REIT, and other governmental regulation.

 

- 30 -

INNKEEPERS USA TRUST

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except share and per share data)

 

    

Three Months Ended

June 30,

    

Six Months Ended

June 30,

  
     2003
     2002
     2003
     2002
  

Revenue:

                                 

Percentage lease revenue

    $ 16,949     $ 16,749     $ 33,573     $ 32,881  

Hotel operating revenue

      358       —         358       —    

Other revenue

      108       130       238       271  
    
 
 
 

Total revenue

    $ 17,415     $ 16,879     $ 34,169     $ 33,152  
    
 
 
 

Expenses:

                                 

Depreciation

    $ 8,512     $ 9,144     $ 16,969     $ 18,906  

Amortization of franchise costs

      17       14       31       28  

Ground rent

      126       122       250       244  

Interest expense(1)

      4,400       4,355       8,715       8,813  

Amortization of loan origination fees

      268       303       537       608  

Property taxes and insurance

      3,255       3,094       6,207       6,367  

General and administrative

      1,212       965       2,618       2,046  

Amortization of unearned compensation

      369       336       714       673  

Hotel operating expenses

      236       —         236       —    

Other charges(2)

      344       263       999       396  
    
 
 
 

Total expenses

    $ 18,739     $ 18,596     $ 37,276     $ 38,081  
    
 
 
 

Loss before minority interest

    ($ 1,324 )   ($ 1,717 )   ($ 3,107 )   ($ 4,929 )

Minority interest, common

      144       179       301       418  

Minority interest, preferred

      (1,068 )     (1,068 )     (2,136 )     (2,136 )

Loss from continuing operations

    ($ 2,248 )   ($ 2,606 )   ($ 4,942 )   ($ 6,647 )

Discontinued operations(3)

      141       57       281       127  
    
 
 
 

Net loss

    ($ 2,107 )   ($ 2,549 )   ($ 4,661 )   ($ 6,520 )
    
 
 
 

Preferred share dividends

      (2,496 )     (2,496 )     (4,992 )     (4,992 )
                                  

Net loss applicable to common shareholders

    ($ 4,603 )   ($ 5,045 )   ($ 9,653 )   ($ 11,512 )
                                  

Diluted loss per share

    ($ 0.12 )   ($ 0.14 )   ($ 0.26 )   ($ 0.33 )
                                  

Weighted average number of common shares

      37,387,194       35,109,490       37,386,755       34,754,154  
    
 
 
 

 

(1)   Interest expense has been capitalized in the amounts of $0 and $275,000 for the three months ended June 30, 2003 and 2002, respectively, and $0 and $468,000 for the six months ended June 30, 2003 and 2002, respectively, pertaining to the newly developed Residence Inn by Marriott hotel in Saddle River, New Jersey
(2)   Other charges include TRS transaction costs
(3)   A hotel has been actively marketed for sale and the operations of the hotel (i.e., percentage lease revenue, depreciation and property taxes and insurance) have been recognized and categorized as discontinued operations for all periods presented

INNKEEPERS USA TRUST

CALCULATION OF FFO AND EBITDA (UNAUDITED)

(in thousands, except per share and percentage change data)

 

    

Three Months Ended

June 30,

    

Six Months Ended

June 30,

  
     2003
     2002
     2003
     2002
  

CALCULATION OF FFO

                         

Net loss applicable to common shareholders

    ($          4,603 )   ($          5,045 )   ($        9,653 )   ($        11,512 )

Depreciation

    8,512     9,144     16,969     18,906  

Depreciation included in discontinued operations

    —       78     —       156  

Minority interest, common

    (144 )   (179 )   (301 )   (418 )

FFO

    $          3,765     $          3,998     $        7,015     $          7,132  

Weighted average number of common
shares and common share equivalents

    38,634,315     36,540,979     38,595,777     36,176,175  

Diluted FFO per share

    $            0.10     $            0.11     $          0.18     $            0.20  
                          
    

Three Months Ended

June 30,

    

Six Months Ended

June 30,

  
     2003
     2002
     2003
     2002
  

CALCULATION OF EBITDA

                         

Net loss

    ($          2,107 )   ($        2,549 )   ($        4,661 )   ($        6,520 )

Interest expense

    4,400     4,355     8,715     8,813  

Depreciation and amortization

    9,166     9,797     18,251     20,215  

Depreciation included in discontinued operations

    —       78     —       156  

Minority interest, common and preferred

    924     889     1,835     1,718  

EBITDA

    $        12,383     $      12,570     $      24,140     $      24,382  

 

INNKEEPERS USA TRUST

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share data)

 

    

June 30,

2003

    

December 31,

2002

  

ASSETS

                 

Investment in hotel properties:

                 

Land and improvements

    $ 104,682     $ 101,104  

Building and improvements

      660,150       655,373  

Furniture and equipment

      106,764       104,513  

Renovations in process

      11,245       828  

Hotels held for sale, net

      2,000       2,000  
    
 
       884,841       863,818  

Accumulated depreciation

      (197,758 )     (180,789 )
    
 

Net investment in hotel properties

      687,083       683,029  

Cash and cash equivalents

      10,403       21,367  

Restricted cash and cash equivalents

      9,711       14,151  

Due from Lessees

      9,529       8,784  

Deferred expenses, net

      3,308       3,685  

Other assets

      2,189       3,032  
    
 

Total assets

    $ 722,223     $ 734,048  
    
 

LIABILITIES AND SHAREHOLDERS’ EQUITY

                 

Debt

    $ 234,472     $ 236,730  

Accounts payable and accrued expenses

      8,758       7,700  

Distributions payable

      3,981       9,000  

Deferred percentage lease revenue

      7,892       —    

Minority interest in Partnership

      52,023       52,458  
    
 

Total liabilities

      307,126       305,888  
    
 

Shareholders’ equity:

                 

Preferred shares, $0.01 par value, 20,000,000 shares authorized,
4,630,000 shares issued and outstanding

      115,750       115,750  

Common shares, $0.01 par value, 100,000,000 shares authorized,
37,684,570 and 37,483,913 issued and outstanding, respectively

      377       375  

Additional paid-in capital

      394,566       393,259  

Unearned compensation

      (1,626 )     (1,036 )

Distributions in excess of earnings

      (93,970 )     (80,188 )
    
 

Total shareholders’ equity

      415,097       428,160  
    
 

Total liabilities and shareholders’ equity

    $ 722,223     $ 734,048  
    
 

 

INNKEEPERS USA TRUST

DEBT COMPOSITION (UNAUDITED)

AS OF JUNE 30, 2003

(outstanding balance in thousands)

 

DEBT

    Outstanding
Balance
    Stated
Interest
Rate
    

Maturity Date

    Encumbered
Properties

Unsecured Line of Credit

    $ 0    — (2)   July 2004    —  

Industrial Revenue Bonds

      10,000    2.38 %(2)   Dec. 2014    —  

Term Loan #1

      26,000    8.17 %   Oct. 2007    8

Term Loan #2

      38,000    8.15 %   Mar. 2009    8

Term Loan #3

      38,000    7.02 %   Apr. 2010    8

Term Loan #4

      57,000    7.16 %   Oct. 2009    8

Term Loan #5

      50,000    7.75 %   Jan. 2011    6

Mortgage(1)

      13,000    10.35 %   June 2010    1

Adjustment(1)

      2,000    —       —      —  

TOTAL

    $ 234,000    7.5 %(3)   7 yrs.(4)    39

 

(1)   Adjustment to record $13 million mortgage at a fair market interest rate of 7% (the stated interest rate is 10.35%)
(2)   Variable rated debt. The stated interest rate of the industrial revenue bonds includes an annual letter of credit fee of 1.25%.
(3)   Weighted average calculated using the stated interest rate
(4)   Weighted average maturity

INNKEEPERS USA TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

    

Six Months Ended

June 30,

  
     2003
     2002
  

Cash flows from operating activities:

                 

Net loss

    ($ 4,661 )   ($ 6,520 )

Adjustments to reconcile net loss to net cash provided by operating activities:

                 

Depreciation and amortization

      18,251       20,371  

Minority interests

      1,835       1,718  

Deferred percentage lease revenue

      7,892       12,922  

Changes in operating assets and liabilities:

                 

Due from lessees

      (745 )     (1,116 )

Other assets

      843       693  

Accounts payable and accrued expenses

      1,058       (811 )

Net cash provided by operating activities

      24,473       27,257  

Cash flows from investing activities:

                 

Investment in hotel properties

      (21,023 )     (19,304 )

Costs paid on sale of hotel

      —         (247 )

Net withdrawals into restricted cash accounts

      4,440       3,447  

Payments for franchise fees

      (10 )     —    

Net cash used by investing activities

      (16,593 )     (16,104 )

Cash flows from financing activities:

                 

Proceeds from debt issuance

      —         4,000  

Payments on debt

      (2,258 )     (26,595 )

Distributions paid to unit holders

      (2,416 )     (2,251 )

Distributions paid to shareholders

      (13,989 )     (8,123 )

Redemption of units

      —         (236 )

Proceeds from issuance of common shares, net

      —         25,038  

Loan origination fees and costs paid

      (181 )     (246 )

Net cash used by financing activities

      (18,844 )     (8,413 )

Net increase (decrease) in cash and cash equivalents

      (10,964 )     2,740  

Cash and cash equivalents at beginning of period

      21,367       5,077  

Cash and cash equivalents at end of period

    $ 10,403     $ 7,817  

Supplemental cash flow information:

                 

Interest paid

    $ 8,715     $ 8,887  

INNKEEPERS USA TRUST

OTHER DATA (UNAUDITED)

(in thousands, except shares data)

 

 

    

June 30,

2003

    

June 30,

2002

  
      

CAPITALIZATION

                 

Common share market capitalization

    $ 256,000     $ 358,000  

Market capitalization

    $ 641,000     $ 762,000  

Common share closing price

    $ 6.80     $ 9.58  

Common dividend(1)

    $ 0.35     $ 0.47  

Common share dividend yield(1)

      5.1 %     4.9 %

Preferred share closing price

    $ 25.25     $ 24.60  

Preferred share dividend(2)

    $ 2.156     $ 2.156  

Preferred share dividend yield(2)

      8.5 %     8.8 %

DEBT COVERAGE

                 

Debt weighted average interest rate

      7.5 %     7.5 %

Debt to investment in hotel properties

      26 %     27 %

Debt and preferred shares to investment in hotel properties

      40 %     40 %

Debt to total market capitalization

      37 %     31 %

Debt and preferred shares to total market capitalization

      55 %     47 %

LIQUIDITY/FLEXIBILITY

                 

Debt Due 2002

      —       $ 2,000  

Debt Due 2003

    $ 2,000     $ 5,000  

Debt Due 2004

    $ 5,000     $ 5,000  

Debt Due 2005

    $ 6,000     $ 6,000  

Debt Due 2006 and thereafter

    $ 221,000     $ 221,000  

Unencumbered hotel assets(3)

      43 %     42 %

Unsecured Line of Credit Outstanding Balance

    $ 0     $ 0  

Unsecured Line of Credit Available Balance(4)

    $ 125,000     $ 125,000  

SHARES AND UNITS OUTSTANDING

                 

Common Shares

      37,684,570       37,384,558  

Common Partnership Units

      1,167,236       1,267,248  

Preferred Partnership Units

      3,884,469       3,884,469  

Preferred Shares(5)

      6,857,493       6,857,493  

 

(1)   Regular and special common share dividends declared for the twelve months ended June 30, 2003 and regular common share dividends declared for the twelve months ended June 30, 2002

 

(2)   Regular preferred share dividends declared for the twelve months ended June 30, 2003 and 2002

 

(3)   Based upon the number of hotels

 

(4)   The actual amount that may be borrowed is contingent upon many factors, such as compliance with unsecured line of credit covenants and the use of proceeds from borrowings

 

(5)   Assuming conversion into common shares

INNKEEPERS USA TRUST

HOTEL OPERATING RESULTS (UNAUDITED)

 

           Three Months Ended     Six Months Ended  
    

As of

June 30,

2003

     June 30,     %     June 30,     %  
       2003
     2002
     Inc
(dec)
     2003
     2002
     Inc
(dec)
  

PORTFOLIO(1)(2)

                                                   

Average Daily Rate

          $ 89.75     $ 94.73     -5.26 %   $ 91.12     $ 95.54     -4.63 %

Occupancy

            71.50 %     76.77 %   -6.86 %     68.82 %     72.49 %   -5.06 %

RevPAR

          $ 64.17     $ 72.72     -11.76 %   $ 62.71     $ 69.25     -9.44 %

Number of hotels

    66                                              

Percent of total rooms

    100 %                                            

Percent of percentage lease revenue(3)

    100 %                                            

BY SEGMENT

                                                   

Upscale Extended Stay(1)

                                                   

Average Daily Rate

          $ 92.29     $ 96.86     -4.72 %   $ 93.09     $ 97.46     -4.48 %

Occupancy

            74.16 %     81.05 %   -8.50 %     71.79 %     76.19 %   -5.78 %

RevPAR

          $ 68.44     $ 78.50     -12.82 %   $ 66.83     $ 74.26     -10.01 %

Number of hotels

    51                                              

Percent of total rooms

    76 %                                            

Percent of percentage lease revenue(3)

    80 %                                            

Mid-Priced(2)

                                                   

Average Daily Rate

          $ 80.57     $ 86.33     -6.67 %   $ 83.84     $ 88.12     -4.86 %

Occupancy

            63.29 %     63.57 %   -0.44 %     59.64 %     61.06 %   -2.33 %

RevPAR

          $ 50.99     $ 54.88     -7.09 %   $ 50.00     $ 53.80     -7.06 %

Number of hotels

    15                                              

Percent of total rooms

    24 %                                            

Percent of percentage lease revenue(3)

    20 %                                            

BY FRANCHISE AFFILIATION

                                                   

Residence Inn(1)

                                                   

Average Daily Rate

          $ 93.00     $ 96.59     -3.72 %   $ 94.05     $ 97.16     -3.20 %

Occupancy

            71.88 %     80.53 %   -10.74 %     69.68 %     75.33 %   -7.50 %

RevPAR

          $ 66.85     $ 77.79     -14.06 %   $ 65.53     $ 73.20     -10.48 %

Number of hotels

    45                                              

Percent of total rooms

    66 %                                            

Percent of percentage lease revenue(3)

    70 %                                            

                Three Months Ended          Six Months Ended  
     As of          June 30,          %          June 30,     %  
     June 30, 2003
         

2003

          2002
         

Inc (dec)

          2003
          2002
     Inc (dec)
  

Summerfield Suites

                                                                            

Average Daily Rate

               $ 88.27          $ 98.64          -10.51 %        $ 87.59          $ 99.42     -11.90 %

Occupancy

                 90.34 %          84.76 %        6.58 %          86.80 %          82.28 %   5.49 %

RevPAR

               $ 79.74          $ 83.61          -4.63 %        $ 76.03          $ 81.80     -7.05 %

Number of hotels

    6                                                                       

Percent of total rooms

    9 %                                                                     

Percent of percentage lease revenue(3)

    11 %                                                                     

Hampton Inn

                                                                            

Average Daily Rate

               $ 80.73          $ 87.70          -7.95 %        $ 84.02          $ 88.79     -5.37 %

Occupancy

                 63.83 %          64.32 %        -0.76 %          59.82 %          62.04 %   -3.58 %

RevPAR

               $ 51.53          $ 56.41          -8.65 %        $ 50.26          $ 55.09     -8.77 %

Number of hotels

    12                                                                       

Percent of total rooms

    19 %                                                                     

Percent of percentage lease revenue(3)

    15 %                                                                     
                                                                             

BY MANAGEMENT COMPANY

                                                                            

Innkeepers Hospitality(1)(2)

                                                                            

Average Daily Rate

               $ 89.76          $ 93.43          -3.93 %        $ 91.35          $ 94.01     -2.83 %

Occupancy

                 70.65 %          74.38 %        -5.01 %          67.46 %          70.33 %   -4.08 %

RevPAR

               $ 63.41          $ 69.49          -8.75 %        $ 61.63          $ 66.12     -6.79 %

Number of hotels

    47                                                                       

Percent of total rooms

    68 %                                                                     

Percent of percentage lease revenue(3)

    66 %                                                                     

Marriott

                                                                            

Average Daily Rate

               $ 90.54          $ 96.58          -6.25 %        $ 92.32          $ 98.01     -5.81 %

Occupancy

                 66.39 %          80.57 %        -17.60 %          65.52 %          74.85 %   -12.46 %

RevPAR

               $ 60.11          $ 77.81          -22.75 %        $ 60.49          $ 73.36     -17.54 %

Number of hotels

    13                                                                       

Percent of total rooms

    23 %                                                                     

Percent of percentage lease revenue(3)

    23 %                                                                     

Wyndham

                                                                            

Average Daily Rate

               $ 88.27          $ 98.64          -10.51 %        $ 87.59          $ 99.42     -11.90 %

Occupancy

                 90.34 %          84.76 %        6.58 %          86.80 %          82.28 %   5.49 %

RevPAR

               $ 79.74          $ 83.61          -4.63 %        $ 76.03          $ 81.80     -7.05 %

Number of hotels

    6                                                                       

Percent of total rooms

    9 %                                                                     

Percent of percentage lease revenue(3)

    11 %                                                                     

                Three Months Ended          Six Months Ended  
     As of          June 30,          %          June 30,     %  
     June 30, 2003
          2003
          2002
          Inc (dec)
          2003
          2002
     Inc (dec)
  
                                                                             

BY GEOGRAPHIC REGION

                                                                            

New England [ME, NH, VT, MA, CT, RI]

                                                                            

Average Daily Rate

               $ 88.88          $ 96.96          -8.33 %        $ 88.68          $ 94.83     -6.49 %

Occupancy

                 65.17 %          66.52 %        -2.03 %          57.72 %          59.81 %   -3.49 %

RevPAR

               $ 57.92          $ 64.49          -10.19 %        $ 51.19          $ 56.71     -9.73 %

Number of hotels

    5                                                                       

Percent of total rooms

    7 %                                                                     

Percent of percentage lease revenue(3)

    6 %                                                                     

Middle Atlantic(1)(2) [NY, NJ, PA]

                                                                            

Average Daily Rate

               $ 95.64          $ 97.36          -1.77 %        $ 93.49          $ 95.36     -1.96 %

Occupancy

                 74.02 %          80.42 %        -7.96 %          71.48 %          75.94 %   -5.87 %

RevPAR

               $ 70.79          $ 78.30          -9.59 %        $ 66.83          $ 72.42     -7.72 %

Number of hotels

    9                                                                       

Percent of total rooms

    12 %                                                                     

Percent of percentage lease revenue(3)

    13 %                                                                     

South Atlantic [DE, MD, WV, DC, VA, NC, SC, GA, FL]

                                                                            

Average Daily Rate

               $ 83.86          $ 84.09          -0.27 %        $ 87.93          $ 87.79     0.16 %

Occupancy

                 67.29 %          70.54 %        -4.61 %          65.87 %          68.79 %   -4.24 %

RevPAR

               $ 56.43          $ 59.32          -4.87 %        $ 57.92          $ 60.39     -4.09 %

Number of hotels

    14                                                                       

Percent of total rooms

    22 %                                                                     

Percent of percentage lease revenue(3)

    19 %                                                                     

East North Central [OH, MI, IN, IL, WI]

                                                                            

Average Daily Rate

               $ 86.91          $ 90.16          -3.60 %        $ 87.09          $ 89.86     -3.08 %

Occupancy

                 69.79 %          74.14 %        -5.87 %          66.05 %          68.81 %   -4.01 %

RevPAR

               $ 60.66          $ 66.85          -9.26 %        $ 57.53          $ 61.83     -6.95 %

Number of hotels

    12                                                                       

Percent of total rooms

    16 %                                                                     

Percent of percentage lease revenue(3)

    14 %                                                                     

East South Central [KY, TN, AL, MS]

                                                                            

Average Daily Rate

               $ 81.81          $ 86.07          -4.95 %        $ 80.95          $ 81.48     -0.65 %

Occupancy

                 87.39 %          85.81 %        1.84 %          79.88 %          80.03 %   -0.19 %

RevPAR

               $ 71.49          $ 73.86          -3.21 %        $ 64.66          $ 65.21     -0.84 %

Number of hotels

    2                                                                       

Percent of total rooms

    2 %                                                                     

Percent of percentage lease revenue(3)

    2 %                                                                     

    

As of

June 30, 2003

              Three Months Ended          Six Months Ended  
          June 30,        %          June 30,        %  
          2003
          2002
          Inc (dec)
          2003
          2002
          Inc (dec)
  

West North Central [MN, IA, MO, KS, NE, SD, ND]

                                                                                 

Average Daily Rate

               $ 76.61          $ 81.24          -5.70 %        $ 75.49          $ 80.75          -6.51 %

Occupancy

                 63.76 %          77.64 %        -17.88 %          62.89 %          70.21 %        -10.43 %

RevPAR

               $ 48.84          $ 63.08          -22.57 %        $ 47.48          $ 56.70          -16.26 %

Number of hotels

    2                                                                            

Percent of total rooms

    2 %                                                                          

Percent of percentage lease revenue(3)

    2 %                                                                          

West South Central [AR, LA, OK, TX]

                                                                                 

Average Daily Rate

               $ 79.18          $ 89.36          -11.39 %        $ 79.22          $ 90.38          -12.35 %

Occupancy

                 81.84 %          80.55 %        1.60 %          78.78 %          76.44 %        3.06 %

RevPAR

               $ 64.80          $ 71.98          -9.97 %        $ 62.41          $ 69.08          -9.66 %

Number of hotels

    4                                                                            

Percent of total rooms

    7 %                                                                          

Percent of percentage lease revenue(3)

    6 %                                                                          

Mountain [MT, ID, WY, CO, UT, NM, AZ, NV]

                                                                                 

Average Daily Rate

               $ 87.32          $ 91.47          -4.54 %        $ 88.76          $ 90.09          -1.48 %

Occupancy

                 78.08 %          83.97 %        -7.01 %          72.14 %          79.61 %        -9.38 %

RevPAR

               $ 68.18          $ 76.81          -11.24 %        $ 64.03          $ 71.73          -10.73 %

Number of hotels

    2                                                                            

Percent of total rooms

    4 %                                                                          

Percent of percentage lease revenue(3)

    3 %                                                                          

Pacific [WA, OR, CA, AK, HI]

                                                                                 

Average Daily Rate

               $ 98.18          $ 106.17          -7.53 %        $ 100.63          $ 108.27          -7.06 %

Occupancy

                 72.36 %          81.58 %        -11.30 %          71.20 %          76.99 %        -7.52 %

RevPAR

               $ 71.05          $ 86.62          -17.98 %        $ 71.65          $ 83.35          -14.04 %

Number of hotels

    16                                                                            

Percent of total rooms

    28 %                                                                          

Percent of percentage lease revenue(3)

    35 %                                                                          

BY SELECTED MSA

                                                                                 

Atlanta

                                                                                 

Average Daily Rate

               $ 81.99          $ 81.64          0.43 %        $ 85.46          $ 85.34          0.14 %

Occupancy

                 52.72 %          68.43 %        -22.96 %          52.38 %          66.60 %        -21.35 %

RevPAR

               $ 43.23          $ 55.86          -22.61 %        $ 44.77          $ 56.83          -21.22 %

Number of hotels

    3                                                                            

Percent of total rooms

    5 %                                                                          

Percent of percentage lease revenue(3)

    4 %                                                                          

           Three Months Ended     Six Months Ended  
    

As of
June 30,

2003

     June 30,    

%

Inc (dec)

     June 30,    

%

Inc (dec)

  
       2003
     2002
       2003
     2002
    

Boston

                                                   

Average Daily Rate

          $ 79.81     $ 96.73     -17.49 %   $ 79.65     $ 93.43     -14.75 %

Occupancy

            56.54 %     53.23 %   6.22 %     45.38 %     44.26 %   2.53 %

RevPAR

          $ 45.13     $ 51.49     -12.35 %   $ 36.15     $ 41.36     -12.60 %

Number of hotels

    2                                              

Percent of total rooms

    4 %                                            

Percent of percentage lease revenue(3)

    2 %                                            

Chicago

                                                   

Average Daily Rate

          $ 87.86     $ 94.44     -6.97 %   $ 88.71     $ 94.69     -6.32 %

Occupancy

            67.84 %     70.75 %   -4.11 %     61.94 %     64.72 %   -4.30 %

RevPAR

          $ 59.60     $ 66.82     -10.81 %   $ 54.94     $ 61.28     -10.35 %

Number of hotels

    4                                              

Percent of total rooms

    7 %                                            

Percent of percentage lease revenue(3)

    7 %                                            

Dallas/Ft. Worth

                                                   

Average Daily Rate

          $ 79.18     $ 89.36     -11.39 %   $ 79.22     $ 90.38     -12.35 %

Occupancy

            81.84 %     80.55 %   1.60 %     78.78 %     76.44 %   3.06 %

RevPAR

          $ 64.80     $ 71.98     -9.97 %   $ 62.41     $ 69.08     -9.66 %

Number of hotels

    4                                              

Percent of total rooms

    7 %                                            

Percent of percentage lease revenue(3)

    6 %                                            

Denver

                                                   

Average Daily Rate

          $ 87.32     $ 91.47     -4.54 %   $ 88.76     $ 90.09     -1.48 %

Occupancy

            78.08 %     83.97 %   -7.01 %     72.14 %     79.61 %   -9.38 %

RevPAR

          $ 68.18     $ 76.81     -11.24 %   $ 64.03     $ 71.73     -10.73 %

Number of hotels

    2                                              

Percent of total rooms

    4 %                                            

Percent of percentage lease revenue(3)

    3 %                                            

Detroit

                                                   

Average Daily Rate

          $ 92.41     $ 92.12     0.31 %   $ 92.19     $ 93.24     -1.13 %

Occupancy

            74.99 %     78.49 %   -4.46 %     73.58 %     73.20 %   0.52 %

RevPAR

          $ 69.30     $ 72.31     -4.16 %   $ 67.83     $ 68.26     -0.63 %

Number of hotels

    3                                              

Percent of total rooms

    4 %                                            

Percent of percentage lease revenue(3)

    4 %                                            

           Three Months Ended     Six Months Ended  
    

As of
June 30,

2003

     June 30,    

%

Inc (dec)

     June 30,    

%

Inc (dec)

  
       2003
     2002
       2003
     2002
    

Hartford

                                                   

Average Daily Rate

          $ 101.36     $ 105.71     -4.12 %   $ 100.84     $ 105.14     -4.09 %

Occupancy

            75.74 %     79.76 %   -5.04 %     69.90 %     75.86 %   -7.86 %

RevPAR

          $ 76.77     $ 84.31     -8.94 %   $ 70.48     $ 79.76     -11.63 %

Number of hotels

    2                                              

Percent of total rooms

    2 %                                            

Percent of percentage lease revenue(3)

    2 %                                            

Philadelphia

                                                   

Average Daily Rate

          $ 91.22     $ 90.16     1.18 %   $ 89.87     $ 89.06     0.91 %

Occupancy

            78.03 %     82.24 %   -5.12 %     78.01 %     81.66 %   -4.47 %

RevPAR

          $ 71.18     $ 74.15     -4.01 %   $ 70.10     $ 72.73     -3.62 %

Number of hotels

    4                                              

Percent of total rooms

    6 %                                            

Percent of percentage lease revenue(3)

    6 %                                            

Richmond

                                                   

Average Daily Rate

          $ 83.12     $ 82.23     1.08 %   $ 83.60     $ 81.27     2.87 %

Occupancy

            71.83 %     73.29 %   -1.99 %     68.50 %     65.97 %   3.84 %

RevPAR

          $ 59.71     $ 60.26     -0.91 %   $ 57.27     $ 53.62     6.81 %

Number of hotels

    2                                              

Percent of total rooms

    2 %                                            

Percent of percentage lease revenue(3)

    2 %                                            

San Francisco/San Jose/Oakland

                                                   

Average Daily Rate

          $ 102.54     $ 117.66     -12.85 %   $ 106.71     $ 120.91     -11.74 %

Occupancy

            64.06 %     78.72 %   -18.62 %     64.51 %     74.39 %   -13.28 %

RevPAR

          $ 65.68     $ 92.62     -29.09 %   $ 68.84     $ 89.95     -23.47 %

Number of hotels

    8                                              

Percent of total rooms

    15 %                                            

Percent of percentage lease revenue(3)

    17 %                                            

Seattle/Portland

                                                   

Average Daily Rate

          $ 91.97     $ 92.04     -0.08 %   $ 93.47     $ 92.94     0.57 %

Occupancy

            79.40 %     83.17 %   -4.53 %     74.42 %     77.55 %   -4.04 %

RevPAR

          $ 73.03     $ 76.55     -4.60 %   $ 69.56     $ 72.08     -3.50 %

Number of hotels

    6                                              

Percent of total rooms

    9 %                                            

Percent of percentage lease revenue(3)

    13 %                                            

    

As of

June 30, 2003

              Three Months Ended          Six Months Ended  
          June 30,        %          June 30,        %  
          2003
          2002
          Inc (dec)
          2003
          2002
          Inc (dec)
  

Washington, D.C.

                                                                                 

Average Daily Rate

               $ 101.36          $ 103.21          -1.79 %        $ 101.51          $ 102.01          -0.49 %

Occupancy

                 74.74 %          73.31 %        1.95 %          67.09 %          66.51 %        0.87 %

RevPAR

               $ 75.76          $ 75.66          0.13 %        $ 68.10          $ 67.85          0.37 %

Number of hotels

    3                                                                            

Percent of total rooms

    5 %                                                                          

Percent of percentage lease revenue(3)

    6 %                                                                          
(1)   Hotel operating results exclude one newly developed hotel opened in September 2002
(2)   Hotel operating results exclude one newly acquired hotel in June 2002 which will be converted to a Courtyard by Marriott
(3)   Last 12 months