Royco Hotels Adds Management Depth

Also Adds New Systems in Response to Growth From Largest Client Supertel

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. October 14, 2008

NORFOLK, NE, December 13, 2007. Royco Hotels, one of North America's largest independent hotel management companies, today announced that it had added significant depth to its management team and is introducing a number of cutting-edge operating systems to accommodate the company's recent rapid growth and to provide a robust platform for future expansion.

"We have nearly doubled our managed portfolio in the past 12 months, due primarily to an upsurge in acquisitions in the limited-service and extended-stay hotel segments by our largest client, Supertel Hospitality, Inc. (NASDAQ: SPPR)," said Terry Royer, Royco's co-founder and executive chairman. "We expect to have the upgraded operating platform fully functional in early 2008, which will provide us with the capacity to complete the absorption of our recent growth and manage our expected growth over the next several years."

Royer said the company added management bench strength in the past few months by promoting two executives from within and adding four experienced senior executives in operations and marketing. Royco created a new business unit focused solely on the extended-stay hotel segment and hired a seasoned operations director to oversee the current extended-stay portfolio and expected future growth. In addition, the company brought in a new regional operations director for its limited-service properties, bringing to six the number of regional directors in the company's infrastructure. Royco increased its marketing expertise with the addition of an experienced marketing manager who will focus on revenue management and e-marketing. Combined, the seven newly hired and promoted executives have more than 130 years of hotel operating expertise.

"We now have the size and economies of scale to create or tailor highly sophisticated operating systems to support our portfolio's current and future needs," he said. "We are in the final testing of a cutting-edge payroll management system that will allow us to track manpower utilization in real time across hundreds of hotels. While we have reduced labor cost as a percent of revenue in each of the last three years, this new system promises even greater control over labor efficiency.

"Labor is the most controllable cost for a limited-service property," he said. "With our new payroll management system, we have real-time access to labor utilization metrics. This level of sophistication gives us a much better and faster handle on these expenses, which allows us to respond promptly to address any inappropriate variations to budget."

The company also has expanded its extensive training program with more on-line training. "We have augmented our brands' training systems with our own proprietary systems and procedures. As a result, we are able to train and get our key staff up to speed much more quickly.

"Historically, employee turnover in the hotel industry has always been high, but with the strong economy for the past 18 months, attracting, training and retaining qualified people has become even more difficult, especially for property-level management positions," he noted. "The combination of brand training, our GM training and proprietary on-line training provides faster ramp-up for property-level management and allows the managers to become productive quickly, while developing greater bench strength at the property level. Combined with our culture of communication and inclusion, we have built an extensive support system to support recruitment and retention.

Royer noted that he expects the company to begin to reap the benefits of the management team expansion and implementation of the new systems as early as the 2008 first quarter. "Based on our testing, we anticipate it will take four to eight weeks to fully implement the payroll program across our managed portfolio. We expect it and other proprietary programs recently implemented or under review to expand our properties' competitive advantage, especially in secondary and tertiary markets where we typically compete against local, smaller operators who do not have the resources for this type of technology and systems."