Innkeepers USA Trust Announces Second Quarter Earnings; RevPAR Increases 9.3 Percent in Second Quarter

Business Wire, August 3, 2004

PALM BEACH, Fla. -- Innkeepers USA Trust (NYSE:KPA), a hotel real estate investment trust (REIT) and a leading owner of upscale, extended-stay hotel properties throughout the United States, today announced results for the three months and six months ended June 30, 2004.

%    Six Mos. Six Mos.  %
                     2Q 2004* 2Q 2003* Change* 2004*    2003*  Change*
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Net income (loss)
 applicable to common
 shareholders          $2,653 $(4,603)  157.6%$(2,552)$(9,653)   73.6%
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Diluted income (loss)
 per share              $0.07  $(0.12)  158.3% $(0.07) $(0.26)   73.1%
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Funds from operations
 (FFO) (1), (2)       $12,165  $3,765   223.1%$13,117  $7,015    87.0%
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Adjusted FFO (1), (2) $12,163  $8,050    51.1%$17,589 $15,086    16.6%
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FFO per share (1), (2)  $0.29   $0.10   190.0%  $0.34   $0.18    88.9%
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Adjusted FFO per
 share (1), (2)         $0.29   $0.21    38.1%  $0.45   $0.39    15.4%
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Earnings before
 interest expense,
 taxes, depreciation
 and amortization
 (EBITDA) (1), (2)    $20,511   $12,382  65.7% $37,015  $24,139  53.3%
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Adjusted EBITDA (1),(2)$20,509  $16,677  23.0% $36,209  $32,210  12.4%
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    *In thousands, except per share and percentage change data

(1) FFO, Adjusted FFO, FFO per share, Adjusted FFO per share, EBITDA
    and Adjusted EBITDA are not generally accepted accounting
    principles (GAAP) financial measures and are discussed in further
    detail on pages 7-9.

(2) FFO and FFO per share for the six months ended June 30, 2004
    include a $4,249,000 loss related to issuance costs pertaining to
    the Series A Cumulative Convertible preferred shares that were
    redeemed in January 2004. The $4,249,000 Series A preferred share
    issuance costs have been excluded from Adjusted FFO, Adjusted FFO
    per share, EBITDA and Adjusted EBITDA.

    FFO, FFO per share and EBITDA for the 2004 second quarter and six
    months ended June 30, 2004 exclude $4,429,000 and $7,892,000 in
    percentage lease revenue that was deferred. The $4,429,000 and
    $7,892,000 in deferred percentage lease revenue has been
    recognized as revenue for Adjusted FFO, Adjusted FFO per share and
    Adjusted EBITDA.

    Adjusted FFO, Adjusted FFO per share and Adjusted EBITDA exclude
    other charges and discontinued operations for the second
    quarters of 2004 and 2003 and six months ended June 30, 2004
    and 2003.

RevPAR Results

Revenue per available room (RevPAR) for the company's 67 comparable hotels rose 9.3 percent for the 2004 second quarter to $72.60. Occupancy increased 5.9 percent to 76.8 percent, and average daily rate (ADR) rose 3.2 percent to $94.57 for the 2004 second quarter.

The RevPAR improvement for the 2004 second quarter reflects a 23.6 percent increase in RevPAR at the company's eight Silicon Valley, California hotel properties. The eight Silicon Valley hotel properties accounted for 17 percent of the company's room revenues for the 2004 second quarter. Excluding Silicon Valley, the remainder of Innkeepers' portfolio reported a RevPAR increase of 6.9 percent for the 2004 second quarter.

"The lodging industry appears to be in recovery, with transient business travel demand finally trending higher," said Jeffrey H. Fisher, Innkeepers chief executive officer and president. "Even excluding our strong Silicon Valley results, RevPAR across our portfolio was up a solid 6.9 percent. What was particularly gratifying was that the increase was driven by both rate and occupancy, a good indicator of a recovering economy. We also benefited during the quarter from the extensive capital investments we have made in our properties over the past three years. We are very encouraged by our results and particularly the return of the transient business traveler."

Fisher pointed out that 2004 second quarter results for the Silicon Valley properties were very positive, compared to the second quarter of 2003 when management of four of the eight Silicon Valley properties was transitioned to Innkeepers Hospitality. "Second quarter 2004 operating results reflect substantial market share gains at certain Silicon Valley hotel properties. The 23.6 RevPAR increase for Silicon Valley for the 2004 second quarter was magnified due to second quarter 2003 operating results being depressed as a result of certain management transition issues."

Adjusted FFO per share and Adjusted EBITDA for the 2004 second quarter rose to $0.29 and $20.5 million, respectively, from $0.21 and $16.7 million for the 2003 second quarter (see pages 7-9 for a further discussion regarding these financial measures). The increase in the 2004 second quarter adjusted FFO per share and adjusted EBITDA results was due primarily to the positive impact of the 9.3 percent RevPAR increase in the 2004 second quarter. The company's taxable REIT subsidiary (TRS) net income (loss) for the 2004 second quarter and six months ended June 30, 2004 was $15,000 and $(1.7) million, respectively.