Supertel Hospitality Reports 2011 Fourth Quarter, Full-Year Results

Marketwired

NORFOLK, NE--(Marketwire -03/30/12)- Supertel Hospitality, Inc. (NASDAQ: SPPR - News), a real estate investment trust (REIT) which currently owns 98 hotels in 23 states, today announced its results for the fourth quarter and year ended December 31, 2011.

2011 Fourth Quarter and Full-Year Highlights

  • Funds from operations (FFO), adjusted EBITDA and earnings declined, reflecting a year of transition of management leading to a new equity investment.

  • Increased revenues from same store continuing operations 1.6 percent to $17.5 million in the fourth quarter and 0.7 percent for the full year.

  • Sold one hotel in the 2011 fourth quarter, bringing the full year's divestment transactions to six hotels, generating gross proceeds of $11.8 million.

  • Reduced mortgage debt five percent to $165.8 million by year-end.

  • Improved the continuing operations portfolio's 2011 fourth quarter Revenue per Available Room (RevPAR) by 1.9 percent and 0.9 percent for the full year.

  • Improved the continuing operations midscale portfolio's 2011 fourth quarter RevPAR by 5.9 percent and 1.0 percent for the full year. The midscale and upper-midscale segments play heavily into our future growth plans.

  • Transitioned our continuing operations hotel portfolio from one management company to three proven regional operators.

  • Relocated the company's corporate office to a more economical, leased office space.

  • Sourced $30 million in new equity capital through an investment by an IRSA Inversiones y Representaciones Sociedad Anónima (NYSE: IRS - News) affiliate that closed in February 2012.

Fourth Quarter Operating & Financial Results

Revenues from continuing operations for the 2011 fourth quarter rose $0.3 million, or 1.6 percent, to $17.5 million, compared to the same year-ago period, due primarily to the economic recovery. The company had a net loss attributable to common shareholders of $(8.6) million, $(0.37) per diluted share for the 2011 fourth quarter, compared to $(4.2) million, or $(0.18) per diluted share, for the same 2010 period. The portfolio of 76 continuing operations hotels in the 2011 fourth quarter posted a 1.9 percent improvement in RevPAR, compared with the same period a year earlier, led by a 5.3 percent increase in average daily rate (ADR) partially offset by a 3.2 percent decrease in occupancy.

Funds from operations (FFO) was $0.2 million, or $0.01 per diluted share, for the 2011 fourth quarter, compared to $0.4 million, or $0.02 per diluted share, in the same 2010 period.

Earnings before interest, taxes, depreciation and amortization, non-controlling interest and preferred stock dividends (Adjusted EBITDA) decreased to $(3.6) million, down $5.1 million from the 2010 fourth quarter.

"We have addressed multiple complex issues as we recreate the company," said Kelly Walters, Supertel's president and chief executive officer. "We have made significant progress and are confident that we are on the right path to improved shareholder returns. Metaphorically, we are out of the emergency room and in recovery. We're not yet at 100 percent of where we intend to be, but are well on the way."

 

                       Fourth Quarter 2011 vs Fourth Quarter 2010
            ----------------------------------------------------------------

                  RevPar ($)         Occupancy (%)            ADR ($)
            --------------------- ------------------- ----------------------
            Variance  2011   2010 Variance  2011 2010 Variance   2011   2010
            -------- ------ ----- -------- ----- ---- -------- ------- -----


Industry -
 Total US
 Market          7.9% 56.65 52.52      3.9% 55.5 53.4      3.9% 102.15 98.29
Supertel -
 Continuing
 Operations
 Portfolio       1.9% 29.04 28.51     -3.2% 57.8 59.7      5.3%  50.29 47.74

Chain Scale

Industry -
 Midscale        4.1% 34.76 33.40      3.4% 48.7 47.1      0.5%  71.33 70.95
Supertel -
 Midscale        5.9% 36.54 34.50     -0.2% 54.1 54.2      6.0%  67.49 63.64

Industry -
 Economy         6.2% 24.16 22.75      2.7% 49.2 47.9      3.4%  49.09 47.48
Supertel -
 Economy        -0.2% 28.25 28.31     -2.9% 56.7 58.4      2.7%  49.81 48.49

Industry -
 Extended
 Stay            N/A    N/A   N/A      N/A   N/A  N/A      N/A     N/A   N/A
Supertel -
 Extended
 Stay           -5.2% 16.20 17.08     -8.9% 67.9%74.5%     4.1%  23.87 22.92

Industry Source: STR Monthly Review

Midscale Hotels

Fourth quarter RevPAR for the company's 29 midscale continuing operations hotels increased 5.9 percent to $36.54. Occupancy declined 0.2 percent to 54.1 percent, while ADR rose six percent to $67.49.

Economy Hotels

RevPAR in the 2011 fourth quarter for the company's 40 economy hotels in continuing operations was essentially flat, a 0.2 percent decrease, to $28.25. Occupancy declined 2.9 percent to 56.7 percent, and ADR rose 2.7 percent to $49.81.

Extended-Stay Hotels

The company's seven extended-stay hotels in continuing operations reported a 5.2 percent decrease in RevPAR to $16.20, as a result of an 8.9 percent decline in occupancy to 67.9 percent, partially offset by a 4.1 percent increase in ADR to $23.87.

"Operationally, Supertel was a company in transition for most of 2011, as we shifted our entire portfolio to three, strong, new management companies from one central operator," Walters commented. "On balance, the transition occurred as expected. The change in operators was mildly disruptive to the peak summer season. This disruption played a major role in our results lagging behind the percentage increases in occupancy and RevPAR enjoyed by the industry during 2011. We anticipated this disruption, but are confident it was the right move strategically. Even with the transition, our midscale and economy properties continued to exceed their respective segments in occupancy and RevPAR. Entering 2012, we now have all the operating pieces in place and functioning smoothly to rebuild and restore the company to a position of strength."

Walters noted that the company aggressively increased room rate in the year. "The increase impacted our occupancy," Walters said. "We will continue to emphasize rate over occupancy, but will constantly tinker with the formula to optimize RevPAR and margins."

Property operating income (POI), an important operating measurement, is the revenue from room rentals and other hotel services less hotel and property operating expenses. For the 2011 fourth quarter, POI from continuing operations increased $0.1 million, or 1.9 percent, compared to the similar year-ago period.

 

                                     Three months          Twelve months
                                  ended December 31,    ended December 31,
                                 --------------------  --------------------
POI as a percentage of revenue
 from room rentals and other
 hotel services:                    2011       2010       2011       2010
                                 ---------  ---------  ---------  ---------
  Continuing operations               21.4%      21.3%      23.5%      24.3%
  Discontinued operations              2.8%       7.5%      11.7%      13.3%

"The discontinued operations portfolio continues to weigh on our overall operating results," Walters noted. "We continue to execute our plan of disposing of non-strategic, more mature assets. We would prefer to accelerate the speed of dispositions, but given the difficult financing environment, we are moving as rapidly as prudently possible. We have sold 25 properties since we initiated the plan in 2008. We will continue to dispose of underperforming properties and recycle the capital into newer, larger and well positioned brands, including Marriott and Hilton, that we believe, at this stage of our growth cycle, will have greater income durability and higher returns under the REIT investment model."

The company had a net loss of $(8.3) million for the 2011 fourth quarter, compared to a net loss of $(3.8) million for the same 2010 period. The 2011 fourth quarter loss includes a total non-cash impairment charge of $6.5 million, comprised of a $2.4 million non-cash impairment charge against assets classified as continuing operations (76 hotels at December 31, 2011), and $4.1 million of non-cash impairment charges recorded against assets classified as discontinued operations (24 hotels at December 31, 2011). This compares to $2.5 million of impairment charges recorded in the like 2010 period against assets classified as discontinued operations. All income and expenses related to sold hotels are classified as discontinued operations.

After recognition of non-controlling interest and dividends for preferred stock shareholders, net loss attributable to common shareholders was $(8.6) million, or $(0.37) per diluted share, for the 2011 fourth quarter, compared with a net loss attributable to common shareholders of $(4.2) million, or $(0.18) per diluted share, for the like 2010 period.

Full-Year Financial Results

Revenues from continuing operations for full-year 2011 increased 0.7 percent to $75.8 million.

The portfolio of 76 continuing operations hotels in 2011, compared with the same period a year earlier, reported a 0.9 percent rise in RevPAR as a result of a 3.8 percent increase in average daily rate (ADR) partially offset by a 2.9 percent decrease in occupancy.

For full-year 2011, the company recorded $14.3 million of impairment charges, including $5.8 million against discontinued operations hotels and $8.5 million against continuing operations properties.

Net loss attributable to common shareholders for 2011 was $(18.9) million, compared with a 2010 net loss attributable to common shareholders of $(12.1) million. FFO for the full year 2011 was $3.9 million, or $0.17 per diluted share, compared to $6.6 million, or $0.29 per diluted share, for the full year 2010.

Earnings before interest, taxes, depreciation and amortization, non-controlling interest and preferred stock dividends (Adjusted EBITDA) was $3.0 million for the full year 2011.

Disposition Program

During 2011 the company sold six hotels for approximately $11.8 million, resulting in a gain on sale of approximately $0.4 million. Proceeds were used primarily to strengthen the balance sheet by reducing debt. The sold properties included:

 

           -- Masters Inn           Atlanta (Tucker), GA     107 rooms
           -- Super 8               Wichita North, KS        59 rooms
           -- Tara Inn              Jonesboro, GA            127 rooms
           -- Masters Inn           Charleston, SC           119 rooms
           -- Masters Inn           Marietta, GA             87 rooms
           -- Masters Inn           Doraville, GA            88 rooms

Capital Reinvestment

During 2011, the company invested $5.0 million to upgrade its properties and maintain brand standards. "We expect to invest $7 million in improvements for our continuing operations hotels in 2012," he said. "Our goal is to maintain our properties in good, competitive condition, both to attract guests and to attract higher selling prices if they are reclassified as held for sale."

Balance Sheet

The company continued to improve its balance sheet strength and flexibility in 2011 through mortgage debt reduction, loan-term extensions, covenant modifications and obtaining new equity and debt.

As of December 31, 2011, Supertel had $131.3 million in outstanding debt on its continuing operations hotels with an average term of 3.5 years and weighted average annual interest rate of 6.37 percent.

"We have strengthened our balance sheet to the point where we are in a much better negotiating position and able to place debt with a longer time horizon," he said. "An added plus is that interest rates remain historically low. We have a $29.4 million loan coming due in late 2012 on 32 hotels, which we believe hold considerably more equity value. We are in the process of working with multiple mortgage bankers to procure replacement debt with more flexible terms which would allow us to monetize these assets more cost efficiently."

Subsequent Events

At a special meeting held on January 31, 2012, company shareholders approved a $30 million investment in the company by Real Estate Strategies L.P., an investment vehicle indirectly controlled by IRSA Inversiones y Representaciones Sociedad Anónima, an Argentina-based, publicly traded company.

Of the $30 million in new equity, $20 million will be used for future hotel acquisitions. The remaining funds will be used primarily to pay down existing mortgage debt, to cover transaction-related expenses and for general corporate purposes.

Dividends

The company did not declare a common stock dividend in 2011 or for the 2011 fourth quarter. Preferred dividends continued uninterrupted. The board of directors will continue to monitor the dividend policy on a quarterly basis.

Outlook 2012

"Supertel now is in a position to implement the next phase of its revitalization plan, which involves acquiring hotels that lay the foundation for transforming the company into a more stable, institutional grade REIT over the next few years," Walters said. "The recent infusion of equity by Real Estate Strategies will be deployed in an accretive and prudent manner. We believe that Supertel now is well positioned for the current stage of the economic recovery. We have the right management companies in place to execute our growth strategy.

"Our turn-around is not complete, but we believe we are poised on the threshold of a new era of growth and improved returns for our shareholders," Walters noted. "The economy in many of our current markets remains sluggish and is likely to continue to lag behind the economy as a whole. Nonetheless, we believe our continuing operations hotels are in a better position with our new operators to make meaningful improvements in RevPAR in 2012.

"We have the strongest balance sheet and the greatest flexibility to control our destiny than at any time in the past four years," he added. "Over time, our goal is to build a new portfolio of higher quality assets that have greater upside potential and much better defensive characteristics against future downturn in the economy.

"Hotel industry results continue to improve and forecasters called for steady, positive growth over the next few years. New supply remains at very low levels, which will play a major role in our ability to improve occupancy and room rate in the months ahead," he said. "We have executed our new business plan in extraordinary economic times and we now are stronger and more confident than at any time since the beginning of the recession. We look forward to making continued positive strides in 2012."

About Supertel Hospitality, Inc.

As of March 30, 2012, Supertel Hospitality, Inc. (NASDAQ: SPPR - News) owned 98 hotels comprising 8,622 rooms in 23 states. The company focuses primarily on the limited-service hotel segment, which does not offer food and beverage service. The company's hotel portfolio includes Baymont Inn, Comfort Inn/Comfort Suites, Days Inn, Guest House Inn, Hampton Inn, Holiday Inn Express, Key West Inns, Masters Inn, Quality Inn, Ramada Limited, Savannah Suites, Sleep Inn, Super 8 and Supertel Inn. For more information or to make a hotel reservation, visit www.supertelinc.com.

Certain matters within this press release are discussed using forward-looking language as specified in the Private Securities Litigation Reform Act of 1995, and, as such, may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statement. These risks are discussed in the company's filings with the Securities and Exchange Commission.

SELECTED FINANCIAL DATA:

The following table sets forth the company's balance sheet as of December 31, 2011 and 2010. The company owned 100 hotels (including 24 hotels in discontinued operations) at December 31, 2011, and 106 hotels as of December 31, 2010, respectively (in thousands, except share and per share data).

 

                                                            As of
                                                 December 31,  December 31,
                                                     2011          2010
                                                 ------------  ------------


ASSETS
  Investments in hotel properties                $    255,471  $    268,107
  Less accumulated depreciation                        79,236        77,719
                                                 ------------  ------------
                                                      176,235       190,388

  Cash and cash equivalents                               279           333
  Accounts receivable, net of allowance for
   doubtful accounts of $194 and $133                   1,891         1,717
  Prepaid expenses and other assets                     8,917        13,372
  Deferred financing costs, net                           850           988
  Investment in hotel properties, held for sale,
   net                                                 33,000        49,846
                                                 ------------  ------------

                                                 $    221,172  $    256,644
                                                 ============  ============

LIABILITIES AND EQUITY
LIABILITIES
  Accounts payable, accrued expenses and other
   liabilities                                   $     10,704  $     17,732
  Debt related to hotel properties held for sale       34,500        42,739
  Long-term debt                                      131,345       132,271
                                                 ------------  ------------
                                                      176,549       192,742
                                                 ------------  ------------

  Redeemable noncontrolling interest in
   consolidated partnership, at redemption value          114           511

  Redeemable preferred stock 10% Series B,
   800,000 shares authorized; $.01 par value,
   332,500 shares outstanding, liquidation
   preference of $8,312                                 7,662         7,662

EQUITY
  Preferred stock, 40,000,000 shares authorized;
   8% Series A, 2,500,000 shares authorized,
   $.01 par value, 803,270 shares outstanding,
   liquidation preference of $8,033                         8             8
  Common stock, $.01 par value, 100,000,000
   shares authorized; 23,070,387 and 22,917,509
   shares outstanding                                     231           229
  Common stock warrants                                   252           252
  Additional paid-in capital                          121,619       121,384
  Distributions in excess of retained earnings        (85,398)      (66,479)
                                                 ------------  ------------
      Total shareholders' equity                       36,712        55,394
  Noncontrolling interest
    Noncontrolling interest in consolidated
     partnership, redemption value $64 and $250           135           335

                                                 ------------  ------------
      Total equity                                     36,847        55,729
                                                 ------------  ------------

                                                 $    221,172  $    256,644
                                                 ============  ============


The following table sets forth the company's results of operations for the three and 12 months ended December 31, 2011 and 2010, respectively (in thousands, except per share data).

 

                                  Three months            Twelve months
                               ended December 31,      ended December 31,
                             ----------------------  ----------------------

                                2011        2010        2011        2010
                             ----------  ----------  ----------  ----------
REVENUES
  Room rentals and other
   hotel services            $   17,530  $   17,262  $   75,827  $   75,300
                             ----------  ----------  ----------  ----------

EXPENSES
  Hotel and property
   operations                    13,787      13,589      58,039      57,005
  Depreciation and
   amortization                   2,181       2,392       8,825       9,970
  General and administrative        997         861       4,008       3,443
                             ----------  ----------  ----------  ----------
                                 16,965      16,842      70,872      70,418
                             ----------  ----------  ----------  ----------

EARNINGS BEFORE NET GAINS
 (LOSS) ON DISPOSITIONS OF
 ASSETS, OTHER INCOME,
 INTEREST EXPENSE, AND
 INCOME TAXES                       565         420       4,955       4,882

Net gain (loss) on
 dispositions of assets              (1)        (11)      1,129         (66)
Other income                          -          30         107         122
Interest expense                 (2,177)     (2,301)     (8,685)     (8,894)
Impairment                       (2,396)          -      (8,545)     (2,147)
Termination cost                      -           -        (540)          -

LOSS FROM CONTINUING
 OPERATIONS BEFORE INCOME
 TAXES                           (4,009)     (1,862)    (11,579)     (6,103)

Income tax benefit                  288         320         638         472
                             ----------  ----------  ----------  ----------

LOSS FROM CONTINUING
 OPERATIONS                      (3,721)     (1,542)    (10,941)     (5,631)

Loss from discontinued
 operations, net of tax          (4,529)     (2,277)     (6,536)     (4,971)
                             ----------  ----------  ----------  ----------

NET LOSS                         (8,250)     (3,819)    (17,477)    (10,602)

Noncontrolling interest              26          12          32          17
                             ----------  ----------  ----------  ----------

NET LOSS ATTRIBUTABLE TO
 CONTROLLING INTERESTS           (8,224)     (3,807)    (17,445)    (10,585)

Preferred stock dividend           (368)       (369)     (1,474)     (1,474)


                             ----------  ----------  ----------  ----------
NET LOSS ATTRIBUTABLE TO
 COMMON SHAREHOLDERS         $   (8,592) $   (4,176) $  (18,919) $  (12,059)
                             ==========  ==========  ==========  ==========

NET LOSS PER COMMON SHARE -
 BASIC AND DILUTED:
EPS from continuing
 operations                  $    (0.17) $    (0.08) $    (0.54) $    (0.31)
                             ==========  ==========  ==========  ==========
EPS from discontinued
 operations                  $    (0.20) $    (0.10) $    (0.28) $    (0.22)
                             ==========  ==========  ==========  ==========
EPS Basic and Diluted        $    (0.37) $    (0.18) $    (0.82) $    (0.53)
                             ==========  ==========  ==========  ==========



RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

In thousands, except per share data:
                                     Three months          Twelve months
                                  ended December 31,    ended December 31,
                                 --------------------  --------------------

                                    2011       2010       2011       2010
                                 ---------  ---------  ---------  ---------
Weighted average shares
 outstanding for: calculation of
 FFO per share - basic and
 diluted                            23,023     22,918     22,978     22,556

Reconciliation of net loss to
 FFO
Net loss available to common
 shareholders                    $  (8,592) $  (4,176) $ (18,919) $ (12,059)
Depreciation and amortization        2,313      2,748      9,996     11,708
Net (gains) losses on
 disposition of assets                   9       (763)    (1,452)    (1,276)
Impairment                           6,485      2,549     14,308      8,198
                                 ---------  ---------  ---------  ---------
FFO                              $     215  $     358  $   3,933  $   6,571
                                 =========  =========  =========  =========

FFO per share - basic and
 diluted                         $    0.01  $    0.02  $    0.17  $    0.29
                                 =========  =========  =========  =========

FFO is a non-GAAP financial measure. We consider FFO to be a market accepted measure of an equity REIT's operating performance, which is necessary, along with net earnings (loss), for an understanding of our operating results. FFO, as defined under the National Association of Real Estate Investment Trusts (NAREIT) standards, consists of net income computed in accordance with GAAP, excluding gains (or losses) from sales of real estate assets, plus depreciation and amortization of real estate assets. Additionally, in October and November 2011, NAREIT issued guidance reaffirming its view that impairment write-downs of depreciable real estate should be excluded from the computation of FFO. We believe our method of calculating FFO complies with the NAREIT definition. FFO does not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties. FFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) or as an indicator of our liquidity nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. All REITs do not calculate FFO in the same manner; therefore, our calculation may not be the same as the calculation of FFO for similar REITs.

We use FFO as a performance measure to facilitate a periodic evaluation of our operating results relative to those of our peers, who, like us, are typically members of NAREIT. We consider FFO a meaningful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assume that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful indication of our performance.

 

                                     Three months          Twelve months
                                  ended December 31,    ended December 31,
                                 --------------------  --------------------
                                    2011       2010       2011       2010
                                 ---------  ---------  ---------  ---------
RECONCILIATION OF NET LOSS TO
 ADJUSTED EBITDA
Net loss attributable to common
 shareholders                    $  (8,592) $  (4,176) $ (18,919) $ (12,059)
Interest expense, including
 discontinued operations             2,975      3,083     12,402     12,224
Income tax benefit, including
 discontinued operations              (665)      (556)    (1,904)    (1,757)
Depreciation and amortization,
 including discontinued
 operations                          2,313      2,748      9,996     11,708
                                 ---------  ---------  ---------  ---------
  EBITDA                            (3,969)     1,099      1,575     10,116
Noncontrolling interest                (26)       (12)       (32)       (17)
Preferred stock dividend               368        369      1,474      1,474
                                 ---------  ---------  ---------  ---------
  Adjusted EBITDA                $  (3,627) $   1,456  $   3,017  $  11,573
                                 =========  =========  =========  =========

Adjusted EBITDA is a financial measure that is not calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We calculate Adjusted EBITDA by adding back to net earnings (loss) available to common shareholders certain non-operating expenses and non-cash charges which are based on historical cost accounting, and we believe may be of limited significance in evaluating current performance. We believe these adjustments can help eliminate the accounting effects of depreciation and amortization and financing decisions and facilitate comparisons of core operating profitability between periods, even though Adjusted EBITDA also does not represent an amount that accrues directly to common shareholders. In calculating Adjusted EBITDA, we also add back preferred stock dividends and noncontrolling interests, which are cash charges.

Adjusted EBITDA doesn't represent cash generated from operating activities determined by GAAP and should not be considered as an alternative to net income, cash flow from operations or any other operating performance measure prescribed by GAAP. Adjusted EBITDA is not a measure of our liquidity, nor is Adjusted EBITDA indicative of funds available to fund our cash needs, including our ability to make cash distributions. Neither does the measurement reflect cash expenditures for long-term assets and other items that have been and will be incurred. Adjusted EBITDA may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. To compensate for this, management considers the impact of these excluded items to the extent they are material to operating decisions or the evaluation of our operating performance. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.

The following table sets forth the operations of the company's same store hotel properties for the three and twelve months ended December 31, 2011 and 2010, respectively.

 

                                        Three months        Twelve months
                                     ended December 31,  ended December 31,
                                     ------------------  ------------------
                                       2011      2010      2011      2010
                                     --------  --------  --------  --------
Same Store:
  Revenue per available room
   (RevPAR):
    Midscale                         $  36.54  $  34.50  $  39.65  $  39.24
    Economy                          $  28.25  $  28.31  $  31.13  $  30.79
    Extended Stay                    $  16.20  $  17.08  $  17.14  $  17.41
      Total                          $  29.04  $  28.51  $  31.67  $  31.40
                                     ========  ========  ========  ========

  Average daily room rate (ADR):
    Midscale                         $  67.49  $  63.64  $  67.49  $  64.98
    Economy                          $  49.81  $  48.49  $  50.02  $  48.20
    Extended Stay                    $  23.87  $  22.92  $  23.79  $  23.21
      Total                          $  50.29  $  47.74  $  50.49  $  48.62
                                     ========  ========  ========  ========

  Occupancy percentage:
    Midscale                             54.1%     54.2%     58.8%     60.4%
    Economy                              56.7%     58.4%     62.2%     63.9%
    Extended Stay                        67.9%     74.5%     72.0%     75.0%
      Total                              57.8%     59.7%     62.7%     64.6%
                                     ========  ========  ========  ========

This presentation includes non-GAAP financial measures. The company believes that the presentation of hotel property operating income (POI) is helpful to investors, and represents a more useful description of its core operations, as it better communicates the comparability of its hotels' operating results.

 

In thousands, except statistical
 data:                               Three months          Twelve months
                                  ended December 31,    ended December 31,
                                 --------------------  --------------------
Continuing Operations               2011       2010       2011       2010
                                 ---------  ---------  ---------  ---------
Total Hotels:
  Revenue per available room
   (RevPAR):                     $   29.04  $   28.51  $   31.67  $   31.40
  Average daily room rate (ADR): $   50.29  $   47.74  $   50.49  $   48.62
  Occupancy percentage:               57.8%      59.7%      62.7%      64.6%

Revenue from room rentals and
 other hotel services consists
 of:
  Room rental revenue            $  16,986  $  16,675  $  73,476  $  72,869
  Telephone revenue                     73         68        295        295
  Other hotel service revenues         471        519      2,056      2,136
                                 ---------  ---------  ---------  ---------
Total revenue from room rentals
 and other hotel services        $  17,530  $  17,262  $  75,827  $  75,300
                                 =========  =========  =========  =========


Hotel and property operations
 expense
  Total hotel and property
   continuing operations expense $  13,787  $  13,589  $  58,039  $  57,005
                                 =========  =========  =========  =========

Property Operating Income
 ("POI")
  Total property continuing
   operating income              $   3,743  $   3,673  $  17,788  $  18,295
                                 =========  =========  =========  =========

POI as a percentage of revenue
 from room rentals and other
 hotel services - continuing
 operations
  Total POI as a percentage of
   continuing operations revenue      21.4%      21.3%      23.5%      24.3%
                                 =========  =========  =========  =========
Same Store reflects 76 hotels

Discontinued Operations:

Room rentals and other hotel
 services
  Total room rental and other
   hotel services - discontinued
   operations                    $   4,305  $   5,615  $  22,080  $  27,080
                                 =========  =========  =========  =========

Hotel and property operations
 expense
  Total hotel and property
   operations expense -
   discontinued operations       $   4,184  $   5,193  $  19,504  $  23,488
                                 =========  =========  =========  =========

POI
  Total property operating
   income - discontinued
   operations                    $     121  $     422  $   2,576  $   3,592
                                 =========  =========  =========  =========

POI as a percentage of revenue
 from room rentals and other
 hotel services - discontinued
 operations
  Total POI as a percentage of
   revenue                             2.8%       7.5%      11.7%      13.3%
                                 =========  =========  =========  =========




 




Reconciliation of net loss to
 POI:                                Three months          Twelve months
                                  ended December 31,    ended December 31,
                                 --------------------  --------------------
                                    2011       2010       2011       2010
                                 ---------  ---------  ---------  ---------
Net loss                         $  (8,250) $  (3,819) $ (17,477) $ (10,602)
Depreciation and amortization,
 including discontinued
 operations                          2,313      2,748      9,996     11,708
Net gain on disposition of
 assets, including discontinued
 operations                              9       (763)    (1,452)    (1,276)
Other income                             -        (30)      (107)      (122)
Interest expense, including
 discontinued operations             2,975      3,083     12,402     12,224
General and administrative
 expense                               997        883      4,058      3,514
Impairment losses                    6,485      2,549     14,308      8,198
Termination cost                         -          -        540          -
Income tax benefit, including
 discontinued operations              (665)      (556)    (1,904)    (1,757)
Room rentals and other hotel
 services - discontinued
 operations                         (4,305)    (5,615)   (22,080)   (27,080)
Hotel and property operations
 expense - discontinued
 operations                          4,184      5,193     19,504     23,488
                                 ---------  ---------  ---------  ---------
POI--continuing operations       $   3,743  $   3,673  $  17,788  $  18,295
                                 =========  =========  =========  =========



Reconciliation of loss from
 discontinued operations to POI
 - discontinued operations:          Three months          Twelve months
                                  ended December 31,    ended December 31,
                                    2011       2010       2011       2010
                                 ---------  ---------  ---------  ---------
Loss from discontinued
 operations                      $  (4,529) $  (2,277) $  (6,536) $  (4,971)
Depreciation and amortization
 from discontinued operations          132        356      1,171      1,738
Net gain on disposition of
 assets from discontinued
 operations                              8       (774)      (323)    (1,342)
Interest expense from
 discontinued operations               798        782      3,717      3,330
General and administrative
 expense from discontinued
 operations                              -         22         50         71
Impairment losses from
 discontinued operations             4,089      2,549      5,763      6,051
Income tax benefit from
 discontinued operations              (377)      (236)    (1,266)    (1,285)
                                 ---------  ---------  ---------  ---------
POI--discontinued operations     $     121  $     422  $   2,576  $   3,592
                                 =========  =========  =========  =========

Same Store reflects 76 hotels in continuing operations for the three months and year to date ended December 31, 2011 and 2010.

The following table presents our RevPAR, ADR and occupancy, by region, for the three months ended December 31, 2011 and 2010, respectively. The comparisons of same store operations are for 76 hotels in continuing operations as of October 1, 2010.

 

                     Three months ended               Three months ended
                      December 31, 2011                December 31, 2010
                 --------------------------       --------------------------
Same Store
            Room                             Room
Region      Count  RevPAR Occupancy   ADR    Count  RevPAR Occupancy   ADR
           -------------------------------- --------------------------------
Mountain      214  $ 25.37    52.5% $ 48.31    214  $ 22.96    48.7% $ 47.18
West North
 Central    1,780    28.42    57.3%   49.61  1,780    27.76    57.7%   48.07
East North
 Central      978    33.09    50.2%   65.94    978    32.50    54.9%   59.24
Middle
 Atlantic     142    44.12    78.1%   56.52    142    41.33    72.9%   56.72
South
 Atlantic   2,369    26.72    62.3%   42.91  2,369    26.05    64.5%   40.37
East South
 Central      677    32.52    52.1%   62.35    677    31.71    51.6%   61.41
West South
 Central      197    23.56    55.5%   42.49    197    30.89    74.2%   41.62
           -------------------------------- --------------------------------
Total Same
 Store      6,357  $ 29.04    57.8% $ 50.29  6,357  $ 28.51    59.7% $ 47.74
           ================================ ================================



States included in the Regions:
Mountain                           Idaho and Montana
West North Central                 Iowa, Kansas, Missouri, Nebraska and
                                   South Dakota
East North Central                 Indiana and Wisconsin
Middle Atlantic                    Pennsylvania
South Atlantic                     Delaware, Florida, Georgia, Maryland,
                                   North Carolina, South Carolina, Virginia
                                   and West Virginia
East South Central                 Kentucky and Tennessee
West South Central                 Arkansas and Louisiana

The following table presents our RevPAR, ADR and occupancy, by region, for the twelve months ended December 31, 2011 and 2010, respectively. The comparisons of same store operations are for 76 hotels in continuing operations owned as of January 1, 2010.

 

                         2011                             2010
           -------------------------------- --------------------------------
Same Store
            Room                             Room
Region      Count  RevPAR Occupancy   ADR    Count  RevPAR Occupancy   ADR
           -------------------------------- --------------------------------
Mountain      214    32.05    63.8%   50.23    214    31.75    65.0%   48.85
West North
 Central    1,780    30.61    61.7%   49.60  1,780    29.59    61.7%   47.99
East North
 Central      978    35.92    56.8%   63.19    978    37.29    61.9%   60.23
Middle
 Atlantic     142    43.52    75.3%   57.83    142    41.43    71.1%   58.30
South
 Atlantic   2,369    29.50    67.0%   44.00  2,369    28.72    68.2%   42.10
East South
 Central      677    34.32    54.8%   62.64    677    34.60    56.8%   60.91
West South
 Central      197    28.04    66.1%   42.43    197    32.34    82.5%   39.21
           -------------------------------- --------------------------------
Total Same
 Store
 Hotels     6,357  $ 31.67    62.7% $ 50.49  6,357  $ 31.40    64.6% $ 48.62
           ================================ ================================



 


States included in the Regions:
Mountain                         Idaho and Montana
West North Central               Iowa, Kansas, Missouri, Nebraska and South
                                 Dakota
East North Central               Indiana and Wisconsin
Middle Atlantic                  Pennsylvania
South Atlantic                   Delaware, Florida, Georgia, Maryland, North
                                 Carolina, South Carolina, Virginia and West
                                 Virginia
East South Central               Kentucky and Tennessee
West South Central               Arkansas and Louisiana

* The following properties have been moved from the same store portfolio during the reporting period and classified as held for sale:

 

Muscatine, IA Super 8          Wayne, NE Super 8      Sedalia, MO Super 8
Lincoln (West "O"), NE Super 8 Watertown, SD Super 8  El Dorado, KS Super 8
                               Bossier City, LA Days  Erlanger, KY Comfort
Minocqua, WI Quality Inn       Inn                    Inn
Omaha (M Street), NE Super 8   Omaha (West Dodge), NE
                               Super8

The following properties which were included in discontinued operations (held for sale) as of fiscal 2011 were subsequently reclassified as held for use and moved back to the same store portfolio:

 

Clinton, IA Super 8       Pella, IA Super 8        Ellenton, FL Ramada
                                                   Limited
Ellenton, FL Guesthouse   Jackson, TN Guesthouse   Shreveport, LA Days Inn
Inn                       Inn

Contact:

Ms. Krista Arkfeld
Director of Corporate Communications
karkfeld@supertelinc.com
Jerry Daly
Daly Gray
jerry@dalygray.com

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