Supertel Hospitality Reports 2012 Second Quarter Results

NORFOLK, NE -- (Marketwire) -- 08/10/12 -- Supertel Hospitality, Inc. (NASDAQ: SPPR), a real estate investment trust (REIT) which currently owns 94 hotels in 23 states, today announced its results for the second quarter ended June 30, 2012.

Second Quarter 2012 Highlights

  • Increased revenues from continuing operations 5.5 percent to $21.6 million.
  • Advanced RevPAR 3.9 percent to $35.69 for the 74 same store hotels in continuing operations.
  • Reduced loss from continuing operations to $2.7 million, an improvement of 36.6 percent over the same year-ago period.
  • Improved continuing operations Property Operating Income (POI) $0.7 million, or 13.3 percent.
  • Improved net income attributable to common shareholders to $1.6 million, primarily on gains from the sale of four non-strategic hotels.
  • Improved Adjusted EBITDA by $0.4 million, or 6.5% percent, over the same year-ago period.
  • Sold four economy hotels generating gross proceeds of $9.6 million.
  • Moved into the upscale segment with the purchase of a 100-room Hilton Garden Inn on Solomons Island in Maryland.

Second Quarter Operating and Financial Results

Revenues from continuing operations for the 2012 second quarter rose $1.1 million, or 5.5 percent, to $21.6 million, compared to the same year-ago period. The improved performance primarily was due to the increased average daily rate (ADR) of the same store portfolio, in addition to the acquisition of the Hilton Garden Inn.

The company reported net income attributable to common shareholders of $1.6 million, or $0.07 per diluted share for the 2012 second quarter, compared to a net loss of $(4.5) million or $(0.20) per diluted share for the same 2011 period. The second quarter increase of $6.1 million is primarily attributable to a $4.4 million increase in gains related to dispositions of hotels, a $0.9 million unrealized gain from the reduction in fair market value of the derivative liabilities, and a $0.7 million decrease in total non cash impairment losses; the total non cash impairment losses for the three months ended June 30, 2012 were $4.1 million versus $4.8 million for the like prior period.

Funds from operations (FFO) in the 2012 second quarter was $3.1 million, compared to $2.6 million in the same 2011 period. Adjusted funds from operations (AFFO), which is FFO adjusted to include gain or exclude losses on derivatives and exclude acquisition expense, in the 2012 second quarter was $2.4 million, compared to $2.6 million in the same 2011 period.

Earnings before interest, taxes, depreciation and amortization, (EBITDA) increased to $6.7 million, compared to $1.0 million for the second quarter of 2011. Adjusted EBITDA, which is EBITDA before non-controlling interest, net gain on disposition of assets, impairment, preferred stock dividends, unrealized gain/loss on derivatives and acquisition expense, increased to $6.2 million, or 6.5 percent compared to $5.8 million for the second quarter of 2011.

In the 2012 second quarter, the 74-hotel same store portfolio reported an increase in revenue per available room (RevPAR) of 3.9 percent led by a 3.1 percent improvement in ADR and a 0.7 percent increase in occupancy, compared to the 2011 second quarter.

"The significantly improved results in the 2012 second quarter reflect the full ramp-up of our management companies, the continued improvement in our portfolio make-up and the benefits of the infusion of $30 million in new equity in the 2012 first quarter," said Kelly A. Walters, Supertel president and CEO.


                       Second Quarter 2012 vs Second Quarter 2011
           -----------------------------------------------------------------
                   Occ %                ADR ($)              RevPAR ($)
            2012  2011 Variance  2012   2011   Variance  2012  2011 Variance
           ----- ----- -------- ------ ------ --------- ----- ----- --------
Industry -
 Total US
 Market    65.1% 63.2%     3.1% 106.41 101.63      4.7% 69.32 64.22     7.9%
Supertel -
 Same
 Store
 Operations
 (74
 hotels)   67.9% 67.4%     0.7%  52.54  50.98      3.1% 35.69 34.34     3.9%

Chain
 Scale

Industry -
 Upper
 Midscale  67.7% 65.4%     3.4%  98.29  94.38      4.2% 66.50 61.73     7.7%
Supertel -
 Upper
 Midscale
 (21)      71.2% 69.5%     2.4%  72.99  71.23      2.5% 51.95 49.51     4.9%

Industry -
 Midscale  58.9% 56.6%     4.0%  74.96  72.53      3.4% 44.17 41.08     7.5%
Supertel -
 Midscale
 (6)       56.6% 47.6%    18.9%  64.83  63.53      2.0% 36.68 30.24    21.3%

Industry -
 Economy   57.6% 56.3%     2.2%  52.76  50.47      4.5% 30.36 28.42     6.8%
Supertel -
 Economy
 (40)      66.5% 66.9%    -0.6%  50.47  49.46      2.0% 33.54 33.07     1.4%

Industry -
 Extended
 Stay        n/a   n/a      n/a    n/a    n/a       n/a   n/a   n/a      n/a
Supertel -
 Extended
 Stay (7)  71.7% 73.1%    -1.9%  24.71  23.75      4.0% 17.72 17.37     2.0%

Industry Source: STR Monthly Review

Upscale Hotels

The operating results for the Hilton Garden Inn, which was purchased on May 25, 2012, are not reflected in the 74 same store hotel operating results. The hotel generated RevPAR of $93.04, driven by $126.05 ADR and 73.8 percent occupancy during the period of May 25, 2012, through June 30, 2012.

Upper Midscale Hotels

Second quarter RevPAR for the company's 21 continuing operations, upper midscale hotels rose 4.9 percent to $51.95, led by a 2.5 percent improvement in ADR to $72.99 and a 2.4 percent increase in occupancy. Upper midscale hotel brands currently in the company's portfolio include Comfort Inns, Comfort Suites, Hampton Inn and Holiday Inn Express.

Midscale Hotels

RevPAR for the company's six continuing operations midscale hotels rose sharply, 21.3 percent, to $36.68. Occupancy increased 18.9 percent with an ADR increase of 2.0 percent to $64.83. Supertel's midscale brands include Quality Inn, Sleep Inn, Baymont Inn and Ramada Limited.

Economy Hotels

The company's 40 continuing operations economy hotels reported a 1.4 percent increase in RevPAR to $33.54 in the 2012 second quarter as a result of a 2.0 percent rise in ADR to $50.47, partially offset by a 0.6 percent decrease in occupancy. Supertel's branded properties in this segment include Days Inn, Super 8, Key West Inns and Guesthouse Inn.

Extended Stay Hotels

The company's seven continuing operations, extended-stay hotels reported a 2.0 percent increase in RevPAR to $17.72, led by a 4.0 percent increase in ADR to $24.71, partially offset by a 1.9 percent decline in occupancy. Hotels in this segment include the Savannah Suites brand.

"While we are not yet satisfied with our performance in the midscale segment, overall, our hotels continue to achieve above average occupancy compared to the industry, which provides opportunities to increase ADR," Walters noted. "We have instructed our operators to evaluate raising room rates as aggressively as possible, while carefully monitoring market conditions and adjusting accordingly. We believe there is still room for ADR improvement, without materially impacting occupancy."

"Our operators have done a noteworthy job in controlling costs, which is reflected in our 4.6 percent increase for the quarter in property operating income of the total portfolio," he added. "Year-to-date through the second quarter, revenues rose at twice the rate of incremental labor costs; and management fees remained essentially flat on higher revenues when compared with last year. We attribute the bulk of these improvements to our 2011 decision to move to regional operators from one centralized management company.

"What makes these results all the more gratifying is that many of our markets are in smaller population centers," he noted. "While they did not suffer as much in the downturn, many of these markets continue to lag behind in the rebound. Although our results were not as strong as the industry as a whole in the 2012 second quarter, we believe they showed good growth given the local economies in which they operate."

Interest expense from continuing operations decreased slightly to $2.1 million for the quarter. In addition, the company temporarily paid its credit line down to zero by applying the unused portion of its recent equity infusion. A portion of the credit line is expected to be invested in hotel acquisitions by year end. Depreciation and amortization expense from continuing operations declined $0.1 million from the 2011 second quarter to $2.2 million.

Property operating income (POI) from continuing operations for the 2012 second quarter rose $0.7 million, or 13.3 percent, compared to the same period a year earlier. The increase was led by higher same store room revenue, and improved expense management by our new operators, and $0.1 million of POI from the new Hilton Garden Inn in Solomons, Maryland. POI is calculated as revenue from room rentals and other hotel services less hotel and property operations expenses. See attached chart (Property Operating Income Percent Second Quarter 2012 versus Second Quarter 2011).

Year-to-Date Operating and Financial Results

Revenues from continuing operations for the six months ended June 30, 2012 rose $1.5 million or 4.2 percent, to $38.2 million, compared to $36.7 million for the same year-ago period.

Net loss attributable to common shareholders was $(3.0) million, or $(0.13) per diluted share for the six months ended June 30, 2012, compared to a net loss of $(8.5) million, or $(0.37) per diluted share for the same 2011 period.

RevPAR for the 74 same store hotels was $31.82, a 2.9 percent increase compared to the same period in 2011.

FFO for the six months ended June 30, 2012 was $1.6 million, compared to $1.6 million for the same 2011 period. The company's Adjusted FFO for six months ended June 30, 2012 was $2.1 million, which is an increase of $0.5 million over the $1.6 million reported at June 30, 2011.

Earnings before interest, taxes, depreciation and amortization, impairment, non controlling interest, net gain on disposition of assets, preferred stock dividends, unrealized gain/loss on derivatives and acquisition expense (Adjusted EBITDA) increased to $8.5 million, compared to $7.2 million for the prior year.

Acquisition Activity

On May 25, the company purchased, in an all cash transaction, the 100-room Hilton Garden Inn in Solomons Island, Maryland for $11.5 million, excluding closing costs and fees. The purchase was funded with proceeds from the company's first quarter preferred equity capital raise. The company currently is negotiating a mortgage loan for the property, which it expects to complete by year-end.

"While we've only owned the property for two months, we already are seeing a positive impact on our overall portfolio," Walters said. "The hotel has performed to our expectations and continues to hold a substantial market share RevPAR premium over its competitive set. This hotel has multiple, year-round demand generators, and we are quite positive about this acquisition."

Walters noted, "The company is pursuing several other acquisitions with a similar profile: premium-branded, select-service hotels in healthy secondary markets with identifiable and durable sources of business."

Disposition Program

During the 2012 second quarter, the company sold four hotels: a 49-room Super 8 hotel located in El Dorado, Kansas, for $1.6 million, an 87-room Super 8 in Sedalia, Missouri for $1.8 million; a 119-room Super 8 in Wichita, Kansas for $4.1 million; and a 127-room Masters Inn in Tampa, Florida for $2.05 million. Proceeds were used to reduce associated mortgage debt by $7.8 million.

"We continue to average selling a non-core hotel approximately every six to eight weeks," Walters noted. "Financing has eased somewhat, but still takes time for the buyers to obtain. Most of our transactions remain single sales, but we are exploring opportunities for targeted portfolio sales."

Property Renovations

The company invested $1.6 million in property improvements in the 2012 second quarter. "Based on our experience with renovations at similar hotels, while it causes a temporary displacement in revenues, we typically see improved bottom line results through steady RevPAR growth and improved market share," Walters said.

Balance Sheet

"Our balance sheet is stronger now than at any point in the last few years," said Connie Scarpello, chief financial officer. "We have reduced our debt by $32.2 million, or 18.9 percent, in the past 12 months. We will continue to reduce our debt leverage ratios, with a long-term goal of approximately 50 percent debt-to-total enterprise value over time."

Outstanding debt on hotels in continuing operations totaled $117.6 million, and has an average term to maturity of 3.2 years and a weighted average annual interest rate of 6.4 percent.

"We are in negotiations to finance $28.6 million debt mortgage that matures this year," Scarpello said. "We also expect to place a prudent amount of debt on our recently acquired Hilton Garden Inn to free up funds to acquire additional hotels."

"The terms of the preferred capital raise require the company to invest $20 million of equity in hotels meeting the firm's investment criteria, $11.7 million, including acquisition expenses, of which was used to purchase the Hilton Garden Inn in Solomons, Maryland, initially for cash. The remaining $8.3 million was used to pay down the Great Western revolver until other core acquisitions are ready to close which will then involve drawing down on our credit lines as well as using the proceeds from the financing of the Hilton Garden Inn. By year end, the company has plans to invest as much as $40 million in equity and debt as we begin to rebuild our portfolio," Walters said. "We continue to focus on balance sheet improvements through additional de-levering measures."

Subsequent Events

Following the close of the second quarter, the company closed on the sale of its 57-room Super 8 hotel in Watertown, South Dakota for $1.55 million. The associated mortgage debt was fully retired with excess proceeds applied to general corporate purposes.

Dividends

The company did not declare a common stock dividend for the 2012 second quarter. Preferred dividends continued uninterrupted. The company will monitor requirements to maintain its REIT status and will routinely evaluate the dividend policy. The company intends to continue to meet its dividend requirements to retain its REIT status.

Outlook

"We are making steady process in implementing our business plan," Walters said. "We have made meaningful strides in improving operations, are improving our portfolio make up by selling off non-strategic assets while launching an acquisition program. The weak economic recovery in many markets where we own hotels keeps us cautious, but our dependency on tertiary markets is decreasing steadily as we sell non-core properties. On balance, with proper execution of our business plan, we believe Supertel has a promising future."

About Supertel Hospitality, Inc.

Supertel Hospitality, Inc. (NASDAQ: SPPR) is a self-administered real estate investment trust that specializes in the ownership of select-service hotels. The company currently owns 94 hotels comprising 8,283 rooms in 23 states. Supertel's hotels are franchised by a number of the industry's most well-regarded brand families, including Hilton, IHG, Choice and Wyndham. For more information or to make a hotel reservation, visit www.supertelinc.com.

Forward Looking Statement

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.


                         Supertel Hospitality, Inc.
                               Balance Sheet
                 As of June 30, 2012, and December 31, 2011
          (dollars in thousands, except share and per share data)

The Company owned 95 hotels (including 20 hotels in discontinued
 operations) at June 30, 2012, and 105 hotels as of December 31, 2011
 respectively.

                                                           As of
                                                  June 30,     December 31,
                                                    2012           2011
                                               -------------  -------------
                                                (unaudited)

ASSETS
  Investments in hotel properties              $     263,534  $     255,677
  Less accumulated depreciation                       78,326         76,777
                                               -------------  -------------
                                                     185,208        178,900

  Cash and cash equivalents                            1,167            279
  Accounts receivable, net of allowance for
   doubtful accounts of $194 and $194                  2,808          1,891
  Prepaid expenses and other assets                   10,287          8,917
  Deferred financing costs, net                          709            850
  Investment in hotel properties, held for
   sale, net                                          22,121         30,335
                                               -------------  -------------
                                               $     222,300  $     221,172
                                               =============  =============

LIABILITIES AND EQUITY
LIABILITIES
  Accounts payable, accrued expenses and other
   liabilities                                 $      13,051  $      10,704
  Derivative liabilities, at fair value               16,035              -
  Debt related to hotel properties held for
   sale                                               20,824         35,173
  Long-term debt                                     117,625        130,672
                                               -------------  -------------
                                                     167,535        176,549
                                               -------------  -------------

  Redeemable noncontrolling interest in
   consolidated partnership, at redemption
   value                                                 114            114

  Redeemable preferred stock
    10% 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; 8% Series A, 2,500,000 shares
   authorized, $.01 par value, 803,270 shares
   outstanding, liquidation preference of
   $8,033                                                  8              8
  6.25% Series C, 3,000,000 shares authorized,
   $.01 par value, 3,000,000 shares
   outstanding, liquidation preference of
   $30,000                                                30              -
  Common stock, $.01 par value, 200,000,000
   shares authorized; 23,128,477 and
   23,070,387 shares outstanding                         231            231
  Common stock warrants                                  252            252
  Additional paid-in capital                         134,762        121,619
  Distributions in excess of retained earnings       (88,425)       (85,398)
                                               -------------  -------------
    Total shareholders' equity                        46,858         36,712
Noncontrolling interest
  Noncontrolling interest in consolidated
   partnership, redemption value $92 and $64             131            135

                                               -------------  -------------
    Total equity                                      46,989         36,847
                                               -------------  -------------

COMMITMENTS AND CONTINGENCIES
                                               $     222,300  $     221,172
                                               =============  =============



                         Supertel Hospitality, Inc.
                           Results of Operations
  For the three and six months ended June 30, 2012 and 2011, respectively
          (Unaudited-Dollars in thousands, except per share data)


                                  Three Months Ended     Six Months Ended
                                       June 30,              June 30,
                                 --------------------  --------------------
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  ---------
REVENUES
  Room rentals and other hotel
   services                      $  21,562  $  20,433  $  38,243  $  36,703
                                 ---------  ---------  ---------  ---------

EXPENSES
  Hotel and property operations     15,269     14,878     28,810     28,366
  Depreciation and amortization      2,226      2,313      4,350      4,559
  General and administrative           921      1,001      2,014      2,104
  Acquisition expense                  162          -        162          1
  Termination cost                       -          -          -        540
                                 ---------  ---------  ---------  ---------
                                    18,578     18,192     35,336     35,570
                                 ---------  ---------  ---------  ---------

EARNINGS BEFORE NET LOSS ON
 DISPOSITIONS OF ASSETS, OTHER
 INCOME, INTEREST EXPENSE AND
 INCOME TAXES                        2,984      2,241      2,907      1,133

Net loss on dispositions of
 assets                                 (4)        (8)        (7)       (14)
Other income (expense)                 872         20       (341)       105
Interest expense                    (2,057)    (2,147)    (4,173)    (4,482)
Impairment                          (4,096)    (4,198)    (3,714)    (4,392)
                                 ---------  ---------  ---------  ---------

LOSS FROM CONTINUING OPERATIONS
 BEFORE INCOME TAXES                (2,301)    (4,092)    (5,328)    (7,650)

Income tax (expense) benefit          (353)       (97)       111        512
                                 ---------  ---------  ---------  ---------

LOSS FROM CONTINUING OPERATIONS     (2,654)    (4,189)    (5,217)    (7,138)

Gain (loss) from discontinued
 operations, net of tax              5,094         77      3,686       (685)
                                 ---------  ---------  ---------  ---------

NET INCOME (LOSS)                    2,440     (4,112)    (1,531)    (7,823)

Noncontrolling interest                 (8)         3         (2)        14
                                 ---------  ---------  ---------  ---------

NET INCOME (LOSS) ATTRIBUTABLE
 TO CONTROLLING INTERESTS            2,432     (4,109)    (1,533)    (7,809)

Preferred stock dividends             (837)      (369)    (1,494)      (737)
                                 ---------  ---------  ---------  ---------

NET INCOME (LOSS) ATTRIBUTABLE
 TO COMMON SHAREHOLDERS          $   1,595  $  (4,478) $  (3,027) $  (8,546)
                                 =========  =========  =========  =========

NET INCOME (LOSS) PER COMMON
 SHARE - BASIC AND DILUTED
EPS from continuing operations   $   (0.15) $   (0.20) $   (0.29) $   (0.34)
                                 =========  =========  =========  =========
EPS from discontinued operations $    0.22  $       -  $    0.16  $   (0.03)
                                 =========  =========  =========  =========
EPS basic and diluted            $    0.07  $   (0.20) $   (0.13) $   (0.37)
                                 =========  =========  =========  =========

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FFO and AFFO

FFO and Adjusted FFO ("AFFO") are non-GAAP financial measures. We consider FFO and AFFO to be market accepted measures of an equity REIT's operating performance, which are 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. AFFO is FFO adjusted to include gain or exclude losses on derivative liabilities, which is a non-cash charge against income and which does not represent results from our core operations. AFFO also adds back acquisition costs. FFO and AFFO do 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 and AFFO should not be considered as alternatives to net income (loss) (computed in accordance with GAAP) as an indicator of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. All REITs do not calculate FFO and AFFO in the same manner; therefore, our calculation may not be the same as the calculation of FFO and AFFO for similar REITs.

Diluted FFO per share and diluted Adjusted FFO per share are computed after adjusting the numerator and denominator of the basic computation for the effects of any dilutive potential common shares outstanding during the period. Up to 30,000,000 shares of common stock may be issued upon conversion of the Series C convertible preferred stock, and adjustments are made for these shares in the computation of diluted FFO per share and diluted Adjusted FFO per share. The Company's outstanding warrants to purchase common stock and stock options would be antidilutive and are not included in the dilution computation.

We use FFO and AFFO as performance measures to facilitate a periodic evaluation of our operating results relative to those of our peers. We consider FFO and AFFO to be useful additional measures 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 and AFFO provide a meaningful indication of our performance.

(Unaudited-In thousands, except per share data)

                                     Three months           Six Months
                                    ended June 30,        ended June 30,
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  ---------
RECONCILIATION OF NET INCOME
 (LOSS) TO FFO
Net income (loss) attributable
 to common shareholders          $   1,595  $  (4,478) $  (3,027) $  (8,546)
Depreciation and amortization        2,226      2,643      4,396      5,263
Net gain on disposition of
 assets                             (4,772)      (354)    (5,263)      (335)
Impairment                           4,083      4,813      5,517      5,262
                                 ---------  ---------  ---------  ---------
FFO available to common
 shareholders                    $   3,132  $   2,624  $   1,623  $   1,644
Unrealized (gain) loss on
 derivatives                          (867)         -        346          -
Acquisition expense                    162          -        162          1
                                 ---------  ---------  ---------  ---------
Adjusted FFO                     $   2,427  $   2,624  $   2,131  $   1,645
                                 =========  =========  =========  =========

FFO available to common
 shareholders                    $   3,132  $   2,624  $   1,623  $   1,644
Dividends paid on Series C
 convertible preferred stock           469          -        758          -
                                 ---------  ---------  ---------  ---------
FFO for FFO per share - diluted  $   3,601  $   2,624  $   2,381  $   1,644
                                 =========  =========  =========  =========

Adjusted FFO available to common
 shareholders                    $   2,427  $   2,624  $   2,131  $   1,645
Dividends paid on Series C
 convertible preferred stock           469          -        758          -
                                 ---------  ---------  ---------  ---------
Adjusted FFO for Adjusted FFO
 per share - diluted             $   2,896  $   2,624  $   2,889  $   1,645
                                 =========  =========  =========  =========

Weighted average shares
 outstanding for:
  calculation of FFO per share -
   basic                            23,075     22,964     23,073     22,941
                                 =========  =========  =========  =========
  calculation of FFO per share -
   diluted                          53,075     22,964     47,271     22,941
                                 =========  =========  =========  =========

FFO per share - basic            $    0.14  $    0.11  $    0.07  $    0.07
                                 =========  =========  =========  =========
Adjusted FFO per share - basic   $    0.11  $    0.11  $    0.09  $    0.07
                                 =========  =========  =========  =========
FFO per share - diluted          $    0.07  $    0.11  $    0.05  $    0.07
                                 =========  =========  =========  =========
Adjusted FFO per share - diluted $    0.05  $    0.11  $    0.06  $    0.07
                                 =========  =========  =========  =========

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are financial measures that are not calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We calculate EBITDA and 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 EBITDA and Adjusted EBITDA also do not represent an amount that accrues directly to common shareholders. In calculating Adjusted EBITDA, we add back noncontrolling interest, net (gain) loss on disposition of assets, preferred stock dividends and acquisition expenses which are cash charges. We also add back impairment and unrealized gain or loss on derivatives, which are non-cash charges.

EBITDA and Adjusted EBITDA do not represent cash generated from operating activities determined by GAAP and should not be considered as alternatives to net income, cash flow from operations or any other operating performance measure prescribed by GAAP. EBITDA and Adjusted EBITDA are not measures of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to make cash distributions. Neither do the measurements reflect cash expenditures for long-term assets and other items that have been and will be incurred. EBITDA and 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         Six months
                                       ended June 30,      ended June 30,
                                       2012      2011      2012      2011
                                     --------  --------  --------  --------
RECONCILIATION OF NET INCOME (LOSS)
 TO ADJUSTED EBITDA
Net income (loss) attributable to
 common shareholders                 $  1,595  $ (4,478) $ (3,027) $ (8,546)
Interest expense, including
 discontinued operations                2,549     2,862     5,227     5,964
Income tax expense (benefit),
 including discontinued operations        354       (55)     (308)   (1,127)
Depreciation and amortization,
 including discontinued operations      2,226     2,643     4,396     5,263
                                     --------  --------  --------  --------
  EBITDA                                6,724       972     6,288     1,554
Noncontrolling interest                     8        (3)        2       (14)
Net gain on disposition of assets      (4,772)     (354)   (5,263)     (335)
Impairment                              4,083     4,813     5,517     5,262
Preferred stock dividend                  837       369     1,494       737
Unrealized (gain) loss on
 derivatives                             (867)        -       346         -
Acquisition expense                       162         -       162         1
                                     --------  --------  --------  --------
  ADJUSTED EBITDA                    $  6,175  $  5,797  $  8,546  $  7,205
                                     ========  ========  ========  ========



                         Supertel Hospitality, Inc.
 Operating Statistics by Chain Scale Classification - Hotels in Continuing
                                 Operations
  For the three and six months ended June 30, 2012 and 2011, respectively
             (Unaudited - In thousands, except per share data)

                                     Three months           Six months
                                    ended June 30,        ended June 30,
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  ---------
Same Store:*
  Revenue per available room
   (RevPAR):
    Upper Midscale               $   51.95  $   49.51  $   46.03  $   42.99
    Midscale                     $   36.68  $   30.24  $   32.27  $   29.00
    Economy                      $   33.54  $   33.07  $   29.48  $   29.65
    Extended Stay                $   17.72  $   17.37  $   17.63  $   17.69
                                 ---------  ---------  ---------  ---------
      Total                      $   35.69  $   34.34  $   31.82  $   30.92
                                 =========  =========  =========  =========

Average daily room rate (ADR):
    Upper Midscale               $   72.99  $   71.23  $   69.85  $   68.63
    Midscale                     $   64.83  $   63.53  $   62.66  $   61.43
    Economy                      $   50.47  $   49.46  $   49.25  $   48.16
    Extended Stay                $   24.71  $   23.75  $   24.55  $   23.61
                                 ---------  ---------  ---------  ---------
      Total                      $   52.54  $   50.98  $   50.57  $   48.92
                                 =========  =========  =========  =========

Occupancy percentage:
    Upper Midscale                    71.2%      69.5%      65.9%      62.6%
    Midscale                          56.6%      47.6%      51.5%      47.2%
    Economy                           66.5%      66.9%      59.9%      61.6%
    Extended Stay                     71.7%      73.1%      71.8%      74.9%
                                 ---------  ---------  ---------  ---------
      Total                           67.9%      67.4%      62.9%      63.2%
                                 =========  =========  =========  =========

*Same store reflects 74 hotels.


                         Supertel Hospitality, Inc.
  Property Operating Income (POI) - Continuing and Discontinued Operations

Note: This presentation includes non-GAAP financial measures. The Company
 believes that the presentation of hotel property operating income (POI) is
 helpful to investors, and represents a useful description of its
 operations, as it communicates the comparability of its hotels' operating
 results.

Unaudited-In thousands, except
 statistical data:                   Three months           Six months
                                    ended June 30,        ended June 30,
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  ---------
Total Same Store Hotels (74
 hotels):
  Revenue per available room
   (RevPAR):                     $   35.69  $   34.34  $   31.82  $   30.92
  Average daily room rate (ADR): $   52.54  $   50.98  $   50.57  $   48.92
  Occupancy percentage:               67.9%      67.4%      62.9%      63.2%

                                 ---------  ---------  ---------  ---------
Continuing Operations

Revenue from room rentals and
 other hotel services consists
 of:
Room rental revenue              $  20,927  $  19,854  $  37,084  $  35,560
Telephone revenue                       71         75        148        146
Other hotel service revenues           564        504      1,011        997
                                 ---------  ---------  ---------  ---------
  Total revenue from room
   rentals and other hotel
   services                      $  21,562  $  20,433  $  38,243  $  36,703
                                 =========  =========  =========  =========

Hotel and property operations
 expense
  Total hotel and property
   operations expense            $  15,269  $  14,878  $  28,810  $  28,366
                                 =========  =========  =========  =========

Property Operating Income
 ("POI") from Continuing
 Operations
  Total POI - continuing
   operations                    $   6,293  $   5,555  $   9,433  $   8,337
                                 =========  =========  =========  =========


POI - continuing operations as a
 percentage of revenue from room
 rentals and other hotel
 services
  POI - continuing operations as
   a percentage of revenue            29.2%      27.2%      24.7%      22.7%
                                 =========  =========  =========  =========

                                 ---------  ---------  ---------  ---------
Discontinued Operations

Room rentals and other hotel
 services
  Total room rental and other
   hotel services                $   4,847  $   6,314  $   9,036  $  11,619
                                 =========  =========  =========  =========

Hotel and property operations
 expense
  Total hotel and property
   operations expense            $   4,049  $   5,091  $   7,914  $  10,162
                                 =========  =========  =========  =========

Property Operating Income
 ("POI") from discontinued
 operations
  POI - discontinued operations  $     798  $   1,223  $   1,122  $   1,457
                                 =========  =========  =========  =========

POI - discontinued operations as
 a percentage of revenue from
 room rentals and other hotel
 services
  POI - discontinued operations
   as a percentage of revenue         16.5%      19.4%      12.4%      12.5%
                                 =========  =========  =========  =========

                                      Three months           Six months
                                     ended June 30         ended June 30
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  ---------
Reconciliation of net loss from
 continuing operations to POI
 from continuing operations
Net loss from continuing
 operations                      $  (2,654) $  (4,189) $  (5,217) $  (7,138)
Depreciation and amortization        2,226      2,313      4,350      4,559
Net loss on disposition of
 assets                                  4          8          7         14
Other (income) expense                (872)       (20)       341       (105)
Interest expense                     2,057      2,147      4,173      4,482
General and administrative
 expense                               921      1,001      2,014      2,104
Acquisition, termination expense       162          -        162          1
Termination cost                         -          -          -        540
Income tax (benefit) expense           353         97       (111)      (512)
Impairment expense                   4,096      4,198      3,714      4,392
                                 ---------  ---------  ---------  ---------
POI - continuing operations      $   6,293  $   5,555  $   9,433  $   8,337
                                 =========  =========  =========  =========

Net income (loss) as a
 percentage of continuing
 operations revenue from room
 rentals and other hotel
 services                            -12.3%     -20.5%     -13.6%     -19.4%
                                 =========  =========  =========  =========



Reconciliation of loss from
 discontinued operations to POI from    Three months         Six months
 discontinued operations:              ended June 30,      ended June 30,
                                       2012      2011      2012      2011
                                     --------  --------  --------  --------

Gain (loss) from discontinued
 operations                          $  5,094  $     77  $  3,686  $   (685)
Depreciation and amortization from
 discontinued operations                    -       330        46       704
Net gain on disposition of assets
 from discontinued operations          (4,776)     (362)   (5,270)     (349)
Interest expense from discontinued
 operations                               492       715     1,054     1,482
General and administrative expense
 from discontinued operations               -         -         -        50
Impairment losses from discontinued
 operations                               (13)      615     1,803       870
Income tax benefit from discontinued
 operations                                 1      (152)     (197)     (615)
                                     --------  --------  --------  --------
POI - discontinued operations        $    798  $  1,223  $  1,122  $  1,457
                                     ========  ========  ========  ========



Reconciliation of Total POI:            Three months         Six months
                                       ended June 30,      ended June 30,
                                       2012      2011      2012      2011
                                     --------  --------  --------  --------
POI - Continuing operations             6,293     5,555     9,433     8,337
POI - Discontinued operations             798     1,223     1,122     1,457
                                     --------  --------  --------  --------
Total - POI                          $  7,091  $  6,778  $ 10,555  $  9,794
                                     ========  ========  ========  ========

Total POI as a percentage of
 revenues                                26.9%     25.3%     22.3%     20.3%
                                     ========  ========  ========  ========



                         Supertel Hospitality, Inc.
                       Operating Statistics by Region
       For the three months ended June 30, 2012 and 2011, respectively
              (Unaudited - In thousands, except per share data)

The comparisons of same store operations are for 74 hotels in continuing
 operations as of April 1, 2011.

                       Three months ended June       Three months ended June
                              30, 2012                       30, 2011
                      ------------------------       -----------------------
                 Room                           Room
Region          Count RevPAR Occupancy   ADR   Count RevPAR Occupancy   ADR
--------------------- ------ --------- ------- ----- ------ --------- ------
Mountain          214 $40.06     77.8% $ 51.47   214 $35.03     69.2% $50.60
West North
 Central        1,559  36.13     69.9%   51.65 1,559  33.71     67.4%  50.04
East North
 Central          978  37.78     61.1%   61.88   978  37.78     61.4%  61.51
Middle Atlantic   142  51.10     82.0%   62.33   142  47.62     79.9%  59.63
South Atlantic  2,525  32.66     69.4%   47.05 2,525  31.66     69.7%  45.43
East South
 Central          563  46.03     68.2%   67.52   563  41.20     61.9%  66.52
West South
 Central          373  24.31     55.4%   43.89   373  30.26     69.4%  43.57
                ----- ------ --------- ------- ----- ------ --------- ------
Total Same Store
 (74 hotels)    6,354 $35.69     67.9% $ 52.54 6,354 $34.34     67.4% $50.98
                ----- ------ --------- ------- ----- ------ --------- ------

South Atlantic
 Acquisitions     100 $93.04     73.8% $126.05     - $    -      0.0% $    -
                ----- ------ --------- ------- ----- ------ --------- ------
Total
 Acquisitions     100 $93.04     73.8% $126.05     - $    -      0.0% $    -
                ----- ------ --------- ------- ----- ------ --------- ------

Total           6,454 $36.05     68.0% $ 53.05 6,354 $34.34     67.4% $50.98
                ===== ====== ========= ======= ===== ====== ========= ======

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 Pennsylvania
South Atlantic  Delaware, Florida, Georgia, Maryland, North Carolina, South
                Carolina, Virginia and West Virginia
East South
 Central        Kentucky and Tennessee
West South
 Central        Arkansas and Louisiana



                         Supertel Hospitality, Inc.
                       Operating Statistics by Region
        For the six months ended June 30, 2012 and 2011, respectively
              (Unaudited - In thousands, except per share data)

The comparisons of same store operations are for 74 hotels in continuing
operations as of January 1, 2011.

                        Six months ended June         Six months ended June
                              30, 2012                       30, 2011
                      ------------------------       -----------------------
                 Room                           Room
Region          Count RevPAR Occupancy   ADR   Count RevPAR Occupancy   ADR
--------------------- ------ --------- ------- ----- ------ --------- ------
Mountain          214 $32.78     65.8% $ 49.79   214 $29.22     60.8% $48.06
West North
 Central        1,559  30.64     60.9%   50.27 1,559  29.61     61.2%  48.37
East North
 Central          978  33.39     55.6%   60.01   978  33.16     55.5%  59.76
Middle Atlantic   142  42.86     71.9%   59.62   142  39.62     69.9%  56.71
South Atlantic  2,525  30.57     67.9%   45.03 2,525  29.48     68.3%  43.19
East South
 Central          563  39.67     60.1%   65.99   563  36.59     55.8%  65.61
West South
 Central          373  24.19     55.6%   43.55   373  29.36     67.5%  43.47
                ----- ------ --------- ------- ----- ------ --------- ------
Total Same Store
 (74 hotels)    6,354 $31.82     62.9% $ 50.57 6,354 $30.92     63.2% $48.92
                ===== ====== ========= ======= ===== ====== ========= ======

South Atlantic
 Acquisitions     100 $93.04     73.8% $126.05     - $    -      0.0% $    -
                ----- ------ --------- ------- ----- ------ --------- ------
Total
 Acquisitions     100 $93.04     73.8% $126.05     - $    -      0.0% $    -
                ----- ------ --------- ------- ----- ------ --------- ------

Total           6,454 $32.01     63.0% $ 50.85 6,354 $30.92     63.2% $48.92
                ===== ====== ========= ======= ===== ====== ========= ======

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 Pennsylvania
South Atlantic  Delaware, Florida, Georgia, Maryland, North Carolina, South
                Carolina, Virginia and West Virginia
East South
 Central        Kentucky and Tennessee
West South
 Central        Arkansas and Louisiana

Note: During the reporting periods above, no properties were moved from the same store portfolio and reclassified as held for sale and no properties which were included in discontinued operations (held for sale) were reclassified as held for use.

Image Available: http://www2.marketwire.com/mw/frame_mw?attachid=2062881

Contact:
Ms. Krista Arkfeld
Director of Corporate Communications
karkfeld@supertelinc.com

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