Gross profit from domestic hotel operations increased 28% during the fourth quarter and, for the full, year, increased 19% to $72.2 million. Recurring domestic EBITDA increased 48% for the fourth quarter and increased 17% for the full year to $58.3 million. EBITDA margin for 1998 was 28.5% as compared to 27.7% in 1997.

In the fourth quarter, recurring domestic revenues increased 10% over the prior year and, for the full year 1998, recurring domestic revenues increased 13% to $204.1 million. The increase is due to an addition of 787 rooms and an increase of 1.19% in same store revenue per available room ("RevPAR") for the quarter. For the full year, same store RevPAR increased 1.85%.

Diluted continuing earnings per share before extraordinary item increased 29% from $.14 in calendar 1997 to $.18 in calendar 1998. The loss from continuing operations during the fourth quarter of 1998 was only $.01 compared to a $.19 loss in the fourth quarter of 1997.

Income from discontinued operations for the 1997 periods represents the net income of the Choice Hotels franchising business, which, along with the European Hotel operations, was distributed to shareholders in a tax-free spin-off on October 15, 1997. Although the European hotel operations were distributed to shareholders, generally accepted accounting principles do not permit presenting the European hotel operations as discontinued.

Therefore, European hotel operations are included as part of continuing operations in 1997. Extraordinary per share losses of $.01 in 1998 and $.05 in 1997 result from early extinguishment of certain debt obligations.

Commenting on the company's results, Donald Landry, Chief Executive Officer said, "I am pleased with the 1998 results. While our team faced the challenge of significant increases in competitive supply in a number of markets, we continued to grow revenue, cash flow, profits and margins. Faced with industry-wide capital constraints, we have aggressively reduced overhead with the elimination of approximately 30 corporate positions, sold two hotels not meeting our criteria for long-term retention and opened eleven new hotels.

"We also finalized the outstanding issues with our former affiliate Choice Hotels International and improved upon our strategic alliance agreement with Choice. For 1999, we plan to open another nine new hotels and also plan to continue our program of selling those hotels which do not meet our criteria for retention. The monetization of those hotels, together with our strong cash flow, will enable us to continue to develop mid-priced extended stay hotels under the MainStay Suites banner.

"MainStay Suites serves an attractive industry niche where the demand for a mid-priced lodging alternative designed to accommodate the needs of extended stay guests greatly exceeds the supply of such hotels. We continue to be very excited about this product and are realizing excellent financial returns on the capital deployed to date for the development of our 14 MainStay Suite hotels".

Sunburst Hospitality Corporation operates 11,911 rooms in 88 hotels in 27 states compared with 10,885 rooms in 76 hotels at December 31, 1997. An additional 9 hotels, totaling 909 rooms, are currently under construction.

MainStay Suites(R) represent the Company's principal development focus.

The references to improving returns and future development are forward-looking statements. Such statements are subject to certain risks and uncertainties, which may cause the actual performance of Sunburst to differ. Some of these uncertainties are discussed under the heading "Risk Factors" in Sunburst's SEC filings. These forward-looking statements speak only as of the date hereof, and Sunburst does not undertake any obligation to publicly release the result of any changes in such forward-looking statements which may be made to reflect events or circumstances after the date hereof.