Interstate Reports 4th Qtr Net Income of $7.2 mil

Incentive Management Fees Up 40.2% tistics

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. October 14, 2008

ARLINGTON, VA, February 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.

Highlights:

-- 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."