Earnings per share before extraordinary loss from early debt redemption and cumulative effect of a change in accounting principle increased to $0.20 from $0.04 in the third quarter and to $0.44 from $0.19 for the nine months ended September 30, 1999.

Net income, before extraordinary loss and cumulative effect of a change in accounting principle increased $3.1 million to $3.9 million in the third quarter of 1999 and increased $4.8 million to $8.6 million for the nine months ended September 30, 1999.

Excluding non-recurring items, recurring earnings before interest, taxes, depreciation and amortization (�recurring EBITDA�) increased 6.8% to $17.9 million in the third quarter of 1999 from $16.7 million in the third quarter of the prior year.

Non-recurring items consisted of $1.5 million in pre-tax gains on the sale of hotels in 1999 and a pre-tax charge of $3.7 million against earnings in 1998 related principally to the impairment of asset values of the assets held for sale.

Revenues increased to $56.8 million in the third quarter of 1999, an increase of less than 1% from $56.3 million in the same period of 1998. Contributing to the overall increase in revenues was a 23.9% increase in revenues per available room for extended-stay hotels.

Extended-stay hotels open and operating increased from 13 hotels at September 30, 1998 to 18 at September 30, 1999, and total extended-stay revenues increased from $4.4 million in the third quarter of 1998 to $7.6 million in the third quarter of 1999.

Offsetting the impact of the growing portfolio of extended-stay hotels was the impact of the Company�s asset disposition program as 12 mature hotels were sold during the twelve months ended September 30, 1999.

�I am pleased with our financial performance during the quarter, especially considering the weather-related challenges,� commented Don Landry, Vice Chairman and Chief Executive Officer of Sunburst. Mr.  Landry further commented, �Weather issues in August and September cost us at least an estimated $300,000 in lost operating profits as travelers were either evacuated from or simply stayed away from our hotels in South Florida and other key, east coast destinations.�

During the quarter, the Company recorded an extraordinary loss of $339,000, net of taxes, relating to the early redemption of secured debt associated with hotels sold. Year to date extraordinary loss from early debt redemption, net of tax, amounted to $772,000 or $.04 per share.

After the effect of the extraordinary loss from early debt redemption, the Company reported an increase of $3.1 million in net income to $3.5 million for the third quarter of 1999 from $448,000 in 1998. The increase in net income per share after extraordinary items was $0.17, from $0.02 in 1998 to $0.19 in 1999.

Total revenues for the nine months ended September 30, 1999 increased 3.7% to $162.7 million, compared to $156.9 million in the prior year. Recurring EBITDA increased 11% to $50.8 million for the nine months ended September 30, 1999 from $45.8 million for the nine months ended September 30, 1998.

In the first quarter of the year, the Company recorded an after-tax charge of $599,000, or $0.03 per share, for the cumulative effect of a change in accounting principle. As required by a new accounting rule, all previously capitalized, but unamortized, new hotel pre-opening costs were written off with this one-time, non-cash charge against income. Beginning January 1, 1999, new hotel pre-opening costs are expensed as incurred.

Mr. Landry, the Company�s CEO, further noted, �We have continued our program of selectively disposing of assets that do not meet our criteria for long term retention and redeploying that capital into mid-priced, extended-stay hotels. To date, we have sold 12 hotels and we now have 20 newly built, mid-priced, extended-stay hotels open and operating.�

Sunburst Hospitality Corporation owns and operates 11,506 hotel rooms in 84 hotels in 26 states, compared to 11,850 rooms in 86 hotels a year ago. An additional 4 mid-priced extended stay hotels with 443 rooms are currently being developed.

As part of its program to reallocate capital from mature hotels to higher returning extended stay hotels, the Company has sold 10 hotels for approximately $32.7 million since the beginning of calendar year 1999. An additional three hotels are currently being marketed for sale.

The Company has purchased 1.4 million shares of its common stock at a total cost of $6.6 million as of October 27, 1999 and has remaining authority to acquire up to 1.1 million additional shares.

The references to future development and asset sales are forward-looking statements.