First Quarter 2002 Results
Comparing the operating results of the Candlewood hotels owned, leased and managed by the Company for the first quarter of 2002, occupancy increased to 72.6%, compared to 71.1% in the first quarter of 2001. Revenue per available room (RevPAR) was $40.72, a decrease of 7.4 % from $43.97 in the first quarter of 2001. The decline in RevPAR was primarily attributable to the decrease in average daily rate (ADR) to $56.06 from $61.89 in the first quarter of 2001, as corporate business travel has been slow to recover.

"We continue to feel positive with regard to our operating results for the quarter when compared to the industry averages, even though we experienced a modest decline in operating results for the first quarter of 2002," commented Jack P. DeBoer, chairman and chief executive officer. "Our 7.4 % decline in RevPAR for the first quarter of 2002 compares favorably when measured against our key competitors and the estimated overall industry decline of between 10 - 11 %. In adapting to the slowdown in transient business travel, we have experienced a reduction in ADR, but have focused on our strategy of increasing market share and RevPAR, and are pleased to report a continuation of improvement in our occupancy rates, primarily due to our direct sales efforts."

Hotel operations revenue for the three-month period ended March 31, 2002 was $30.0 million compared with $31.2 million for the same period in 2001. Income from hotel operations (hotel operating revenues less hotel and related corporate operating expenses and hotel opening costs) was $9.8 million for the first quarter of 2002, compared with $12.4 million for the comparable period in 2001.

The Company reported a one-time $8.6 million asset impairment expense in the 2002 first quarter, as part of the previously announced sale-leaseback transaction with Hospitality Properties Trust (HPT).  The hotels will be operated by Candlewood pursuant to a long-term lease whose initial term expires in 2018, and provides for three 14-year extensions. Loss before preferred dividends was $11.7 million for the three months ended March 31, 2002, compared with a loss of $741,000 for the same time period in 2001. Excluding the $8.6 million one-time impairment charge, net loss before preferred dividends was $3.1 million, or $0.34 per basic share for the quarter ended March 31, 2002. This increase in net loss over the prior year comparable period was primarily attributable to three factors: the one-time impairment charge of $8.6 million in accordance with GAAP; the decline in ADR; and increased resources allocated to sales and marketing efforts, which were partially offset by the reduction in corporate operating expenses.

In the first quarter, one franchised hotel opened and construction began on two franchised hotels. In addition, during the quarter the Company acquired a Candlewood hotel located in San Antonio, Texas. This hotel was previously owned by a franchisee.

Financial Position
Since the close of the first quarter, the company has consummated a sale- leaseback transaction with Hospitality Properties Trust for 21 Candlewood Hotels, refinanced its remaining mortgage debt with GMAC-Commercial Mortgage and repaid outstanding indebtedness owed to Doubletree Corporation. Commenting on the financial position and recent transactions, Warren D. Fix, the Company's Chief Financial Officer, said, "We were very pleased to have completed this sale-leaseback and refinancing. The 21 hotels sold to HPT were combined into a master lease with the 36 Candlewood properties that HPT had previously acquired and leased back to the Company. 

With the proceeds from the sale-leaseback and concurrent refinancing, we have reduced our debt from $191.5 million at December 31, 2001 to $59 million today, and extended the maturities to 2006. By strengthening our balance sheet we now have greater financial flexibility, enabling us to focus on our strategy of growing RevPAR."
 

                          CANDLEWOOD HOTEL COMPANY, INC.
                         FIRST QUARTER OPERATING RESULTS
           (Unaudited) (In thousands, except share and per share data)

                                                  For the three-months ended
                                                            March 31,
                                                      2002              2001
    Revenues:
    Hotel operations                                $29,976           $31,184
    Other income                                        456               677
       Total hotel operating revenues                30,432            31,861
    Deferred gain recognition on sales of
     hotels                                             283               346
       Total revenues                                30,715            32,207

    Operating costs and expenses:
    Hotel operating expenses                         19,202            17,875
    Corporate operating expenses                      1,442             1,509
    Rent expense on leased hotels                     7,174             6,326
    Hotel opening costs                                 -                  98
    Depreciation and amortization                     2,669             2,777
    Impairment loss on assets held for sale           8,604               -
       Total operating costs and expenses            39,091            28,585
                                                     (8,376)            3,622

    Interest income                                      93               247
    Interest expense                                 (3,428)           (4,610)
       Loss before preferred dividends              (11,711)             (741)

    Preferred stock dividends                        (1,979)           (1,979)
       Net loss available to common
        stockholders                                (13,690)           (2,720)

    Per share data:
       Net loss per share of common stock
        - basic and diluted                          $(1.52)           $(0.30)

       Average weighted shares of common
        stock outstanding                             9,025             9,025
 

                          CANDLEWOOD HOTEL COMPANY, INC.

                                                   For the three-months ended
                                                             March 31,
                                                       2002              2001
    Hotel statistics (Candlewood owned,
     leased or managed)
          # of Hotels                                    78                75
          Average occupancy %                         72.6%             71.1%
          Average daily rate                         $56.06            $61.89
          Revenue per available room                 $40.72            $43.97
            Growth                                    -7.4%

    Hotel statistics - comparable hotels
     (owned, leased or managed open as of beginning
      of period)
          # of Hotels                                    73                73
          Average occupancy %                         72.8%             71.4%
          Average daily rate                         $54.71            $61.80
          Revenue per available room                 $39.81            $44.12
            Growth                                    -9.8%
 

                                                            As of March 31,
                                                        2002              2001
    Open Hotels
          Owned                                          32                32
          Leased                                         36                34
          Managed (A)                                     2                 2
          Joint Venture                                   9                 8
          Franchised                                     27                19
            Total Open                                  106                95

    Under Construction
          Owned                                         -                   1
          Leased                                        -                 -
          Managed                                       -                 -
          Joint Venture                                 -                   1
          Franchised                                      4                 7
            Total Under Construction                      4                 9

          Total Hotels                                  110               104

    Open Rooms
          Owned                                       3,896             3,971
          Leased                                      4,292             3,893
          Managed (A)                                   203               179
          Joint Venture                               1,159             1,035
          Franchised                                  2,749             2,110
            Total Open                               12,299            11,188

    Under Construction Rooms
          Owned                                         -                 214
          Leased                                        -                 -
          Managed                                       -                 -
          Joint Venture                                 -                 124
          Franchised                                    365               668
            Total Under Construction                    365             1,006

          Total Rooms                                12,664            12,194

    Signed Franchise Agreements                          22                24
 

    (A) Includes two managed hotels not under the Candlewood brand.

SOURCE: Candlewood Hotel Company, Inc.

Candlewood Hotel Company, headquartered in Wichita, Kansas, owns, operates and franchises Candlewood Suites and Cambridge Suites -- hotel properties that offer high-quality accommodations for all guests, while catering to mid-market and upscale business and personal travelers seeking multiple night stays. Jack DeBoer, Chairman and CEO and founder of Residence Inn, started Candlewood Hotel Company in late 1995.

The financial results may not be indicative of results for future periods. 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 Candlewood Hotel Corporation filings with the Securities and Exchange Commission.