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Supertel Acquires 20 Hotels During 2nd Qtr 2007 for $79.6 million 
Net Income Available to Shareholders Up 65.9% to $2.2 million
Hotel Operating Statistics
NORFOLK, Nebraska., August 13, 2007 – Supertel Hospitality, Inc. (NASDAQ: SPPR), a real estate investment trust (REIT) which owns 115 hotels in the limited-service, economy and economy extended-stay sectors, today announced results for the second quarter ended June 30, 2007.  

Revenues in the 2007 second quarter improved 53.2 percent to $30.8 million, compared to the same period a year earlier.  Net income available to common shareholders rose 65.9 percent to $2.2 million, or $0.11 per fully diluted share, for the 2007 second quarter, compared to $1.3 million, or $0.11 per fully diluted share, for the like 2006 period. 

Funds from operations (FFO) available to common shareholders increased 53.2 percent to $5.2 million, or $0.24 per diluted share, compared to $3.4 million, or $0.25 per diluted share, for the same quarter of 2006.  The diluted weighted average number of shares outstanding for the two quarters were 22,355,529 and 14,756,910, respectively.   

Earnings before interest, taxes, depreciation and amortization (EBITDA) advanced 56.7 percent to $9.4 million in the 2007 second quarter, up from $6.0 million for the same year-ago period.  The improvement in all of these metrics was primarily attributable to the addition of 38 hotels to the company’s portfolio since the close of the 2006 first quarter.  

“We have added a substantial number of properties, 20 in the second quarter alone, and are assimilating them rapidly into our portfolio,” said Paul J. Schulte, chairman, president and CEO of Supertel Hospitality, Inc.  “We are beginning to see the benefits of our buying power in insurance, benefits and other expenses related to these assets.  We expect these acquisitions to follow our historic pattern of becoming accretive within the initial 12 months of our ownership, as we take advantage of our economies of scale and integrate them into our operating systems.”

Second Quarter Highlights

• Increased its dividends by $0.0025 per share in the second quarter and raised the dividend $0.01 per share for the 2007 third quarter.  

• Acquired four hotels located in Virginia and Louisiana from Waterloo Hospitality, Inc. for approximately $30.9 million.

• Purchased the Tara Inn and Suites, located in Jonesboro, Ga., for approximately $6 million.

• Obtained 15 Masters Inn hotels for approximately $42.7 million.
  
• Following the close of the second quarter, acquired a Days Inn hotel located in Bossier City, La. and a Days Inn in Fredericksburg, Va. from Budget Motels, Inc. for $6.9 million of  limited partnership interests in the company’s operating partnership.

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Days Inn - Bossier City
200 John Wesley Blvd.
Bossier City, Louisiana

Tara Inn And Suites
628 S Side Commercial Pky
Jonesboro, Georgia
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Second Quarter Operating Results 

Supertel’s portfolio consists of limited-service hotels, including mid-scale without food and beverage, economy and economy extended-stay hotels.  For the second quarter 2007 compared to the same period a year ago, the company’s mid-scale hotels’ RevPAR increased 2 percent, driven by a 5.1 percent increase in average daily rate (ADR).  The company’s economy hotels’ RevPAR rose 3.3 percent, primarily due to a 4.7 percent increase in occupancy.  The company did not own extended-stay hotels in the same period a year ago and therefore comparisons are not available.  Since the economy extended-stay hotels have a significantly lower ADR than the mid-scale and economy hotels, the overall impact of the newly added economy extended-stay hotels on the company’s portfolio was a 9.7 percent reduction in ADR and an 8.7 percent decline in the portfolio’s RevPAR.

“The first two quarters of 2006 were very favorable, making for tougher than normal comparisons for same-store hotels in the first half of 2007,” Schulte said.  “However, we are seeing steady improvement in the third quarter and are returning to more normal patterns.”
During the 2007 second quarter, hotel and property operations expenses increased $7.1 million, of which $6.5 million can be attributed to hotels acquired after April 1, 2006. Same store operating expenses rose $0.6 million, primarily due to advertising, business promotion, repairs and room supplies, including linen upgrades.

Interest expense rose $1.5 million, due primarily to increased debt in conjunction with hotel acquisitions.  The depreciation and amortization expense increased $0.9 million in the 2007 second quarter due primarily to hotel acquisitions. 

The company believes property operating income, which is revenue from room rentals and other hotel services less hotel and property operations expenses, is a useful measure of the company’s operating efficiency of its hotel properties.  Property operating income increased by $3.6 million, or 54.0 percent for the 2007 second quarter, compared to the same year-ago period, due primarily to hotel acquisitions.  General and administration expense for the 2007 second quarter rose $0.2 million, compared to the same period last year, primarily as a result of increases in salaries and professional fees, associated principally with the company’s acquisition activities.

Hotel Acquisitions

During the quarter, the company acquired 20 hotels, a 21.5 percent increase in the size of the portfolio, for a total purchase price of $79.6 million. The hotels were purchased using advances from its revolving lines of credit and new first mortgage obligations. 

On July 31, the company acquired two Days Inn hotels that it had leased and managed since April 4, 2007.  The properties, located in Bossier City, La. and Fredericksburg, Va., were purchased from Budget Motels, Inc. for $6.9 million limited partnership interests in the company’s operating partnership.

“We have an active pipeline and continue to review a substantial number of acquisition candidates, both portfolios and individual properties,” Schulte noted.  “Concurrently, we expect to periodically prune our portfolio of properties that no longer fit our long-term growth strategy.” “We are the only publicly traded REIT to concentrate on hotels in the mid-market and economy limited-service and economy extended-stay sectors.  As a result, we do not experience the same pricing pressures as some other hotel REITs and typically acquire hotels at more attractive cap rates,” he said.  “Our acquisition strategy remains to buy properties that can generate strong cash flow and benefit from our scale, distribution and asset management.”

“Our portfolio is in very good physical condition,” he said.  “We continue to invest in our properties and have spent $4.4 million in renovations and upgrades during the first half of 2007.”

Balance Sheet Information

In the 2007 second quarter, shareholders approved an increase in the number of shares of common stock available for issuance to 100 million shares and an increase in the number of preferred stock shares to 40 million.  

Dividend Increases

The board of directors declared a $0.12 ½ dividend for the 2007 third quarter, payable October 31, 2007 to shareholders of record September 28, 2007, a $0.01 increase over the second quarter dividend.  Based on the closing price of the common shares at the close of business on August 10, 2007, the annualized dividend represents a yield of approximately 6.3 percent.

“This increase will result in a 35 percent compounded annual growth rate of our dividend since the first quarter of 2003,” Schulte said.  “This increase also reflects the confidence that the board has in our recent acquisitions and our outlook for the industry and our specific markets.  We will continue to evaluate our dividend policy on a quarterly basis.”
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Hotel Operating Statistics

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About Supertel Hospitality, Inc.

As of August 10, 2007, Supertel Hospitality, Inc. (NASDAQ: SPPR) owns 115 hotels  in 24 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, Masters Inn and Savannah Suites.  This diversity enables the company to participate in the best practices of each of these respected hospitality partners.  The company’s portfolio concentrates on mid-market and economy limited-service hotels and economy extended-stay hotels, which typically do not offer food and beverage service.  For additional information about the company or to make a hotel reservation, please visit the company’s Web site, 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. 

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Contact:

Donavon A. Heimes
Supertel Hospitality
Chief financial officer
402.371.2520
Dheimes@supertelinc.com

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Also See: Humphrey Hospitality Trust, Inc. Relocating Corporate Headquarters from Columbia, Maryland to Norfolk, Nebraska; President/CEO George R. Whittemore Resigns, Paul Schulte Named President/CEO / July 2004
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