Hersha Announces 1Q 2009 Earnings

Consolidated Hotel RevPAR decreased 19.9% - Same Store Consolidated Hotel RevPAR decreased 20.0%

. May 07, 2009

MAY 7, 2009 - Hersha Hospitality Trust (NYSE: HT), owner of select service and upscale hotels in major metropolitan markets, today announced earnings for the first quarter ended March 31,2009. Summary financial results for the quarter are as follows:

Consolidated Hotel RevPAR decreased 19.9% -
Same Store Consolidated Hotel RevPAR decreased 20.0% -
Adjusted Funds from Operations ('AFFO') was $1.2 million -
Adjusted EBITDA from Operations was $14.7 million -
Modifies Outlook for 2009 -

Financial Results

For the first quarter ending March 31, 2009, AFFO was $1.2 million, compared to $7.2 million in the first quarter of 2008. AFFO per diluted common share and unit was $0.02 compared to $0.15 for the same quarter of 2008.

Net loss applicable to common shareholders was ($9.8) million, or ($0.21) per common share, compared to ($4.1) million, or ($0.10) per common share for the first quarter of 2008. A reconciliation of AFFO and Adjusted EBITDA to net income applicable to common shares, the most directly applicable U.S. GAAP measure, is included at the end of this release.

'The unprecedented economic turmoil combined with extremely difficult year over year comparisons resulted in a challenging quarter for the Company,' stated Mr. Jay H. Shah, Hersha Hospitality's Chief Executive Officer. 'While our first quarter results are not reflective of what we expect for the remainder of the year, this normal seasonality combined with revenue declines due to economic conditions, eroded operating margins for the quarter. Due to the normal seasonality of our business, the first quarter historically accounts for less than 15% of the Company's annual revenues. We anticipate improvement in hotel operating margins as we move into the stronger seasonal quarters for the northeast and we recognize the benefits of our expense control measures for the remainder of the year. To that end, we are pleased that our latest cost containment programs implemented late in the first quarter, combined with higher revenues as the quarter progressed due to seasonality, resulted in a meaningful margin improvement of more than 200 basis points in March as compared to January and February.'

Jay H. Shah concluded, 'In the current market, we are focused on gaining share, aggressively managing property-level expenses and driving margins. Although, we anticipate that operating fundamentals will remain difficult and we continue to operate with limited visibility, we are pleased that we are starting to see the demand trends in our markets stabilizing. In April, we achieved over 90% occupancy in New York and over 80% in Boston and Washington. Our resilient portfolio and a balance sheet that has manageable debt maturities through 2012, positions us well to deliver profitable growth over the long-term.'

Operating Results

Total consolidated hotel operating revenues were $45.1 million for the quarter ended March 31, 2009, compared to $51.9 million in 2008. This decrease was primarily driven by the impact of the challenging economic environment, along with difficult comparisons to the first quarter of 2008. The first quarter of 2008 was one of the strongest in the Company's history with total consolidated hotel operating revenues up 15.9% from the first quarter of 2007.

Revenue per available room ('RevPAR') for the Company's consolidated hotels (61 hotels) was $68.47 for the quarter ended March 31, 2009 compared to $85.46 in the prior year period. The decline was a result of an average daily rate ('ADR') decrease of 8.5% to $119.00 and an 8.1% decline in occupancy to 57.54%.

On a regional basis, during the first quarter of 2009, the Company's New York properties (which historically have accounted for approximately 35% of the Company's EBITDA) underperformed the rest of the portfolio. The decline was primarily due to the difficult economic environment in that region and challenging year over year comparisons which ease as the year progresses. Same- store RevPAR for the Company's New York City hotels declined 31.4% from the prior year first quarter, driven by an ADR decrease of 22.6% and a 9.8% decline in occupancy. This decrease compares to a record first quarter RevPAR growth of 19.4% in 2008.

Hotel earnings before interest, taxes, depreciation, and amortization ('Hotel EBITDA') for Hersha's consolidated hotels was $11.1 million for the quarter ended March 31, 2009 compared to $16.2 million for the same period in 2008. Hotel EBITDA margin was 24.5% for the quarter ended March 31, 2009 compared to 31.2% for the quarter ended March 31, 2008. The margin deterioration was primarily related to the decline in revenues in the quarter and the resulting loss of operating leverage.

The seasonal nature of the Company's revenues limited its ability to control operating margins in the first quarter. During the first quarter, the Company implemented staffing, sales and marketing, and purchasing changes to achieve a higher level of operating efficiencies from its hotel operations. The Company anticipates these changes will start to contribute to operating margin improvement starting in the second quarter of 2009. The Company's operating margins are forecasted to improve as the year progresses from the benefit from these cost savings, along with anticipated stronger revenues in the second through fourth quarters due to the seasonality of revenues in the Company's core Northeast markets.

On a same-store basis for Hersha's consolidated hotels (55 hotels), RevPAR was $68.02 for the quarter ended March 31, 2009 compared to $85.01 in the prior year period. The decline was a result of an ADR decrease of 8.9% to $117.76 and an 8.0% decline in occupancy.

Same-store consolidated Hotel EBITDA for the quarter ended March 31, 2009 was $10.2 million compared to $16.2 million for the quarter ended March 31, 2008. The Company's same-store Hotel EBITDA margin was 25.0% in the first quarter of 2009 compared to 31.5% in the first quarter of 2008.

Balance Sheet

At March 31, 2009, Hersha Hospitality Trust had approximately $759.5 million of total consolidated debt outstanding, which included approximately $51.5 million of trust preferred securities and $105.3 million outstanding on the Company's line of credit. Fixed rate debt, including variable rate debt fixed by an interest rate swap, amounted to approximately 79.1% of total consolidated debt. For the first quarter of 2009, the weighted average interest rate on all of the Company's fixed and floating rate debt was approximately 6.1% and 3.45%, respectively. The weighted average life to maturity of the Company's debt, excluding the line of credit, was approximately 7.7 years. Total common shares and units of limited partnership interest of Hersha Hospitality Limited Partnership outstanding at March 31, 2009 were approximately 48.3 million and 8.8 million, respectively.

Financial Outlook for 2009

The Company is adjusting its financial guidance for full-year 2009. The outlook assumes that operating conditions remain challenging for the remainder of the year but also assumes that the overall economy performs better in the second half of the year.

Based on those expectations, the Company is providing the following set of assumptions for the portfolio in 2009:

-RevPAR is forecasted to decline by 14.0% to 20.0%, compared to the prior expected decline of 12.0% to 15.0%. In terms of quarterly progression, the Company expects that the first half of 2009 will experience RevPAR declines in the mid to high teen range, and moderate in the third and fourth quarters.

-Operating margin deterioration of 200 basis points to 400 basis points.

-2009 results will reflect full year operational results for the six assets purchased in 2008 and the stabilization of assets opened and purchased in 2007.

Dividend

For the second quarter of 2009, Hersha Hospitality Trust declared dividends of $0.05 per common share and limited partnership unit. The Board of Trustees also declared a second quarter cash dividend of $0.50 per Series A Preferred Share.

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