– Comparable Portfolio RevPAR Growth of 2.6% –

– Sells 7 Hotels to Cindat at a 5.4% Capitalization Rate –

– Issues Preferred Shares at Lowest Coupon in Company History –

– Repurchases $36.8 Million of Common Shares –

– Continues Capital Recycling Via Suburban Boston Asset Sales –

July 27, 2016 –PHILADELPHIA–Hersha Hospitality Trust (NYSE: HT) (“Hersha” or the “Company”), owner of upscale hotels in urban gateway markets, today announced results for the second quarter ended June 30, 2016.

Second Quarter 2016 Financial Results

Net income applicable to common shareholders was $102.2 million, or $2.33 per diluted common share, in second quarter 2016, compared to net income applicable to common shareholders of $15.6 million, or $0.32 per diluted common share, in second quarter 2015. The increase in second quarter 2016 net income was the result of the gain recognized from the Company’s contribution and sale of seven premium limited service hotels in Manhattan to the Company’s joint venture with an affiliate of Cindat Capital Management Limited (“Cindat”).

Adjusted Funds from Operations (“AFFO”) per diluted common share and unit of limited partnership interest in Hersha Hospitality Limited Partnership (“OP Unit”) was $0.89 in second quarter 2016, a 17.1% increase from AFFO of $0.76 per diluted common share and OP Unit reported in second quarter 2015. AFFO in second quarter 2016 increased by $2.4 million, or 6.2%, to $41.2 million, compared to $38.8 million in second quarter 2015. The Company’s weighted average diluted common shares and OP Units outstanding were approximately 46.0 million as of June 30, 2016, compared to approximately 50.9 million as of June 30, 2015.

Mr. Jay H. Shah, Hersha’s Chief Executive Officer, stated, “The Company’s portfolio-wide performance during the second quarter was driven by strong fundamentals in our West Coast, Philadelphia and Washington, DC hotel clusters. While our comparable portfolio’s 2.6% RevPAR growth reflected weaker than anticipated business transient trends and a lack of pricing power in New York City. Excluding our New York City portfolio, we reported more robust 5.0% RevPAR growth during the second quarter. We remain constructive with regards to the back half of 2016 based on a favorable macroeconomic environment, healthy employment, and increasing consumer spending, coupled with positive demand trends and solid convention calendars in the majority of our markets. Moving forward, we will continue to utilize hands-on asset and revenue management strategies to leverage the industry’s positive fundamentals to drive outperformance and profitability across our six gateway markets.”

Mr. Shah continued, “Year-to-date in 2016 we have executed several unique entrepreneurial initiatives to drive results and position the Company to benefit from opportunities created by potential dislocation in the markets. We capitalized on demand from international capital sources seeking cash flowing real estate in U.S. gateway markets through our transformative joint-venture with Cindat, a China-based investment management platform. We leveraged the best preferred market in years, redeeming our $115.0 million 8.0% Series B Preferred Shares and raising $192.5 million through the issuance of 6.5% Series D Preferred Shares. We also took advantage of continued interest from local and offshore real estate investors in stabilized, select service assets in suburban markets, and sold a suburban Philadelphia hotel, while entering into an agreement to sell two assets in Suburban Boston at very attractive terms. In addition, we utilized a significant portion of remaining 1031 Exchange proceeds from the Cindat transaction to acquire the very well-located Envoy Hotel in Boston’s flourishing Innovation District subsequent to the end of the second quarter. Simultaneous to these transactions, we remained true to our value creation philosophy and commitment to total shareholder returns and repurchased $36.8 million of our common shares. The activities of our busy second quarter furthered our strategy of crafting a differentiated portfolio, recycling investment capital and creating financial flexibility to execute our business plan and act in an opportunistic manner.”

Second Quarter 2016 Operating Results

The best performing market during the second quarter was the Company’s comparable Philadelphia portfolio, which reported 8.8% revenue per available room (“RevPAR”) growth. The Company’s comparable West Coast and Washington, DC portfolios reported 7.4% and 6.1% RevPAR growth, respectively.

RevPAR at the Company's 43 comparable hotels increased 2.6% to $187.00 in second quarter 2016. The Company’s average daily rate (“ADR”) for the comparable hotel portfolio increased 1.8% to $213.22, while occupancy increased 66 basis points to 87.7%. Gross Operating Profit (“GOP”) margins increased 20 basis points to 51.4%. However, Hotel EBITDA margins for the comparable hotel portfolio were flat at 41.7% primarily due to property tax increases.

New York City and Manhattan

The New York City hotel portfolio, which includes the five boroughs, consisted of 10 hotels as of June 30, 2016. The Company’s comparable New York City hotel portfolio reported a 3.9% RevPAR decrease to $219.89 due to a 2.5% ADR decline to $237.16, as new supply continued to impact rate growth. Occupancy decreased 132 basis points, but remained robust at 92.7%.

The Manhattan hotel portfolio consisted of 7 hotels as of June 30, 2016. The Company’s comparable Manhattan hotel portfolio reported a 5.5% RevPAR decline to $243.87 as the aforementioned new supply inhibited rate growth, which drove a 3.1% ADR decline to $263.58. Occupancy declined 232 basis points to 92.5%, demonstrating the continued demand resiliency characteristic of the Manhattan market. The Company’s Manhattan portfolio reported GOP and EBITDA margins of 56.7% and 43.7%, respectively.

Financing

As of June 30, 2016, the Company maintained significant financial flexibility with approximately $236.1 million of cash and cash equivalents and full capacity on the Company’s senior unsecured credit facility. As of June 30, 2016, 54.0% of the Company’s consolidated debt was fixed rate debt or hedged through interest rate swaps and caps. The Company’s total consolidated debt had a weighted average interest rate of approximately 3.7% and a weighted average life-to-maturity of approximately 3.6 years.

Preferred Shares

On May 24, 2016, the Company priced a public offering of 6.5% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share, for gross proceeds of $175.0 million. Inclusive of the over-allotment exercised by the underwriters, the Company raised $192.5 million through the 6.5% Series D Preferred Share issuance.

On June 8, 2016, the Company redeemed its 8.0% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest. The redemption price was equal to $25.00 per Series B Preferred Share, plus accrued and unpaid dividends through the Redemption Date in the amount of $0.3722 per Series B Preferred Share, for a total redemption price per Series B Preferred Share equal to $25.3722.

Dispositions

On April 29, 2016, the Company closed on the joint venture with Cindat for seven of the Company’s limited service hotels in Manhattan, for a total purchase price, including closing and capital improvement costs, of $571.4 million, or $526,000 per key. The joint venture was structured with Cindat as the preferred joint venture partner holding a 70.0% ownership stake, while HT retained a 30.0% equity interest. The purchase price including closing costs represented a trailing 5.4% economic capitalization rate and an EBITDA multiple of 16.8x based on 2015 results for the seven assets.

During the second quarter, the Company also closed on the sale of the 129-room Hyatt Place in King of Prussia, PA for $13.0 million, or approximately $101,000 per key. The sale price reflected a trailing economic capitalization rate of 7.8% based on the hotel’s net operating income for the twelve-month period ended March 31, 2016, and a hotel EBITDA multiple of 10.9x.

Subsequent Events

In July, the Company acquired the 136-room Envoy Hotel in Boston for $112.5 million. The fee simple asset, acquired unencumbered of debt or management, is affiliated with Marriott’s Autograph Collection, leveraging Marriott’s powerful distribution capabilities.

The Company has entered into a definitive agreement to sell the 125-room Residence Inn in Framingham, MA and the 96-room Residence Inn in Norwood, MA for a combined $47.0 million, or approximately $213,000 per key. The sale price for the two suburban Boston hotels reflects a blended economic capitalization rate of 7.7% based on the hotels’ net operating income for the twelve-month period ended June 30, 2016, and a blended hotel EBITDA multiple of 11.7x. The hotels are being sold to an offshore entity as a portfolio unencumbered of debt and management. The sale is anticipated to close in third quarter 2016, subject to customary closing conditions. No assurances can be given the sale will close within the expected time frame or at all.

Share Repurchase Activity

In second quarter 2016, the Company repurchased approximately 2.0 million common shares for an aggregate repurchase price of $36.8 million. Year-to-date through June 30, 2016, the Company repurchased approximately 2.1 million common shares for an aggregate repurchase price of $39.1 million, which represents 4.7% of the Company common shares outstanding. The Company has approximately $33.0 million remaining on its $100 Million Share Repurchase Program.

Dividends

Hersha paid a dividend of $0.4297 per Series C Preferred Share for the second quarter ended June 30, 2016. The Series C Preferred Share dividends were paid July 15, 2016 to holders of record as of July 1, 2016. The Company paid an initial dividend of $0.203125 per Series D Preferred Share based on a settlement date of May 31, 2016 for the Series D Preferred Shares. The Series D Preferred Share dividends were paid July 15, 2016 to shareholders of record as of July 1, 2016.

The Company also declared quarterly cash dividends of $0.28 per common share and per limited partnership unit for the second quarter ended June 30, 2016. The common share dividend and OP Unit distribution were paid July 15, 2016 to holders of record as of June 30, 2016.

2016 Outlook

The Company is updating its operating and financial expectations for 2016 to reflect the sale of seven New York City hotels to Cindat, and the simultaneous formation of the Cindat joint venture, the issuance of the 6.5% Series D Preferred Shares, the disposition of the Hyatt Place in King of Prussia, PA, the planned disposition of two suburban Boston hotels, the acquisition of the Envoy Hotel in Boston, in addition to the Company’s current view of operating and economic fundamentals. The Company’s updated outlook does not build in any additional acquisitions, dispositions or capital market activities for 2016. Based on management’s current outlook and assumptions, the Company’s updated full-year 2016 operating expectations are as follows:

Previous 2016 Outlook Updated 2016 Outlook ($’s in millions except per share amounts) Low High Low High Net income $20.0 $30.0 $99.0 $105.0 Net income per share $0.44 $0.67 $2.27 $2.41 Comparable Property RevPAR Growth 4.0% 6.0% 2.5% 3.5% Comparable Property EBITDA Margin Growth 50 bps 75 bps 40 bps 60 bps Adjusted EBITDA $175.0 $185.0 $171.0 $177.0 Adjusted FFO $117.0 $127.0 $109.0 $115.0 Adjusted FFO per share $2.48 $2.69 $2.38 $2.51

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