Hotel Online Special Report
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MeriStar Hospitality Will Invest $24 million to Enhance 
the South Seas Resort Portfolio
Completes Acquisition of South Seas Properties Company
 
WASHINGTON - Oct. 5, 1998--MeriStar Hospitality Corporation (NYSE: MHX), the nation's fourth largest hotel REIT, today announced that it has completed the previously announced acquisition of South Seas Properties Company, L.P., west Florida's largest beachfront resort owner and operator.

The properties are owned by MeriStar Hospitality Corporation and leased and operated by MeriStar Hotels  Resorts, Inc. (NYSE:MMH), the nation's largest independent, non-branded hotel management company.

MeriStar Hospitality plans to invest $24 million to enhance the South Seas portfolio, comprising seven resorts and a championship golf course, as well as the leases and management contracts for two additional resorts. All of the properties are located on Florida's Gulf Coast and will be leased and managed by MeriStar Hotels Resorts, Inc. (NYSE: MMH).

"This acquisition is accretive to our earnings and significantly broadens our base in the highly fragmented resort hotel segment," said Paul W. Whetsell, chairman and chief executive officer of MeriStar Hospitality and MeriStar Hotels  Resorts. "With more than 25 premier resorts nationwide, MeriStar Hospitality now is one of the nation's largest independent resort owners. We expect to achieve more than $2 million in economies of scale with this acquisition over the next 12 months.

"The South Seas resort portfolio is located in destinations with extremely high barriers to new competition due to development costs and regulatory constraints," he added. "With the completion of the $24 million renovation upgrades to the resorts, we see positive long-term upside potential."

Whetsell noted that Robert M. Taylor, South Seas chairman and CEO, will play an active role in the REIT's Resort Division, focusing on acquisitions and timesharing.

South Seas properties are located on Sanibel Island, Captiva Island, Marco Island, Ft. Myers Beach and Tampa Bay, Fla. The resorts range in size from the 330-acre, 570-unit South Seas Plantation Resort on Captiva Island to the 30-unit Song of the Sea, a European-style bed and breakfast inn on Sanibel Island. (See resort descriptions attached.) The resort portfolio, which is operated by MeriStar Hotels Resorts, has more than 1,700 rooms, many with multiple bedrooms, including 810 condominium management contracts. All properties are located within an hour of either the Fort Myers or Tampa Airports, both of which cater to national and international tourist embarkation  cities.

"We already have completed the integration of the two management operations," said David McCaslin, MeriStar Hotels  Resorts' president. "South Seas adds significant depth to our Resorts Division at both the senior and mid-management levels in traditional resort operations as well as in condominium management and timesharing."

"As one of the nation's largest resort management companies, we now are well-positioned to take advantage of synergies in marketing, purchasing and management," said Robin A. Kirk, MeriStar Hotel Resorts executive vice-president of resorts. "We now are second only to Disney as a resort owner and operator in Florida."

Property Descriptions

Safety Harbor Resort and Spa The 192-room Safety Harbor Resort and Spa is one of America's historic spa resorts. Located on the waterfront of Old James Bay, the resort will be leased and managed by MeriStar Hotels  Resorts, with an option to purchase the property. Safety Harbor features a comprehensive skin and body care center, a 30,000 square foot spa, indoor and outdoor pools, tennis court and 31,000 square feet of meeting space. Plans call for a $3.8 million upgrade of the spa, public spaces and guestrooms.
South Seas Plantation Resort and Yacht Harbor Located on Captiva Island, Fla., the destination resort consists of 570 units, 106 of which MeriStar Hospitality will own, with all of the units to be leased and managed by MeriStar Hotels  Resorts under rental and lease agreements. Developed as a master-planned resort community in the 1970s, the property comprises 330 acres with 5,000 feet of beach frontage. Resort amenities and common areas owned by South Seas include 18 pools, a nine-hole golf course, two marinas, 29,000 square feet of meeting space, eight food and beverage facilities and eight retail stores. MeriStar Hospitality plans to invest approximately $15 million to enhance guest rooms and condominiums, upgrade public spaces and restaurants, add additional meeting space and improve the resort's landscaping.
Sundial Beach Resort Occupying 33 acres, including 2,300 feet of prime Gulf of Mexico beach frontage, on Middle Gulf Drive, the Sundial Beach Resort has 407 condominium units, 207 of which will be managed by MeriStar Hotels Resorts. The property offers five swimming pools, 18 tennis courts, 10,000 square feet of meeting space, two retail outlets and four food and beverage outlets. MeriStar Hospitality will spend approximately $1.3 million to add and improve meeting space and renovate restaurant facilities.
Sanibel Inn The Sanibel Inn, owned by MeriStar Hospitality, consists of a 96-room hotel and 30 condominiums on an adjacent eight-acre site, leased and managed by MeriStar Hotels  Resorts. With approximately 570 feet of direct beach frontage on the Gulf of Mexico, the property provides two meeting rooms and two restaurants. The hotel recently completed an extensive improvement plan to upgrade room interiors, building exteriors and landscaping.
Song of the Sea The 30-room European-style bed  breakfast inn is world-renowned for its intimate atmosphere and personal attention to guests. The property is situated on 3.3 acres along approximately 200 feet of direct beachfront overlooking the Gulf of Mexico and features a swimming pool, whirlpool, tennis courts and laundry facilities.
Seaside Inn The Seaside Inn features 31 guest rooms, including 22 hotel-style rooms, 8 one-bedroom suites, 1 two-bedroom suite and 1 three-bedroom suite. Hotel amenities range from a heated pool and outdoor barbecue grills to shuffleboard courts and spacious lanais. The property, which offers a laid-back, Key West-style alternative on Sanibel Island, recently completed a $1.0 million renovation that blended a tropical island flair and old Florida charm.
Best Western Sanibel Island Resort The Best Western Sanibel Island Resort, located on 4.5 acres of beachfront property, is one of the island's original resorts. The 45-room hotel features a swimming pool, tennis and shuffleboard courts, a full-service restaurant and frontage on approximately 350 feet of Gulf of Mexico beach. Recently, the hotel completed approximately $1.0 million in renovations to upgrade and re-flag the property to the Best Western brand.
Dunes Golf  Tennis Club The Dunes Golf  Tennis Club, a semi-private establishment, is the only non-hospitality property in the South Seas portfolio. The club features an 18-hole, par 70 championship golf course designed by Mark McCumber, seven soft-surface tennis courts, swimming pool, volleyball courts, pro shop, full banquet facilities and a full-service restaurant. The Dunes recently underwent a $2.8 million renovation to upgrade the golf course to USGA standards, remodel the greenside bunkers, and add a computerized irrigation system. The enhancements also included a new clubhouse, pro-shop and American-style restaurant, all of which overlook the golf course.
Radisson Suite Beach Resort Located south of Naples, Fla. on Marco Island on 7.6 acres of beachfront property, the 269 all-suite property is composed of oversized one- and two-bedroom suites. In addition to 8,500 square feet of meeting space, the hotel also features two tennis courts, outdoor heated pool with sundeck, the island's largest outdoor whirlpool, beach volleyball court, state-of-the-art fitness center, supervised children's activity club and two full-service restaurants. MeriStar Hospitality will invest approximately $3.6 million to improve the building's guestrooms, exterior, public space, restaurants and corridors.
Best Western Pink Shell Beach Resort MeriStar Hotels  Resorts will lease and manage the 209-unit (a mix of hotel guest rooms and approximately 50 condominium units) Best Western Pink Shell Beach Resort, a 12-acre family-oriented resort located on 1,500 feet of beachfront in Fort Myers Beach.
 

Washington, D.C.-based MeriStar Hospitality Corporation owns 117 principally upscale, full-service hotels in major market and resort locations with 29,337 rooms in 27 states, the District of Columbia and Canada. The company owns hotels under such internationally known brands as Hilton, Sheraton, Marriott, Westin, Radisson and Doubletree.

MeriStar Hotels  Resorts leases or manages 212 hotels with 44,839 rooms in 34 states, the District of Columbia, Canada and the U.S. Virgin Islands.

For more information about MeriStar Hospitality Corporation and MeriStar Hotels  Resorts, Inc., visit the companies' web site: www.meristar.com.

The matters in this press release include "forward looking statements" within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are qualified by cautionary statements contained herein and in MeriStar Hospitality's and MeriStar Hotels  Resorts' filings with the Securities and Exchange Commission.

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Contact:
John Emery
Chief Financial Officer
MeriStar Hospitality Corporation
(202) 295-1000
or
Jim Calder
Chief Financial Officer
MeriStar Hotels  Resorts, Inc.
 (202) 965-4455
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Also See:
CEO Interview: Paul Whetsell / KPMG / 1998 
Robert Karch Appointed Executive Vice-President of Operations Hotels at Meristar / Sept 1998 

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