Hotel Online  Special Report

Interstate Hotels & Resorts Reports 4th Qtr 2005 Net Income of $7.2 million; 
Incentive Management Fees Up 40.2%
Hotel Operating Statistics
ARLINGTON, Va., Feb. 22, 2006 - Interstate Hotels & Resorts (NYSE: IHR), the nation's largest independent hotel management company, today reported strong operating results for the fourth quarter and year ended December 31, 2005. The company's quarterly results exceeded its earnings guidance for the fourth consecutive quarter. A summary of the company's robust performance for the fourth quarter and full year include the following (in millions, except per share amounts):
                            4th Qtr.     4th Qtr.    Full Year    Full Year
                              2005         2004         2005         2004
                              ----         ----         ----         ----
    Total revenue (1)        $66.7        $54.0       $222.5       $188.9
    Net income (loss)         $7.2         $1.0        $12.9        $(5.7)
    Diluted earnings (loss)
     per share               $0.23        $0.03        $0.42       $(0.19)
    Adjusted EBITDA (2)      $18.0        $12.5        $37.1        $27.9
    Adjusted net income (2)   $9.7         $7.5        $13.8         $9.3
    Adjusted diluted EPS (2) $0.31        $0.24        $0.45        $0.30

    (1) Total revenue excludes other revenue from managed properties
        (reimbursable costs).

    (2) Adjusted EBITDA, Adjusted net income, and Adjusted diluted EPS are
        non-GAAP financial measures and should not be considered as an
        alternative to any measures of operating results under GAAP.  See the
        discussion included in the non-GAAP financial measures section of this
        press release.

    Additional highlights include:
     -- Record earnings with base management fees of $56.4 million, an
        increase of 13.9 percent, and incentive management fees of $14.3
        million, an increase of 40.2 percent for full-year 2005.
     -- The purchase of the Hilton Durham near Duke University in North
        Carolina for $14.1 million in November 2005.
     -- The sale of the company's interest in the Marriott Residence Inn
        Houston hotel, resulting in a gain of $1.1 million in December 2005
        and retention of management of the hotel.
     -- The grand opening and management of the 357-suite Residence Inn New
        York Manhattan/Times Square.
     -- For the year, a reduction of $4.1 million of debt.
     -- The settlement of a business interruption insurance claim in February
        2006 for the hotels affected by Hurricane Charley for $3.2 million,
        which will be recognized as revenue in the first quarter of 2006.

Fourth-Quarter Results

Same-store(1) revenue per available room (RevPAR) for all managed hotels in the 2005 fourth quarter increased 11.2 percent to $74.97, which was 2.2 percentage points above the high end of the company's guidance and 2.8 percentage points above the industry average of 8.4 percent, as reported by Smith Travel Research. Average daily rate (ADR) advanced 8.4 percent to $112.73, and occupancy increased 2.6 percent to 66.5 percent.

Same-store RevPAR for all full-service managed hotels rose 11.2 percent to $78.36. ADR improved 8.6 percent to $117.82, with occupancy advancing 2.3 percent to 66.5 percent.

Same-store RevPAR for all select-service managed hotels increased 11.3 percent to $59.09, led by a 7.5 percent gain in ADR to $88.88 and a 3.6 percent improvement in occupancy to 66.5 percent.

"We continued to deliver exceptional hotel operating results for our owners, significantly exceeding the industry average for both the quarter and full year," said Thomas F. Hewitt, chief executive officer. "Our operating efficiencies and economies of scale allowed us to enhance owner profits by increasing room rates during the quarter and full year while continuing to carefully control costs. As a result, we earned record-level incentive fees, which are reported in the fourth quarter, of $14.3 million, up 40.2 percent from $10.2 million in the prior year.

"In addition to achieving outstanding results for our shareholders and our owners in our hotel management business, we have continued to execute and remain focused on our growth strategy of selective whole ownership, joint venture and sliver investments in hotels. We acquired the 195-room Hilton Durham near Duke University, our second wholly-owned property, during the fourth quarter," he noted. "While we owned the hotel for only slightly more than a month in the historically slowest quarter of the year, the property was modestly accretive to fourth-quarter earnings. We will invest $2.9 million to upgrade the hotel and look forward to strong returns on an annualized basis.

"This property is an excellent example of our ability to capitalize on strategic investments in whole ownership. Because of our knowledge of this property and the market in which it operates, we believe we can maximize returns on this hotel by making a smart, limited-capital investment to reposition it within the market. We will continue to invest in properties where we believe we can realize significant value for our shareholders."

BridgeStreet Continues Positive Growth

BridgeStreet, the company's corporate housing division, posted solid results in the 2005 fourth quarter, led by healthy growth in London and continued robust results in Chicago, Washington, D.C. and New York. "We have aggressively managed our inventory this past year with an intense focus on yield management," Hewitt said. "We continue to effectively manage rate, up 5.4 percent in the 2005 fourth quarter, balanced against maximizing occupancy, which rose 6.6 percent, with slightly lower inventory levels."

Following the close of the fourth quarter, BridgeStreet expanded its operations by becoming the exclusive provider of short-term furnished housing and related services for the entire portfolio of AMLI Residential, a leading provider of multi-family housing that operates in nine major markets. In addition, BridgeStreet acquired Chicago-based Twelve Oaks Corporate Housing, which has approximately 300 units in Chicago. With this acquisition, BridgeStreet nearly doubled its presence in this core market.

"We continue to look for ways to prudently expand BridgeStreet's brand through its Global Partners licensing program and the addition of units in select markets, such as the recent acquisition in Chicago. This spring, we will add more capacity in London, where we already have a significant leadership position. BridgeStreet has continued to gain market share within the corporate housing industry, and we believe BridgeStreet will have additional strong growth opportunities in 2006," Hewitt noted.

    Balance Sheet Strengthened
     On December 31, 2005, Interstate had:
     -- Total cash of $12.9 million.
     -- An increase in wholly-owned hotel assets of $32.1 million.
     -- Total debt of $85.1 million, consisting of $66.1 million of senior
        debt and $19.0 million of non-recourse mortgage debt.

"We were able to make significant improvements in the strength of our balance sheet this year," said J. William Richardson, chief financial officer. "Early in 2005, we successfully refinanced our senior secured credit facility and increased our capacity to $108 million. During the year, we acquired two hotels for a net purchase price of $42.5 million and reduced our senior debt by securing $19.0 million in non-recourse debt. We currently have more than $30 million available under our credit facility to fund future growth initiatives. Our balance sheet is the strongest that it has been in recent years and we are well positioned to take on new opportunities. During 2006, we will continue to maintain focus on managing our balance sheet by lowering our overall leverage while increasing our asset base with selective, high- quality investments.

"I also would like to take this opportunity to welcome Bruce Riggins as the incoming chief financial officer as I will be stepping down as CFO and entering retirement from Interstate on April 17, 2006. I believe he will be a tremendous addition to the company and will help drive the company to new heights in the years to come."

Outlook and Guidance

"We achieved excellent operating results in 2005 and have a positive outlook for the hotel and corporate housing industry in 2006," Hewitt noted. "The economy remains buoyant, business travel has returned to more historical levels, and leisure travel remains high. Although development activity is increasing, new supply additions are expected to remain low through 2006. 
Industry experts forecast positive growth for the hotel industry for at least the next several years. At this time, we are optimistic about the fundamentals of our industry and expect to deliver continued strong results in 2006 for our shareholders."

The company provides the following guidance for the first-quarter and full-year 2006:

     -- RevPAR, on a same-store basis, is expected to increase 10.0 to 11.0
        percent in the first quarter and 7.0 to 9.0 percent for the full year;
     -- Net income (loss) of $(0.9) million to $(0.3) million in the first
        quarter and $10.4 million to $11.6 million for the full year;
     -- Earnings (loss) per diluted share of $(0.03) to $(0.01) for the first
        quarter and $0.33 to $0.37 for the full year;
     -- Adjusted net income of $3.7 million to $4.3 million in the first
        quarter and $14.9 million to $16.1 million for the full year;
     -- Adjusted earnings per diluted share of $0.12 to $0.14 for the first
        quarter and $0.48 to $0.52 for the full year;
     -- Adjusted EBITDA of $10.8 million to $11.8 million for the first
        quarter and $44 million to $46 million for the full year.

Included in the first-quarter and full-year guidance are $3.2 million of proceeds from business interruption insurance related to Hurricane Charley, as well as one-time termination payments of $4.0 million from MeriStar Hospitality, related to their recently announced sale of 10 properties. Included in the first-quarter and full-year net income guidance are $7.6 million of write-offs of intangible assets due to the expected termination of 16 properties by MeriStar Hospitality in the 2006 first quarter.

Yesterday MeriStar announced that it signed a merger agreement to be acquired by an affiliate of The Blackstone Group. "We expect our contracts to remain in place with Blackstone," Hewitt noted. "Interstate has had a great relationship with Blackstone over the years and we are looking forward to the opportunity to work with them again."

                        Interstate Hotels & Resorts, Inc.
                       Historical Statements of Operations
                (Unaudited, In thousands except per share amounts)

                                         Quarter Ended        Year Ended
                                          December 31,       December 31,
                                        -------  -------  ---------  -------
                                          2005     2004       2005     2004
                                        -------  -------  ---------  -------
        Lodging                          $4,145     $-      $12,656     $-
        Management fees                  23,304   15,351     49,771   32,765
        Management fees - related
         parties (1)                      7,838    7,835     28,102   31,180
        Corporate housing                28,727   27,114    120,519  110,620
        Other                             2,717    3,706     11,434   14,305
                                        -------  -------   --------  -------
                                         66,731   54,006    222,482  188,870
       Other revenue from managed
        properties                      228,309  187,153    893,760  751,892
                                        -------  -------  ---------  -------
            Total revenue               295,040  241,159  1,116,242  940,762

     Operating expenses by department:
        Lodging expenses                  3,518      -       10,009      -
        Corporate housing                22,945   23,471     96,868   91,592
     Undistributed operating expenses:
        Administrative and general       22,258   18,251     79,219   69,950
        Depreciation and amortization     2,311    2,559      9,141    9,199
        Restructuring charges               -        567      2,043    4,048
        Asset impairments and other
         write-offs (2)                   2,626    1,130      5,583    8,922
                                        -------  -------   --------  -------
                                         53,658   45,978    202,863  183,711
       Other expenses from managed
        properties                      228,309  187,153    893,760  751,892
                                        -------  -------   --------  -------
            Total operating expenses    281,967  233,131  1,096,623  935,603

                                        -------  -------   --------  -------
     OPERATING INCOME                    13,073    8,028     19,619    5,159

     Interest income                        322      204        980    1,005
     Interest expense (3)                (2,045)  (2,512)   (10,263)  (8,605)
     Equity in earning (loss) of
      affiliates                            681     (110)     3,492   (1,056)
     Gain on sale of marketable
      securities and extinguishment of
      debt                                  (53)     -        4,658      -
                                        -------  -------  ---------  -------

      INTEREST AND INCOME TAXES          11,978    5,610     18,486   (3,497)

     Income tax (expense) benefit        (4,680)  (2,270)    (7,327)     994
     Minority interests (expense)
      benefit                              (124)     (23)      (173)      45
                                        -------  -------  ---------  -------

      OPERATIONS                          7,174    3,317     10,986   (2,458)
     Income (loss) from discontinued
      operations, net of tax (4)             (7)  (2,285)     1,891   (3,205)
                                        -------  -------  ---------  -------
     NET INCOME (LOSS)                   $7,167   $1,032    $12,877  $(5,663)
                                        =======  =======  =========  =======

       Continuing operations              $0.23    $0.11      $0.36   $(0.08)
       Discontinued operations              -      (0.08)      0.06    (0.11)
                                        -------  -------  ---------  -------
       Basic earnings (loss) per share    $0.23    $0.03      $0.42   $(0.19)
                                        =======  =======  =========  =======

       Continuing operations              $0.23    $0.11      $0.36   $(0.08)
       Discontinued operations              -      (0.08)      0.06    (0.11)
                                        -------  -------  ---------  -------
       Diluted earnings (loss) per share  $0.23    $0.03      $0.42   $(0.19)
                                        =======  =======  =========  =======

     Weighted average shares outstanding
      (in thousands):
       Basic                             30,579   30,446     30,522   30,328
       Diluted (5)                       30,935   30,764     30,825   30,328

                        Interstate Hotels & Resorts, Inc.
                         Hotel Level Operating Statistics

    Same-store hotel               Quarter Ended             Year Ended
    operating statistics(6):        December 31,             December 31,
                             -----------------------  -----------------------
                              2005    2004  % change   2005    2004  % change
                             -----------------------  -----------------------
        Full-service hotels:
        Occupancy              66.5%    65.0%   2.3%    70.9%    69.5%   2.0%
        ADR                  $117.82  $108.44   8.6%  $115.00  $105.76   8.7%
        RevPAR                $78.36   $70.46  11.2%   $81.49   $73.50  10.9%

        Occupancy              66.5%    64.2%   3.6%    70.5%    68.6%   2.8%
        ADR                   $88.88   $82.71   7.5%   $87.99   $82.40   6.8%
        RevPAR                $59.09   $53.07  11.3%   $62.04   $56.51   9.8%

        Occupancy              66.5%    64.8%   2.6%    70.8%    69.3%   2.2%
        ADR                  $112.73  $103.96   8.4%  $110.27  $101.70   8.4%
        RevPAR                $74.97   $67.41  11.2%   $78.07   $70.52  10.7%

                        Interstate Hotels & Resorts, Inc.
                Reconciliations of Non-GAAP Financial Measures (7)
                (Unaudited, in thousands except per share amounts)

                                            Quarter Ended       Year Ended
                                             December 31,      December 31,
                                          -------  -------  -------  -------
                                            2005     2004     2005     2004
                                          -------  -------  -------  -------
     Net income (loss)                     $7,167   $1,032  $12,877  $(5,663)
        Depreciation and amortization       2,311    2,559    9,141    9,199
        Interest expense, net               1,723    2,308    9,283    7,600
        Discontinued operations, net (4)      (58)    (349)   1,417      252
        Income tax expense (benefit)        4,680    2,270    7,327     (994)
                                          -------  -------  -------  -------

     EBITDA                                15,823    7,820   40,045   10,394
        Restructuring charges                 -        567    2,043    4,741
        Asset impairments and other write-
         offs (2)                           2,626    4,015    5,583   11,807
        Gain on sale of investments and
         extinguishment of debt (8)           113      -     (7,203)     -
        Equity in (earnings) losses of
         affiliates                          (681)     110   (3,492)   1,056
        Minority interest expense
         (benefit)                            124       23      173      (45)
        Other                                 -        -        -        (55)
                                          -------  -------  -------  -------
     Adjusted EBITDA                      $18,005  $12,535  $37,149  $27,898
                                          =======  =======  =======  =======

                                          Quarter Ended      Year Ended
                                           December 31,     December 31,
                                          ------  ------  -------  -------
                                           2005    2004    2005     2004
                                          ------  ------  -------  -------
     Net income (loss)                    $7,167  $1,032  $12,877  $(5,663)
        Restructuring charges                -       567    2,043    4,741
        Asset impairments and other
         write-offs (2)                    2,626   4,015    5,583   11,807
        Gain on sale of investments and
         extinguishment of debt (8)          113     -     (7,203)     -
        Deferred financing costs write-
         off (3)                             -       -      1,847      -
        Equity interest in the gain on
         sale of Hilton San Diego (9)        -       -     (4,202)     -
        Equity interest in the loss on
         sale of Wyndham Milwaukee (10)      -       -        395      -
        Equity in the write-off of
         deferred financing costs (11)       -       -        295      -
        Equity interest in the gain on
         sale of Residence Inn Houston
         (12)                             (1,107)    -     (1,107)
        Other                                -       -        -        (55)
        Minority interest                     16     (59)      39     (149)
        Income tax rate adjustment (13)      899   1,976    3,265   (1,360)
                                          ------  ------  -------  -------
     Adjusted net income                  $9,714  $7,531  $13,832   $9,321
                                          ======  ======  =======  =======

     Adjusted diluted earnings per share   $0.31   $0.24    $0.45    $0.30
                                          ======  ======  =======  =======

     Weighted average number of common
      shares outstanding (in thousands):
       Diluted (5)                        30,935  30,764   30,825   30,647

                        Interstate Hotels & Resorts, Inc.
                        Outlook Reconciliation (7), (14)

                                               Quarter ending    Year ending
                                                  March 31,      December 31,
                                                     2006             2006

     Net income (loss)                               $(600)          $11,000
         Depreciation and amortization               2,600            10,600
         Interest expense, net                       1,800             7,600
         Income tax expense (benefit)                 (400)            7,300
                                               -----------      ------------

     EBITDA                                          3,400            36,500

        Asset impairments (2)                        7,600             7,600
       (Gain) Loss on sale of investment               -                 -
        Equity investment adjustment:                  -                 -
         Equity in (earnings) losses of
          affiliates:                                  200               700
         Distributions received from
          equity investments                           -                 -
        Minority interest expense
         (benefit)                                     100               200

                                               -----------      ------------
     Adjusted EBITDA                               $11,300           $45,000
                                               ===========      ============

     Net income (loss)                               $(600)          $11,000
    Adjustments to net income (loss):
        Asset impairments and other
         write-offs (2)                              7,600             7,600
        Income tax rate adjustment (13)             (3,000)           (3,000)

                                               -----------      ------------
    Adjusted net income                             $4,000           $15,600
                                               ===========      ============

    Adjusted diluted earnings per share (5)          $0.13             $0.50
                                               ===========      ============

                      Interstate Hotels & Resorts, Inc.
                          Notes to Financial Tables

    (1)  Related parties include MeriStar Hospitality, the hotels included in
         our real estate joint ventures and a small number of our hotels which
         are affiliated with certain of our directors.

    (2)  This amount represents losses recorded for intangible costs
         associated with terminated management contracts and other asset

    (3)  For the year ended 2005, interest expense includes $1,847 of deferred
         financing fees written off in connection with the refinancing of our
         senior secured credit facility during the first quarter of 2005.

    (4)  In June 2004, we completed the disposal of BridgeStreet Canada, Inc.,
         our corporate housing operation in Toronto.  In September 2005, we
         completed the sale of the Pittsburgh Airport Residence Inn by
         Marriott.  Accordingly, we have presented the operations of
         BridgeStreet Canada, Inc., and the Pittsburgh Airport Residence Inn
         by Marriott as discontinued operations for all periods presented.  In
         addition, the calculation of EBITDA reflects the add back of interest
         expense, depreciation and amortization, and income taxes related to
         those discontinued operations.

    (5)  Our diluted earnings (loss) per share assumes the issuance of common
         stock for all potentially dilutive common stock equivalents
         outstanding.  Potentially dilutive shares include restricted stock
         and stock options granted under our comprehensive stock plan and
         operating partnership units held by minority partners.  No effect is
         shown for any securities that are anti-dilutive.

    (6)  We present certain operating statistics (i.e. occupancy, RevPAR and
         ADR) for the periods included in this report on a same-store hotel
         basis.  We define our same-store hotels as those which (i) are
         managed by us for the entirety of the reporting periods being
         compared or have been managed by us for part of the reporting periods
         compared and we have been able to obtain operating statistics for the
         period of time in which we did not manage the hotel, and (ii) have
         not sustained substantial property damage, business interruption or
         undergone large-scale capital projects during the reporting periods
         being reported.  In addition, the operating results of hotels for
         which we no longer managed as of December 31, 2005 are also not
         included in same-store hotel results for the periods presented
         herein.  Of the 286 properties that we managed as of December 31,
         2005, 264 hotels have been classified as same-store hotels.  RevPar
         is defined as revenue per available room.  ADR is defined as average
         daily rate.

    (7)  See discussion of EBITDA, adjusted EBTIDA, adjusted net income and
         adjusted diluted earnings per share, located in the "Non-GAAP
         Financial Measures" section, described earlier in this press release.

    (8)  In the first quarter of 2005, we recognized a gain of $332 from the
         exercise of stock warrants for stock in an unaffiliated company.   In
         the third quarter of 2005, we recognized a gain of $4,326 on the
         extinguishment of the remaining principal and accrued interest on a
         non-recourse promissory note and a gain of $2,545 on the sale of the
         Pittsburgh Residence Inn by Marriott (this gain is included in
         discontinued operations on our statement of operations).

    (9)  This amount is included in equity in earnings (losses) of affiliates
         and represents our portion of the gain on the sale of the Hilton San
         Diego Gaslamp hotel and related retail space, which was owned by one
         of our joint ventures.

    (10) This amount is included in equity in earnings (losses) of affiliates
         and represents our portion of the loss on sale of the Wyndham
         Milwaukee, which was owned by one of our joint ventures.

    (11) This amount is included in equity in earnings (losses) of affiliates
         and represents our portion of deferred financing costs written off in
         connection with the refinancing of the MIP joint venture's senior

    (12) This amount is included in equity in earnings (losses) of affiliates
         and represents our portion of the gain on the sale of the Marriott
         Residence Inn Houston, which was owned by one of our joint ventures.

    (13) This amount represents adjustments to recorded income tax expense to
         bring the overall effective tax rate to an effective rate of 28% in
         2005 and 40% in 2004.  The outlook reconciliation for 2006 assumes a
         40% tax rate.  This effective tax rate will differ from the effective
         tax rate reported in our historical statements of operations.

    (14) Our outlook reconciliation uses the mid-point of our estimates.

    (1) Please see footnote 6 to the financial tables within this press
        release for a detailed explanation of "same-store" hotel operating

Interstate will hold a conference call to discuss its fourth-quarter and year-end results today, February 22, at 9 a.m. Eastern Standard Time. To hear the webcast, interested parties may visit the company's Web site at and click on Investor Relations and then Fourth-Quarter Conference Call. A replay of the conference call will be available until midnight on Wednesday, March 22, 2006, by dialing (800) 405-2236, reference number 11051318 and an archived webcast of the conference call will be posted on the company's Web site through March 22, 2006.

As of January 31, Interstate Hotels & Resorts operated 279 hospitality properties with more than 63,000 rooms in 41 states, the District of Columbia, Canada, and Russia. BridgeStreet Worldwide, an Interstate Hotels & Resorts' subsidiary, is one of the world's largest corporate housing providers. BridgeStreet and its network of Global Partners offer more than 8,900 corporate apartments located in more than 90 MSAs throughout the United States and internationally. For more information about Interstate Hotels & Resorts, visit the company's Web site:

Non-GAAP Financial Measures

Included in this press release are certain non-GAAP financial measures, which are measures of our historical or estimated future performance that are different from measures calculated and presented in accordance with GAAP, within the meaning of applicable SEC rules, that we believe are useful to investors. They are as follows: (i) Earnings before interest expense, taxes, depreciation and amortization (or "EBITDA") and (ii) Adjusted EBITDA and Adjusted net income (loss), and Adjusted diluted EPS. The following discussion defines these terms and presents the reasons we believe they are useful measures of our performance.


A significant portion of our non-current assets consists of intangible assets. Of those intangible assets, the costs of our management contracts are amortized over their expected terms. Because depreciation and amortization are non-cash items, management and many industry investors believe the presentation of EBITDA is useful. EBITDA represents consolidated earnings before interest expense, income taxes, depreciation and amortization. We believe EBITDA provides useful information to investors regarding our financial condition and results of operations because EBITDA is useful for evaluating our performance and our capacity to incur and service debt, fund capital expenditures and expand our business. Management also uses EBITDA as one measure in determining the value of acquisitions and dispositions, and management uses EBITDA and Adjusted EBITDA as part of our annual budget process. We also believe that the rating agencies and a number of lenders use EBITDA for those purposes and a number of restrictive covenants related to our indebtedness use measures similar to EBITDA presented herein.
Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS

We define Adjusted EBITDA as excluding the effects of certain charges, transactions and expenses incurred in connection with events management believes are not reasonably likely to recur or have a continuing effect on our ongoing operations. Non-recurring items and special charges include restructuring and severance expenses, asset impairments and write-offs, equity in earnings (losses) of affiliates, gains and losses on asset dispositions and other investments, and other non-cash charges.

Similarly, we define Adjusted net income (loss) and Adjusted diluted EPS as net income (loss) and diluted EPS, without the effects of those same charges, transactions and expenses described earlier. We believe that Adjusted EBITDA and Adjusted net income (loss) and Adjusted diluted EPS are useful performance measures because including these non-recurring items and special charges may either mask or exaggerate trends in our ongoing operating performance. Furthermore, performance measures that include non-recurring items and special charges may not be indicative of the continuing performance of our underlying business. Therefore, we present Adjusted EBITDA and Adjusted net income (loss) and Adjusted diluted EPS because they may help investors to compare our performance before the effect of various items that do not directly affect our ongoing operating performance.

Limitations on the use of EBITDA, Adjusted EBITDA and Adjusted Net Income

We calculate EBITDA, Adjusted EBITDA, Adjusted net income, and Adjusted diluted EPS as we believe they are important measures for our management and our investors understanding of our operations. These may not be comparable to measures with similar titles as calculated by other companies. This information should not be considered as an alternative to net income, operating profit, cash from operations or any other operating performance measure calculated in accordance with GAAP. Cash expenditures for investments, interest expense and other items have been and will be incurred and are not reflected in the EBITDA and Adjusted EBITDA presentations. Adjusted net income and Adjusted diluted EPS do not include cash receipts and expenditures related to those items and charges. Management compensates for these limitations by separately considering these excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures. Additionally, EBITDA, Adjusted EBITDA, Adjusted net income, and Adjusted diluted EPS should not be considered a measure of our liquidity. Adjusted net income and Adjusted diluted EPS should also not be used as a measure of amounts that accrue directly to our stockholders' benefit.

This press release contains "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995, about Interstate Hotels & Resorts, including those statements regarding future operating results and the timing and composition of revenues, among others, and statements containing words such as "expects," "believes" or "will," which indicate that those statements are forward-looking, although not all forward- looking statements will contain such words. Except for historical information, the matters discussed in this press release are forward-looking statements that are subject to certain risks and uncertainties that could cause the actual results to differ materially, including the volatility of the national economy, changes in business and leisure travel patterns or levels, fuel cost, economic conditions generally and the hotel and real estate markets specifically, international and geopolitical instability, health concerns, threatened or actual terrorist attacks, governmental actions, legislative and regulatory changes, availability of debt and equity capital, interest rates, competition, weather conditions or natural disasters, changes in supply and demand for lodging facilities in our current and proposed market areas, and the Company's ability to manage integration and growth. Additional risks are discussed in Interstate Hotels & Resorts' filings with the Securities and Exchange Commission, including Interstate Hotels & Resorts' annual report on Form 10-K as amended for the year ended December 31, 2004.


Interstate Hotels & Resorts
    Melissa Thompson
    Vice President, Corporate Communications
    (703) 387-3377

Also See: Interstate Hotels & Resorts Reports 3rd Qtr Net Income of $5.4 million Compared to a Net Loss of $300,000 a Year Earlier; ADR Up 8.6%, Occupancy Up 2.0% to 75.6% / Hotel Operating Statistics / November 2005
Interstate Hotels & Resorts Reports 2nd Qtr 2005 Net Income of $1.7 million Compared to net loss of $(2.7) million in 2nd Qtr 2004 / August 2005


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