Interstate Hotels & Resorts Posts a Third Qtr Net Loss of $378,000 Compared with a Loss of $19.4 million a Year Earlier; Adds 26 Management Contracts / October 2003

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Interstate Hotels & Resorts Posts a Third Qtr Net Loss
of $378,000 Compared with a Loss of $19.4 million
a Year Earlier; Adds 26 Management Contracts

ARLINGTON, Va - Oct. 29, 2003 - Interstate Hotels & Resorts (NYSE: IHR), the nation's largest independent hotel management company, today reported historical results for the third quarter ended September 30, 2003.

Interstate Hotels & Resorts was formed July 31, 2002, following the merger of MeriStar Hotels & Resorts and Interstate Hotels Corporation. For 2002, both historical financial data and combined pro forma financial data (assuming the merger was completed on January 1, 2002) are included in the tables of this press release. Historical financial data represents results for Interstate Hotels Corporation through July 31, 2002, and results for Interstate Hotels & Resorts subsequent to July 31, 2002.

Third-Quarter Results

For the 2003 third quarter, net loss was $(0.4) million, or $(0.02) per share. On a historical basis, net loss available to common shareholders was $(19.4) million, or $(1.12) per share, in the 2002 third quarter.

The statement of operations for the 2003 third quarter includes the following non-recurring items and special charges:

$0.9 million of merger and integration expenses, including professional fees, travel and other transition costs.
$2.0 million of asset impairments and write-offs of assets related to the termination of management contracts.

In the 2003 third quarter, earnings before interest, taxes, depreciation and amortization (EBITDA), excluding non-recurring items and special charges, was $7.5 million. Net income, excluding non-recurring items and special charges for the 2003 third-quarter reporting period was $1.3 million, or $0.06 per share. These results were in line with consensus analysts' estimates.

Third-quarter 2002 pro forma net loss was $(10.1) million, or a loss of $(0.50) per share. Third-quarter 2002 pro forma EBITDA, excluding non-recurring items and special charges, was $7.3 million, and pro forma net loss, excluding non-recurring items and special charges, was $(0.5) million, or $(0.03) per share.

EBITDA and net income, excluding non-recurring items and special charges, are non-GAAP financial measures within the meaning of the Securities and Exchange Commission (SEC) regulations. See the discussion below in the "Non-GAAP Financial Measures" section of this press release. Reconciliations of EBITDA and EBITDA and net income, excluding non-recurring items and special charges, are provided in the tables of this press release.

Same-store revenue per available room (RevPAR) for all full-service managed hotels in the 2003 third quarter decreased 1.4 percent from the prior year's third quarter to $67.95. Occupancy increased 2.0 percent to 68.2 percent, and average daily rate (ADR) decreased 3.4 percent to $99.65. Same-store RevPAR for all limited-service managed hotels in the 2003 third quarter decreased 1.1 percent to $55.60. Occupancy increased 0.6 percent to 70.0 percent, and ADR declined 1.6 percent to $79.40.

"Leisure travel improved throughout the summer vacation months," said Paul W. Whetsell, chairman. "Group business also was quite active during the period, as we aggressively marketed to this segment. However, increased business travel did not materialize as expected in late August and September. Business travel typically lags an economic rebound by six months, and this historic pattern is holding true. Advanced business travel bookings in the fourth quarter remain soft, but we are seeing some improvements for the first quarter of 2004."

During the quarter, Interstate signed 26 management contracts, led by 22 properties owned by CNL Hospitality Properties, Inc. In addition, the company completed the acquisition of the first hotel in its $400 million acquisition fund, Northridge Interstate Hospitality Fund, a joint venture with Northridge Capital, Inc.

"The 209-room Sheraton Long Island in Smithtown, N.Y., is typical of the type of asset we seek to acquire: first-class, full-service, stabilized hotels in strong markets with high barriers to new competition," said Steve Jorns, chief executive officer. "We expect to benefit from both our management fees and our participation in the underlying real estate investment. We have an active pipeline of potential additional acquisitions as we head into 2004."

The company's BridgeStreet Corporate Housing Worldwide operations continued to have relatively better performance in domestic markets as compared to international markets. Results in Canada were negatively impacted by the aftereffects of the SARS outbreak, and some European markets were impacted by sluggish economies. "We continue to adjust our rooms inventory in those markets that remain soft," Jorns said.

BridgeStreet added three Licensed Global Partners during the quarter, bringing the total to nine. In addition, BridgeStreet expanded its BridgeStreet Concierge service, a comprehensive service that provides BridgeStreet guests with 24/7 coverage.

Capital Structure

Interstate had $24.5 million of availability on its revolving credit facility as of September 30, according to James A. Calder, chief financial officer. "We continue to have excellent flexibility to respond to management contract options that require sliver investments, as well as to real estate investment opportunities through joint ventures," he said.

Key Financial Information
As of September 30, 2003, Interstate had:

Total cash of $20.7 million
Total debt of $131 million, consisting of $87.3 million of senior debt, $40.0 million of subordinated debt and a $3.7 million promissory note
Average cost of debt of 6.7 percent

Board of Directors

Interstate also announced the resignation of John Emery and J. Taylor Crandall from the company's board of directors, effective October 22, 2003. Last week, Emery announced that he would resign as president and chief operating officer of the company at the end of 2003. Crandall previously served on the boards of MeriStar Hospitality and Interstate. His resignation from Interstate's board eliminates the shared board positions between the two companies, with the exception of the chairman.

Outlook and Guidance

"The exact timing of a meaningful rebound in business travel is still unclear," Jorns said. "Based on historical patterns and early booking trends, business travel will not likely pick up until 2004. We are buoyed by the continued strength in the leisure market and look forward to similar patterns in business travel in the future. Based on this lack of clarity and the current short-term outlook, we are providing more conservative guidance for the remainder of the year."

For the full year 2003, Interstate expects net income of $4.2 million to $5.4 million ($0.20 to $0.25 per share) and net income, excluding non-recurring items and special charges, of $1.0 million to $2.2 million ($0.05 to $0.10 per share). The company estimates that EBITDA, excluding non-recurring items and special charges, will be $27 million to $29 million.

Interstate expects 2003 fourth quarter net income of $0.6 million to $1.8 million ($0.03 to $0.08 per share); net income, excluding non-recurring items and special charges, of between $1.9 million and $3.1 million ($0.09 to $0.15 per share); and EBITDA, excluding non-recurring items and special charges, of $9.3 million to $11.3 million. Reconciliations of forecasted EBITDA and net income, excluding non-recurring items and special charges to net income, for the year ending December 31, 2003, and the three months ending December 31, 2003, are included in the tables of this press release.

Interstate Hotels & Resorts, Inc.
Historical Statements of Operations
(Unaudited, in thousands except per share amounts)

                                 Three Months Ended Nine Months Ended
                                    September 30,      September 30,
                                    2003      2002     2003      2002
                                --------- --------- -------- ---------
Revenue:
    Lodging revenues                $929      $832   $2,697    $2,287
    Management fees               15,762    11,068   45,218    18,069
    Corporate housing             29,245    19,779   83,456    19,779
    Other revenue                  3,778     4,620   10,607    16,026
                                --------- --------- -------- ---------
                                  49,714    36,299 141,978    56,161
   Other revenue from managed
    properties                   217,654   163,347 642,256   297,662
                                --------- --------- -------- ---------
Total revenue                   267,368   199,646 784,234   353,823
Operating expenses by department:
    Lodging expenses                 585       575    1,869     1,606
    Corporate housing             24,171    15,327   69,804    15,327
Undistributed operating
expenses:
    Administrative and general    19,082    14,803   55,117    30,010
    Depreciation and
     amortization                  2,646     4,024   10,994     9,133
    Merger and integration
     costs                           874     3,430    3,344     5,653
    Restructuring expenses             -    12,820        -    12,820
   Tender offer costs                  -         -        -     1,000
   Asset impairment and write
    offs                             312         -      312         -
                                --------- --------- -------- ---------
                                  47,670    50,979 141,440    75,549
   Other expenses from managed
    properties                   217,654   163,347 642,256   297,662
                                --------- --------- -------- ---------
Total operating expenses        265,324   214,326 783,696   373,211

--------- --------- -------- ---------
Net operating income (loss) 2,044 (14,680) 538 (19,388)

Interest expense, net             2,359     1,562    7,187     3,474
Equity in losses of affiliates      292     1,074      858     1,670
Conversion incentive payment -
convertible notes                    -         -        -     7,307
Gain on refinancing                   -         - (13,629)
                                --------- --------- -------- ---------

Income (loss) before minority
interests and income taxes        (607) (17,316)   6,122   (31,839)
Minority interests expense
(benefit)                           23       243      184       295
Income tax expense (benefit)       (252)    1,818    2,375       641
                                --------- --------- -------- ---------

Net income (loss)                  (378) (19,377)   3,563   (32,775)
Mandatorily redeemable preferred stock:
   Dividends                           -         -        -       307
   Accretion                           -         -        -       356
   Conversion incentive payment-
    preferred stock                    -         -        -     1,943
                                --------- --------- -------- ---------

Net income (loss) available to
common shareholders $(378) $(19,377) $3,563 $(35,381)
========= ============================

Weighted average shares
outstanding:
Basic (1) 20,649 17,270 20,612 11,277
Diluted (1) 20,649 17,270 20,891 11,277

Basic earnings (loss) per
share                           $(0.02)   $(1.12)   $0.17    $(3.14)
                                ========= ========= ======== =========
Diluted earnings (loss) per
share                           $(0.02)   $(1.12)   $0.17    $(3.14)
                                ========= ========= ======== =========

Reconciliations of Non-GAAP
financial measures
Net income (loss)                 $(378) $(19,377) $3,563 $(32,775)
    Depreciation and
     amortization                  2,646     4,024   10,994     9,133
    Interest expense, net          2,359     1,562    7,187     3,474
    Equity in losses of
     affiliates                      292     1,074      858     1,670
    Gain on refinancing                -         - (13,629)        -
    Conversion incentive payment
     - convertible notes               -         -        -     7,307
    Minority interests expense
     (benefit)                        23       243      184       295
    Income tax expense
     (benefit)                      (252)    1,818    2,375       641
                                --------- --------- -------- ---------

EBITDA (2)                        4,690   (10,656) 11,532   (10,255)
    Merger and integration
     costs                           874     3,430    3,344     5,653
    Restructuring expenses             -    12,820        -    12,820
    Tender offer costs                 -         -        -     1,000
    Asset impairment and write-
     offs (4)                      1,979         -    2,780         -
                                --------- --------- -------- ---------

EBITDA, excluding non-recurring
items and special charges (2) $7,543 $5,594 $17,656 $9,218
========= ========= ======== =========

Net income (loss)                 $(378) $(19,377) $3,563 $(32,775)
Adjustments to net income
(loss), net of income taxes:
   Merger and integration costs      524     2,092    2,006     3,561
   Restructuring expenses              -     7,820        -     8,077
   Tender offer costs                  -         -        -       630
   Asset impairment and write-
    offs                           1,187         -    1,668         -
   Conversion incentive payment
    - convertible notes                -         -        -     7,307
   Gain on refinancing                 -         -   (8,177)        -
   Minority interest                 (16)     (208)     102      (354)
                                --------- --------- -------- ---------

Net income (loss), excluding
non-recurring items and
special charges (2) $1,317 $(9,673) $(838) $(13,554)
========= ========= ======== =========

Basic earnings (loss) per
share, excluding non-recurring
items and special charges        $0.06    $(0.56) $(0.04)   $(1.20)
                                ========= ========= ======== =========
Diluted earnings (loss) per
share, excluding non-recurring
items and special charges        $0.06    $(0.56) $(0.04)   $(1.20)
                                ========= ========= ======== =========

Outlook Reconciliation (3)                    Forecast
                                    Three months       Twelve months
                                       ending             ending
                                 December 31, 2003 December 31, 2003

Net income                       $1,200             $4,763
    Depreciation and
     amortization                  2,600             13,594
    Interest expense, net          2,600              9,787
    Gain on refinancing                             (13,629)
    Equity in losses of
     affiliates                      950              1,808
    Minority interests expense       100                284
    Income tax expense               750              3,125
                                ---------           --------

EBITDA (2)                        8,200             19,732
    Merger and integration
     costs                           500              3,844
    Asset impairments and
     write-offs                    1,600              4,380
                                ---------           --------

EBITDA, excluding non-recurring
items and special charges (2) $10,300 $27,956
========= ========

Net income                       $1,200             $4,763
Adjustments to net loss, net of
income taxes:
    Gain on refinancing                -             (8,177)
    Merger and integration
     costs                           300              2,306
    Asset impairments and
     write-offs                      960              2,628
    Minority Interest                (20)                82
                                ---------           --------

Net income, excluding non-
recurring items and special
charges (2) $2,440 $1,602
========= ========

Income per share, excluding
non-recurring items and
special charges $0.12 $0.08
========= ========

(1) Presented giving effect to the 4.6 shares of common stock issued to Interstate Shareholders, and the one-for-five reverse stock split associated with the merger on July 31, 2002.
(2) See discussion of EBITDA and EBITDA and net income, excluding non-recurring items and special charges located in the in the "Non-GAAP Financial Measures section, described earlier in this press release.
(3) Our outlook reconciliation uses the mid-point of our estimates of net income
(4) A portion of the asset impairments and write-offs are included with administrative and general expenses

Interstate Hotels & Resorts, Inc.
Statement of Operations
(Unaudited, in thousands except per share amounts)

                                     Three Months Ended September 30,
                                        2003              2002
                                   --------------- -----------------
                                      (historical)    (pro forma) (1)
Revenue:
    Lodging revenues                         $929               $832
    Management fees                       15,762             14,305
    Corporate housing                      29,245             29,971
    Other revenue                           3,778              4,838
                                   --------------- -----------------
                                           49,714             49,946
   Other revenue from managed
    properties                            217,654            224,936
                                   --------------- -----------------
Total revenue                            267,368            274,882
Operating expenses by department:
    Lodging expenses                          585                575
    Corporate housing                      24,171             23,191
Undistributed operating
expenses:
    Administrative and
     general                               19,082             18,893
    Depreciation and
     amortization                           2,646              4,765
    Lease expense                               -
    Merger and
     integration costs                        874              3,295
    Restructuring
     expenses                                   -             12,820
   Tender offer costs                           -                  -
   Gain on Winston lease
    conversion                                  -                  -
   Asset impairment and
    write offs                                312                  -
                                   --------------- -----------------
                                           47,670             63,539
   Other expenses from managed
    properties                            217,654            224,936
                                   --------------- -----------------
Total operating expenses                 265,324            288,475

--------------- -----------------
Net operating income
(loss) 2,044 (13,593)

Interest expense, net                      2,359              2,306
Equity in losses of
affiliates                                  292              1,019
Gain on refinancing                            -                  -
                                   --------------- -----------------

Income (loss) before minority
interests and income taxes                 (607)           (16,918)
Minority interests expense (benefit)                            23               (241)
Income tax expense
(benefit)                                  (252)            (6,537)
                                   --------------- -----------------

Net income (loss) $(378) $(10,140)
=============== =================

Weighted average shares
outstanding:
Basic (2) 20,649 20,228
Diluted (2) 20,649 20,228

Basic earnings (loss)
per share                                $(0.02)            $(0.50)
                                   =============== =================
Diluted earnings (loss)
per share                                $(0.02)            $(0.50)
                                   =============== =================

Reconciliations of Non-GAAP
financial measures
Net income (loss)                          $(378)          $(10,140)
    Depreciation and
     amortization                           2,646              4,765
    Interest expense, net                   2,359              2,306
    Equity in loss of
     affiliates                               292              1,019
    Gain on refinancing                         -                  -
    Minority interests
     expense (benefit)                         23               (241)
    Income tax expense
     (benefit)                               (252)            (6,537)
                                   --------------- -----------------

EBITDA (3)                                 4,690             (8,828)
    Merger and
     integration costs                        874              3,295
    Gain on Winston Lease
     Conversion
    Restructuring
     expenses                                   -             12,820
    Tender offer costs                          -                  -
    Asset impairment and
     write-offs (4)                         1,979                  -
                                   --------------- -----------------

EBITDA, excluding non-recurring
items and special charges (3) $7,543 $7,287
=============== =================

Net income (loss)                          $(378)          $(10,140)
Adjustments to net income (loss),
net of income taxes:
   Gain on Winston Lease
    Conversion
   Merger and integration
    costs                                     524              2,010
   Restructuring expenses                       -              7,764
   Tender offer costs                           -                  -
   Asset impairment and
    write-offs                              1,187                  -
   Gain on refinancing                          -                  -
   Minority interest                          (16)              (150)
                                   --------------- -----------------

Net income (loss), excluding non-
recurring items and special
charges (3) $1,317 $(516)
=============== =================

Basic earnings (loss) per
share, excluding non-recurring
items and special charges                 $0.06             $(0.03)
                                   =============== =================
Diluted earnings (loss)
per share, excluding non-
recurring items and special
charges                                   $0.06             $(0.03)
                                   =============== =================

Pro-forma hotel operating
statistics:
Full-service hotels:
Occupancy                                   68.2%              66.8%
ADR                                       $99.65            $103.15
RevPAR                                    $67.95             $68.95

Limited-service hotels:
Occupancy                                    70.0%              69.6%
ADR                                       $79.40             $80.73
RevPAR                                    $55.60             $56.22

(1) Assumes the merger transaction between Interstate Hotels Corporation and MeriStar Hotels & Resorts, Inc. was completed on January 1, 2002.
(2) Presented giving effect to the 4.6 shares of common stock issued to Interstate Shareholders, and the one-for-five reverse stock split associated with the merger on July 31, 2002.
(3) See discussion of EBITDA and EBITDA and net income, excluding non-recurring items and special charges located in the in the "Non-GAAP Financial Measures section, described earlier in this pressrelease.
(4) A portion of the asset impairments and write-offs are included with administrative and general expenses.

                                     Nine Months Ended September 30,
                                        2003              2002
                                   --------------- -----------------
                                      (historical)   (pro forma) (1)
Revenue:
    Lodging revenues                       $2,697            $70,262
    Management fees                       45,218             44,214
    Corporate housing                      83,456             81,641
    Other revenue                          10,607             16,101
                                   --------------- -----------------
                                          141,978            212,218
   Other revenue from managed
    properties                            642,256            629,730
                                   --------------- -----------------
Total revenue                            784,234            841,948
Operating expenses by department:
    Lodging expenses                        1,869             31,121
    Corporate housing                      69,804             65,313
Undistributed operating
expenses:
    Administrative and
     general                               55,117             67,891
    Depreciation and
     amortization                          10,994             14,527
    Lease expense                                             27,569
    Merger and
     integration costs                      3,344              4,296
    Restructuring
     expenses                                   -             13,502
   Tender offer costs                           -              1,000
   Gain on Winston lease
    conversion                                  -             (7,229)
   Asset impairment and
    write offs                                312                  -
                                   --------------- -----------------
                                          141,440            217,990
   Other expenses from managed
    properties                            642,256            629,730
                                   --------------- -----------------
Total operating expenses                 783,696            847,720

--------------- -----------------
Net operating income
(loss) 538 (5,772)

Interest expense, net                      7,187              7,704
Equity in losses of
affiliates                                  858              1,731
Gain on refinancing                      (13,629)                 -
                                   --------------- -----------------

Income (loss) before minority
interests and income taxes                6,122            (15,207)
Minority interests expense (benefit)                           184               (207)
Income tax expense
(benefit)                                 2,375             (8,308)
                                   --------------- -----------------

Net income (loss) $3,563 $(6,692)
=============== =================

Weighted average shares
outstanding:
Basic (2) 20,612 20,208
Diluted (2) 20,891 20,208

Basic earnings (loss)
per share                                 $0.17             $(0.33)
                                   =============== =================
Diluted earnings (loss)
per share                                 $0.17             $(0.33)
                                   =============== =================

Reconciliations of Non-GAAP
financial measures
Net income (loss)                         $3,563            $(6,692)
    Depreciation and
     amortization                          10,994             14,527
    Interest expense, net                   7,187              7,704
    Equity in loss of
     affiliates                               858              1,731
    Gain on refinancing                   (13,629)                 -
    Minority interests
     expense (benefit)                        184               (207)
    Income tax expense
     (benefit)                              2,375             (8,308)
                                   --------------- -----------------

EBITDA (3)                                11,532              8,755
    Merger and
     integration costs                      3,344              4,296
    Gain on Winston Lease
     Conversion                                               (7,229)
    Restructuring
     expenses                                   -             13,502
    Tender offer costs                          -              1,000
    Asset impairment and
     write-offs (4)                         2,780                  -
                                   --------------- -----------------

EBITDA, excluding non-recurring
items and special charges (3) $17,656 $20,324
=============== =================

Net income (loss)                         $3,563            $(6,692)
Adjustments to net income (loss),
net of income taxes:
   Gain on Winston Lease
    Conversion                                                (7,229)
   Merger and integration
    costs                                   2,006              2,741
   Restructuring expenses                       -              8,228
   Tender offer costs                           -                630
   Asset impairment and
    write-offs                              1,668                  -
   Gain on refinancing                     (8,177)                 -
   Minority interest                          102               (172)
                                   --------------- -----------------

Net income (loss), excluding non-
recurring items and special
charges (3) $(838) $(2,494)
=============== =================

Basic earnings (loss) per
share, excluding non-recurring
items and special charges                $(0.04)            $(0.12)
                                   =============== =================
Diluted earnings (loss) per
share, excluding non-recurring
items and special charges                $(0.04)            $(0.12)
                                   =============== =================

Pro-forma hotel operating
statistics:
Full-service hotels:
Occupancy                                   66.5%              66.5%
ADR                                      $103.63            $107.26
RevPAR                                    $68.91             $71.34

Limited-service hotels:
Occupancy                                    67.0%              67.7%
ADR                                       $79.23             $79.69
RevPAR                                    $53.10             $53.97
---------------------------------------------------------------------

(1) Assumes the merger transaction between Interstate Hotels
Corporation and MeriStar Hotels & Resorts, Inc. was completed on
January 1, 2002.

(2) Presented giving effect to the 4.6 shares of common stock issued
to Interstate Shareholders, and the one-for-five reverse stock
split associated with the merger on July 31, 2002.

(3) See discussion of EBITDA and EBITDA and net income, excluding
    non-recurring items and special charges located in the in the
    "Non-GAAP Financial Measures section, described earlier in this
    press release.

(4) A portion of the asset impairments and write-offs are included
with administrative and general expenses.

Interstate Hotels & Resorts operates more than 300 hospitality properties with nearly 67,000 rooms in 42 states, the District of Columbia, Canada and Russia. BridgeStreet Corporate Housing Worldwide, an Interstate Hotels & Resorts subsidiary, is one of the world's largest corporate housing providers, offering upscale, fully furnished corporate housing throughout the United States, Canada, the United Kingdom, France and 39 additional countries through its network partners.

This press release contains "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995, about Interstate Hotels & Resorts, including those statements regarding future operating results and the timing and composition of revenues, among others, and statements containing words such as "expects," "believes" or "will," which indicate that those statements are forward-looking.

Contact:

Interstate Hotels & Resorts
Melissa Thompson
703/387-3377

Also See	Interstate Hotels & Resorts Reports a 1st Qtr Profit $4.4 million; RevPAR decreased 2.2% to $66.26 / Hotel operating statistics / May 2003
	MeriStar Hospitality Board Approves MeriStar Hotels & Resorts' Merger with Interstate Hotels; Will Combine Two Independent Hotel Management Companies that Will Operate 412 Hotels / May 2002

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