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Interstate Hotels Invests $5.7 million in a Three-property
Portfolio of Tesoro Resorts in Mexico
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Interstate Will Manage the Three Former Grupo Situr
Properties in Los Cabos, Manzanillo and Ixtapa
ARLINGTON, Va., August 2, 2007 — Interstate Hotels & Resorts (NYSE: IHR), one of the nation’s largest independent hotel management companies, today announced that it has formed a strategic partnership with Steadfast Companies (Steadfast) to own and operate hotels in Mexico.  Interstate invested $5.7 million in a three-property portfolio of Tesoro Resorts in Mexico, currently owned by affiliates of Steadfast.  Interstate’s investment is expected to convert to a 15 percent equity interest in a joint venture with Steadfast in the near future.  Interstate also formed a separate 50-50 joint-venture partnership between Steadfast and Interstate, named Interstate de Mexico, to manage hotels.  The joint venture, which is a platform for further growth in Mexico, took over management of the properties immediately upon its formation.  Steadfast is a privately owned real estate investment consortium based in Newport Beach, Calif.  

A $10 million capital plan will be initiated to make improvements at all three resorts, with primary concentration on redeveloping the Cabo San Lucas property.  The three properties included in this joint venture are:  

Tesoro Los Cabos 286 rooms -  Cabo San Lucas, Mexico
Tesoro Manzanillo  331 rooms -  Manzanillo, Mexico
Tesoro Ixtapa 203 rooms -  Ixtapa, Mexico
Total rooms: 820 
“This investment establishes a solid platform for our entry into Mexico and Latin America, areas where we see significant opportunities for growth over the next decade,” said Thomas F. Hewitt, Interstate’s chief executive officer.  “Steadfast is a well-regarded developer with more than a decade of experience in residential, commercial, resort and hotel development, and strong ties to the Mexican business community.  The joint venture has plans for aggressive growth and intends to seek strategic capital partners to expand its hospitality investments in Mexico and Latin America.”  
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Tesoro Los Cabos
Cabo San Lucas, Mexico

Tesoro Ixtapa
Ixtapa, Mexico

Steadfast launched the Tesoro Resorts brand in 2006 with the purchase and rebranding of the three former Grupo Situr properties, in Los Cabos, Manzanillo and Ixtapa.  To accomplish its growth objectives, the partnership will seek out investment and management opportunities, initially throughout Mexico.

“The partnership also is interested in developing high-end, select-service hotels in major Mexican metropolitan centers,” said Leslie Ng, chief investment officer.  “That market is extremely underserved in Mexico, which represents another important dynamic of this venture.  Our relationships with all major brands, including those affiliated with Hilton, Marriott and Starwood, will enable us to add significant value to this aspect of the partnership.”

Ng added that the transaction is consistent with Interstate’s investment strategy of acquiring real estate assets through whole ownership or minority equity positions, and gaining long-term management contracts on those assets.  IHR de Mexico will be based in Tijuana, out of existing offices which also can serve as a platform from which to grow third-party hotel management in Mexico and Central America.  “We intend to actively seek additional management contract and investment opportunities in the region and have already been approached by other Mexican hotel owners,” he said.

“In addition to its strong franchise relationships, Interstate brings to the table a proven track record as a highly successful manager with a strong infrastructure and support system that will greatly enhance operating fundamentals at these properties,” said Rod Emery, Steadfast chief executive officer.  “Our goal as owners is to take advantage of the relatively favorable real estate pricing in Mexico compared to the U.S. market and to aggressively expand our hospitality portfolio.  We are confident in Interstate’s ability to help us reach our goal.”

The three resorts are located along Mexico’s Pacific Coast, and each provides a spectacular tropical setting for leisure travelers.  The 286-room Tesoro Los Cabos sits amid the downtown marketplace of Cabo San Lucas and on the marina.  The 331-room Tesoro Manzanillo rises above the beach in a picturesque cove.  The 203-room Tesoro Ixtapa lies further down the Pacific Coast.  Each of the relaunched Tesoro resorts excels at high-end leisure travel, especially all-inclusive concepts that cater to children and adults alike.  The resorts feature tropical gardens, serene swimming pools, spacious accommodations, a wide selection of buffet-style and a la carte, sit-down restaurants, and dazzling evening entertainment.

About Steadfast 
The Steadfast Companies is a major Newport Beach, Calif.-based developer and owner of commercial, multifamily, retail and hospitality projects. 

About Interstate
As of July 31, 2007, Interstate Hotels & Resorts operated 189 hospitality properties with more than 43,000 rooms in 36 states, the District of Columbia, Belgium, Canada, Ireland, Mexico and Russia, including six wholly-owned properties and 20 properties with a minority ownership interest through 12 separate joint ventures.  In addition, Interstate Hotels & Resorts has contracts to manage 12 hospitality properties with nearly 4,000 rooms currently under development.  For more information about Interstate Hotels & Resorts, visit the company’s Web site: www.ihrco.com.  

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.  Except for historical information, the matters discussed in this press release are forward-looking statements that are subject to certain risks and uncertainties that could cause the actual results to differ materially, including the volatility of the national economy, economic conditions generally and the hotel and real estate markets specifically, the war in Iraq, international and geopolitical difficulties or health concerns, governmental actions, legislative and regulatory changes, availability of debt and equity capital, interest rates, competition, weather conditions or natural disasters, supply and demand for lodging facilities in our current and proposed market areas, and the company’s ability to manage integration and growth.  Additional risks are discussed in Interstate Hotels & Resorts’ filings with the Securities and Exchange Commission, including Interstate Hotels & Resorts’ annual report on Form 10-K for the year ended December 31, 2006.

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Contact:

Carrie McIntyre
SVP, Treasurer
(703) 387-3320
 

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Also See: Interstate Hotels Acquires for $2 million, a 21% Equity in the 286-room Doral Tesoro Hotel & Golf Club near Dallas/Ft. Worth / June 2006
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