Unassociated Document

Revenues from continuing operations for the 2010 first quarter decreased 5.3 percent to $18.9 million, compared to the same year-ago period. Net loss attributable to common shareholders was $(3.4) million, or $(0.15) per diluted share, for the 2010 first quarter, compared to net loss attributable to common shareholders of $(2.7) million, or $(0.13) per diluted share, in the 2009 same quarter.

Funds from operations (FFO) in the 2010 first quarter were $(0.3) million, or $(0.01) per diluted share, compared to $1.1 million, or $0.05 per diluted share, in the same 2009 period. Earnings before interest, taxes, depreciation and amortization, noncontrolling interest and preferred stock dividends (Adjusted EBITDA) decreased to $2.0 million compared to $3.4 million for the first quarter of 2009.

“We made good progress in the first quarter to execute on our updated strategic plan to shed underperforming and “non-core” assets,” said Kelly A. Walters, Supertel president and CEO. “Consistent with the sales made in 2009, our top priority will continue to be improving our balance sheet and our operating results by eliminating properties that no longer offer upside commensurate with their inherent risk.”

“We continue to focus intensely on operations, especially cost containment and revenue management,” he said. “We are conducting a thorough evaluation of our capital expenditure needs to improve our assets and increase the profitability of the “core” portfolio, as we come out of this protracted recession. Our goal is to focus long-term in our decision-making process, while investing in those projects that we believe will generate the highest risk adjusted returns.”

After noncontrolling interest and recognition of dividends for preferred stock shareholders, the net loss attributable to common shareholders was $(3.4) million, or $(0.15) per diluted share, for the 2010 first quarter, compared with net loss attributable to common shareholders of $(2.7) million, or $(0.13) per diluted share, for the like 2009 period.

The portfolio of 96 hotels in continuing operations in the 2010 first quarter, compared with the same period a year earlier, reported a 2.4 percent increase in occupancy, and a 7.5 percent decrease in ADR, for a 5.4 percent decline in RevPAR, compared to a 2.1 percent RevPAR decline for the industry, as reported by Smith Travel Research.

The company’s eight continuing operations extended-stay hotels reported a 15.1 percent increase in RevPAR to $17.27, reflecting a 20.9 percent rise in occupancy to 73.0 percent, partially offset by a 4.8 percent decline in ADR to $23.64. An aggressive marketing campaign by the management company is believed to have been the main driver of the occupancy improvement. The company’s 59 continuing operations economy hotels reported an 8.9 percent decrease in RevPAR to $23.17 in the 2010 first quarter, caused by a 3.0 percent drop in occupancy to 51.1 percent and a 6.0 percent decrease in ADR to $45.31.

“We were especially encouraged to see an improved March, though clearly all metrics are still well below the peak levels attained in 2007. According to Smith Travel Research, RevPAR is still 17.3 percent below the peak in the last economic cycle, despite a two plus percent increase in March,” Walters said. “The economy sector is rebounding in its historical pattern, lagging in the overall industry recovery. The offset is that economy hotels historically do not suffer as much decline during an economic downturn. For those hotels to gain traction, we need to see more growth in occupancy from traditional drivers like construction crews. Although we have seen some signs of recovery in the economy sector of late, the demand we anticipated to be created from the stimulus package has yet to be fully realized.”

Hotel and property operations expenses from continuing operations for the 2010 first quarter increased $0.1 million, or 0.6 percent, over the like 2009 period. The increase was primarily due to higher expenses in the repairs and maintenance category in anticipation of higher summer occupancy and costs associated with increasing the quality of breakfast provided. “Our operators did a good job of holding costs, something we continue to monitor closely,” he noted.

Interest expense from continuing operations rose slightly to $2.6 million for the quarter. The increase resulted from rate adjustments on the company’s GE loans in addition to new financings, offset partially by loans paid off with property sales, general amortization reduction and refinancings with lower interest rates. Depreciation and amortization expense from continuing operations declined $0.1 million from the first quarter of 2009 to $3.0 million.

For the 2010 first quarter, property operating income (POI) from continuing operations decreased $1.2 million, or 28.4 percent, compared to the year-ago period. POI is calculated as revenue from room rentals and other hotel services less hotel and property operations expenses. This decrease resulted from the increased cost of operating expenses mentioned above.

“We made positive and necessary progress in strengthening our balance sheet in the 2010 first quarter,” Walters said. “Now that we have completed an exhaustive review of our portfolio, we can make much more informed decisions and work towards reducing the portion of our debt on hotels that no longer meet our long-term hold strategy.”

In the 2010 first quarter, the company sold the 99-room Comfort Inn in Dublin, Va. In addition, the company entered into separate purchase and sale agreements to sell two additional non-core assets, which are expected to close in the 2010 second quarter. “At the end of the first quarter, we were actively marketing 18 held for sale hotels that are currently classified in discontinued operations,” said Connie Scarpello, chief financial officer. “From time to time, we may sell underperforming hotels, currently not classified as held for sale, when we see the right opportunity,” she said.

“The early signs of a turnaround are in place, our strategic plan is being implemented on schedule, and we are steadily reducing the company’s debt levels. In addition, we see valuations stabilizing and lending and equity sources expanding, which should bolster our divestment program and, we believe, allow us in the future to return to acquiring real estate assets,” Walters added. “All things considered, we feel very good about our position in the market, but we fully recognize that our focus must remain on operations and further balance sheet improvements.”

As of March 31, 2010, Supertel Hospitality, Inc. (NASDAQ: SPPR) owns 114 hotels comprised of 9,929 rooms in 23 states. The company’s hotel portfolio includes Super 8, Comfort Inn/Comfort Suites, Hampton Inn, Holiday Inn Express, Supertel Inn, Days Inn, Ramada Limited, Guest House Inn, Sleep Inn, Savannah Suites, Masters Inn, Key West Inns and Baymont Inn. This diversity enables the company to participate in the best practices of each of these respected hospitality partners. The company specializes in limited service hotels, which do not normally offer food and beverage service. For more information or to make a hotel reservation, visit www.supertelinc.com.

Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. These risks are discussed in the Company’s filings with the Securities and Exchange Commission.

	As of
	March 31,			December 31,
	2010			2009
	(unaudited)

ASSETS
Investments in hotel properties	$	320,061		$	319,770
Less accumulated depreciation		88,988			86,069
		231,073			233,701

Cash and cash equivalents		420			428
Accounts receivable, net of allowance for doubtful accounts
of $87 and $95		2,134			2,043
Prepaid expenses and other assets		7,255			4,779
Deferred financing costs, net		1,278			1,414
Investment in hotel properties, held for sale, net		29,321			32,030
	$	271,481		$	274,395

LIABILITIES AND EQUITY
LIABILITIES
Accounts payable, accrued expenses and other liabilities	$	12,657		$	10,340
Debt related to hotel properties held for sale		23,742			24,975
Long-term debt		163,927			164,538
		200,326			199,853

Redeemable noncontrolling interest in consolidated partnership,
at redemption value		511			511

Redeemable preferred stock
Series B, 800,000 shares authorized; $.01 par value,
332,500 shares outstanding, liquidation preference of $8,312		7,662			7,662

EQUITY
Shareholders' equity
Preferred stock, 40,000,000 shares authorized;
Series A, 2,500,000 shares authorized, $.01 par value, 803,270
shares outstanding, liquidation preference of $8,033		8			8
Common stock, $.01 par value, 100,000,000 shares authorized;
22,002,322 shares outstanding.		220			220
Additional paid-in capital		120,165			120,153
Distributions in excess of retained earnings		(57,798	)		(54,420	)
Total shareholders' equity		62,595			65,961
Noncontrolling interest
Noncontrolling interest in consolidated partnership,
redemption value $277 and $237		387			408

Total equity		62,982			66,369

COMMITMENTS AND CONTINGENCIES
	$	271,481		$	274,395


	Three Months Ended
	March 31,
	2010			2009
	(unaudited)
REVENUES
Room rentals and other hotel services	$	18,912		$	19,979

EXPENSES
Hotel and property operations		15,973			15,875
Depreciation and amortization		3,042			3,124
General and administrative		999			971
		20,014			19,970

EARNINGS BEFORE NET LOSS
ON DISPOSITIONS OF
ASSETS, OTHER INCOME, INTEREST EXPENSE
AND INCOME TAXES		(1,102	)		9

Net loss on dispositions of assets		(18	)		(26	)
Other income		27			38
Interest expense		(2,601	)		(2,524	)

LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES		(3,694	)		(2,503	)

Income tax benefit		863			781

LOSS FROM CONTINUING OPERATIONS		(2,831	)		(1,722	)

Loss from discontinued operations, net of tax		(186	)		(703	)

NET LOSS		(3,017	)		(2,425	)

Noncontrolling interest		7			87

NET LOSS ATTRIBUTABLE TO CONTROLLING INTERESTS		(3,010	)		(2,338	)

Preferred stock dividends		(368	)		(369	)

NET LOSS ATTRIBUTABLE
TO COMMON SHAREHOLDERS	$	(3,378	)	$	(2,707	)

NET LOSS PER COMMON SHARE - BASIC AND DILUTED
EPS from continuing operations	$	(0.14	)	$	(0.10	)
EPS from discontinued operations	$	(0.01	)	$	(0.03	)
EPS Basic and Diluted	$	(0.15	)	$	(0.13	)

AMOUNTS ATTRIBUTABLE TO COMMON SHAREHOLDERS
Income from continuing operations, net of tax	$	(3,193	)	$	(2,038	)
Discontinued operations, net of tax		(185	)		(669	)
Net loss attributable to common shareholders	$	(3,378	)	$	(2,707	)

	Three months
	ended March 31,
	2010			2009
Weighted average shares outstanding for:
calculation of earnings per share - basic		22,002			20,925
calculation of earnings per share - diluted		22,002			20,925

Weighted average shares outstanding for:
calculation of FFO per share - basic		22,002			20,925
calculation of FFO per share - diluted		22,002			20,925


Reconciliation of net income to FFO
Net loss attributable to common shareholders	$	(3,378	)	$	(2,707	)
Depreciation and amortization		3,040			3,717
Net loss on disposition of assets		36			60
FFO available to common shareholders	$	(302	)	$	1,070

FFO per share - basic	$	(0.01	)	$	0.05
FFO per share - diluted	$	(0.01	)	$	0.05

FFO is a non-GAAP financial measure. We consider FFO to be a market accepted measure of an equity REIT's operating performance, which is necessary, along with net earnings (loss), for an understanding of our operating results. FFO, as defined under the National Association of Real Estate Investment Trusts (NAREIT) standards, consists of net income computed in accordance with GAAP, excluding gains (or losses) from sales of real estate assets, plus depreciation and amortization of real estate assets. We believe our method of calculating FFO complies with the NAREIT definition. FFO does not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties. FFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. All REITs do not calculate FFO in the same manner; therefore, our calculation may not be the same as the calculation of FFO for similar REITs.

We use FFO as a performance measure to facilitate a periodic evaluation of our operating results relative to those of our peers, who, like us, are typically members of NAREIT. We consider FFO a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assume that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful indication of our performance.

Unaudited-In thousands, except statistical data:	Three months
	ended March 31,
	2010			2009
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
Net loss attributable to common shareholders	$	(3,378	)	$	(2,707	)
Interest expense, including disc ops		3,055			3,123
Income tax benefit, including disc ops		(1,106	)		(1,043	)
Depreciation and amortization, including disc ops		3,040			3,717
EBITDA		1,611			3,090
Noncontrolling interest		(7	)		(87	)
Preferred stock dividend		368			369
ADJUSTED EBITDA	$	1,972		$	3,372

Adjusted EBITDA is a financial measure that is not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We calculate Adjusted EBITDA by adding back to net earnings (loss) available to common shareholders certain non-operating expenses and non-cash charges which are based on historical cost accounting and we believe may be of limited significance in evaluating current performance. We believe these adjustments can help eliminate the accounting effects of depreciation and amortization and financing decisions and facilitate comparisons of core operating profitability between periods, even though Adjusted EBITDA also does not represent an amount that accrues directly to common shareholders. In calculating Adjusted EBITDA, we also add back preferred stock dividends and noncontrolling interests, which are cash charges.

Adjusted EBITDA doesn’t represent cash generated from operating activities determined by GAAP and should not be considered as an alternative to net income, cash flow from operations or any other operating performance measure prescribed by GAAP. Adjusted EBITDA is not a measure of our liquidity, nor is Adjusted EBITDA indicative of funds available to fund our cash needs, including our ability to make cash distributions. Neither does the measurement reflect cash expenditures for long-term assets and other items that have been and will be incurred. Adjusted EBITDA may include funds that may not be available for management’s discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of our operating performance. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

Unaudited-In thousands, except statistical data:	Three months
	ended March 31,
	2010			2009
Same Store:
Revenue per available room (RevPAR):
Midscale w/o F&B **	$	32.82		$	34.47
Economy	$	23.17		$	25.43
Extended Stay	$	17.27		$	15.00
Total	$	24.91		$	26.32

Average daily room rate (ADR):
Midscale w/o F&B **	$	61.75		$	66.10
Economy	$	45.31		$	48.22
Extended Stay	$	23.64		$	24.82
Total	$	45.31		$	48.99

Occupancy percentage:
Midscale w/o F&B **		53.2	%		52.1	%
Economy		51.1	%		52.7	%
Extended Stay		73.0	%		60.4	%
Total		55.0	%		53.7	%

Unaudited-In thousands, except statistical data:	Three months
	ended March 31,
	2010			2009

Total Hotels:
Revenue per available room (RevPAR):	$	24.91		$	26.32
Average daily room rate (ADR):	$	45.31		$	48.99
Occupancy percentage:		55.0	%		53.7	%

Revenue from room rentals and other hotel services consists of:
Room rental revenue	$	18,289		$	19,329
Telephone revenue		79			71
Other hotel service revenues		544			579
Total revenue from room rentals and other hotel services	$	18,912		$	19,979

Hotel and property operations expense
Total hotel and property operations expense	$	15,973		$	15,875

Property Operating Income ("POI")
Total property operating income	$	2,939		$	4,104

POI as a percentage of revenue from room rentals
and other hotel services
Total POI as a percentage of revenue		15.5	%		20.5	%

RECONCILIATION OF NET LOSS FROM
CONTINUING OPERATIONS TO POI
Net loss	$	(2,831	)	$	(1,722	)
Depreciation and amortization		3,042			3,124
Net loss on disposition of assets.		18			26
Other income		(27	)		(38	)
Interest expense		2,601			2,524
General and administrative expense		999			971
Income tax benefit		(863	)		(781	)
POI	$	2,939		$	4,104

Net loss as a percentage of continuing operations revenue
from room rentals and other hotel services		-15.0	%		-8.6	%

			Three months ended March 31, 2010									Three months ended March 31, 2009
Same Store	Room									Room
Region	Count		RevPAR		Occupancy			ADR		Count		RevPAR		Occupancy			ADR
Mountain		214	$	25.58		56.5	%	$	45.30		214	$	26.73		55.8	%	$	47.89
West North Central		2,670		22.56		49.7	%		45.35		2,670		24.73		53.2	%		46.48
East North Central		1,081		28.02		49.2	%		56.97		1,081		30.55		51.5	%		59.37
Middle Atlantic/New England		142		27.66		46.9	%		59.02		142		31.40		50.7	%		61.94
South Atlantic		2,772		24.37		61.9	%		39.38		2,772		25.00		55.6	%		44.93
East South Central		822		26.97		47.9	%		56.24		822		29.68		51.1	%		58.04
West South Central		456		29.77		72.0	%		41.33		456		25.86		55.3	%		46.72
Total Same Store		8,157	$	24.91		55.0	%	$	45.31		8,157	$	26.32		53.7	%	$	48.99

States included in the Regions
Mountain	Idaho and Montana
West North Central	Iowa, Kansas, Missouri, Nebraska and South Dakota
East North Central	Indiana and Wisconsin
Middle Atlantic/New England	Pennsylvania
South Atlantic	Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia
East South Central	Alabama, Kentucky and Tennessee
West South Central	Arkansas and Louisiana

Contact:	Jerry Daly, Carol McCune
Mr. Kelly A. Walters	Daly Gray
President and CEO	(Media Contact)
kwalters@supertelinc.com	703.435.6293
	jerry@dalygray.com
Ms. Connie Scarpello
Sr. Vice President & CFO
cscarpello@supertelinc.com

402.371.2520