MEMPHIS, Tenn.-Oct. 21, 1997--RFS Hotel Investors, Inc. (NYSE symbol: RFS) today announced unaudited results for the third quarter of its 1997 fiscal year.

For the quarter ended September 30, funds from operations (FFO) was $16,090,000, or $0.60 per share, compared to $14,001,000, or $0.57 per share, reported for the third quarter of 1996. This represents the Company's best quarterly FFO ever, with year-to-year increases of 15% and 5% for FFO and FFO per share, respectively.

Net income for the quarter was $10,667,000 or $0.42 per share, compared to $11,392,000, or $0.45 per share, for the same period last year. For the nine months ended September 30, funds from operations (FFO) was $43,480,000, or $1.61 per share, compared to $36,233,000, or $1.47 per share, reported for the third quarter of 1996. This represents year-to-year increases of 20% and 9.5% for FFO and FFO per share, respectively. Net income for the nine months was $28,669,000 or $1.14 per share, compared to $28,478,000, or $1.14 per share, for the same period last year. The Company declared a quarterly dividend of $0.375 per share, which represents an increase of 4.2% over the dividend declared last quarter. The dividend is payable on November 17, 1997 to shareholders of record on November 7, 1997.

RFS President Minor Perkins said, "We are delighted to report record revenue, FFO, and FFO per share. For the quarter, lease revenue was up 31% over the prior year, primarily as a result of the five full-service hotels in California that we acquired earlier this year. Compared to the third quarter of last year, room revenue per available room (REVPAR) increased by 4.5% on a same-store basis; however, excluding our Atlanta-area hotels that benefited from last year's Olympic Games, our same-store REVPAR increased by 7.2%," Perkins explained.

"Since the end of the quarter, we have acquired a 205-room Sheraton hotel in Birmingham, Alabama; opened a 120-room Residence Inn in Jacksonville, Florida; started construction on our first TownePlace Suites hotel in Fort Worth, Texas, and a 36-room addition to our Residence Inn in Charlotte, North Carolina; and achieved a reduction in the interest rate on our bank line of credit. Before the end of the year, we expect to open a 78-room Residence Inn in West Palm Beach, Florida, and begin construction on a 39-room addition to our Beverly Heritage Hotel in Milpitas, California,' Perkins said.

"We sold two hotels earlier this month, and have signed letters of intent to sell several others," said Perkins. "We think it's wise to shift the allocation of our assets toward the full-service hotel segment at this time," Perkins added, "and that is what we intend to do with the proceeds from the sale of these hotels."

RFS Hotel Investors, Inc. is a Memphis-based real estate investment trust (REIT) that owns 61 hotels comprising approximately 8,880 rooms in 24 states.

Certain matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors including general economic conditions, competitive factors, interest rates and the other risks inherent in the real estate business. For further information on factors which could impact the Company and the statements contained herein, reference is made to the filings of RFS Hotel Investors, Inc. with the Securities and Exchange Commission, including quarterly reports on Form 10Q, reports on Form 8-K and annual reports on Form 10-K, including factors described in the Form 10-K for the fiscal year ended December 31, 1996 filed by RFS Hotel Investors, Inc.

RFS HOTEL INVESTORS, INC. ACQUISITIONS AND DEVELOPMENT DATA

Acquisitions and Development Completed During Third Quarter 1997

                                               Number Investment Location Franchise Affiliation of Rooms (Millions)

Addition: Ann Arbor, MI Residence Inn 42 $3.7

Development Projects at September 30, 1997

                  Location Affiliation Franchise Number of Rooms Estimated Investment (Millions) Estimated Opening Date

Jacksonville, FL Residence Inn 120 $ 8.3 4Q97

West Palm Beach, Residence Inn 78 $ 6.4 4Q97 FL

Jacksonville, FL Hampton Inn 118 $ 6.2 1Q98

Chandler, AZ Homewood Suites 83 $ 6.7 2Q98 (Phoenix)

Crystal Lake, IL Courtyard 90 $ 6.6 4Q98 (Chicago)

Additions: Charlotte, NC Residence Inn 36 $ 3.6 2Q98

Milpitas, CA Beverly Heritage 39 $ 3.0 3Q98 (Silicon Valley)