Hersha Hospitality Announces First Quarter 2006 Earnings; Acquires Interests in 8 Hotels Totaling 1,402 Rooms; Owned Hotels RevPAR Increases 20.5%; Owned Hotel EBITDA Margin Improves 709 Basis Points

Business Wire, May 10, 2006

PHILADELPHIA -- Hersha Hospitality Trust (AMEX:HT), a real estate investment trust (REIT) that owns interests in 58 nationally franchised, upscale and midscale hotels, today announced earnings for the first quarter 2006.

Consolidated Adjusted FFO for the first quarter 2006 declined to $0.03 per diluted share from $0.06 per diluted in the same quarter of 2005. Net loss applicable to common shareholders was ($5.1) million, or ($0.25) per diluted share compared to a net loss of ($1.0) million, or ($0.05) per diluted share in first quarter 2005. The increase in net loss on a year-over-year basis is primarily due to higher depreciation and amortization charges from growth in the Company's portfolio, dividends on the Company's Series A Preferred shares issued in 2005, write-offs of deferred financing costs related to the Company's new $60 million credit facility and increased interest expense.

Mr. Jay H. Shah, Chief Executive Officer, commented, "We followed up the success we had in 2005 with a strong start to 2006. For the first quarter, which is our seasonally weakest quarter, given our concentration of hotels in the Northeast, we grew hotel revenues by 117% and EBITDA by 165%. Our acquisition activity during the quarter of six wholly-owned hotels and two joint-venture investments is emblematic of our overall strategy of placing an emphasis on buying wholly-owned core hotels and from time-to-time entering into joint-ventures that we believe will add value for shareholders."

Financial Highlights for the First Quarter 2006

Consolidated hotel revenues, including revenues of hotels held for sale, increased 86% to $25.9 million for the first quarter 2006 from $13.9 million in the first quarter 2005 driven primarily by growth in room revenues and acquisitions of hotels. RevPAR for the Company's consolidated hotels (41 hotels) increased 20.5% on a year-over-year basis to $62.73 driven by a 12.0% increase in ADR to $97.89 and a 7.6% improvement in occupancy to 64.1%. Gross operating profit margins increased to 36.7% from 30.3% from the year ago quarter. Total EBITDA for consolidated hotels increased 155.3% to $6.7 million for the first quarter 2006. EBITDA margins for the quarter increased 709 basis points to 26.1% for consolidated hotels.

On a same-store basis (27 hotels), RevPAR for the first quarter 2006 increased 10.2% on a year-over-year basis to $63.30 driven by a 4.4% increase in ADR to $97.27 and a 5.6% improvement in occupancy to 65.1%. Same-store EBITDA increased 11.8% to $4.0 million due to the increase in revenue, offset somewhat by higher utility costs, repairs and maintenance, accounting fees and payroll and benefits costs.

Other First Quarter 2006 Highlights

--In January, the Company closed the acquisition of the 118-room Courtyard - Langhorne, PA, the 103-room Fairfield Inn & Suites - Bethlehem, PA and the 118-room Fairfield Inn & Suites - Mt. Laurel, NJ for total consideration of $40.5 million.

--In January, Hersha Hospitality Trust received $19.5 million in development loan repayments.

--In February, the Company completed the purchase of the 120-room Courtyard - Scranton, PA, the 96-room Residence Inn - Tyson's Corner, VA and the 188-room Hilton Garden Inn - JFK Airport, NY.

--In February, Hersha Hospitality Trust also finalized two joint-venture agreements. The first was for a 15% interest with an 8.5% participating preferred equity return in the 409-room Marriott - Hartford Downtown, CT. The second was for an 80% interest with a 9.0% participating preferred equity return in the 250-room Hampton Inn - Philadelphia, PA.

--In February, Hersha Hospitality Trust also reduced its equity interest in the 392-room Hilton Hartford, CT from 44% to 8.8% with an 8.5% participating preferred equity return.

Balance Sheet

At March 31, 2006, Hersha Hospitality Trust had approximately $313 million of long-term debt outstanding, which included approximately $51.5 million of Trust Preferred Securities and debt on assets held for sale. The weighted average interest rate on the Company's fixed rate debt was approximately 6.71%. The weighted average life of the Company's debt was 10.5 years. Fixed rate debt, including variable rate debt hedged by interest rate swaps, amounted to approximately 88.0% of total debt. At March 31, 2006, the Company's fully-diluted common shares and partnership units outstanding were a combined 23,871,640.

Dividend

For the first quarter 2006, Hersha Hospitality Trust declared cash common and limited partnership unit dividends of $0.18 per common share. The Company's common dividend represents the 28th consecutive quarterly dividend at this amount since the Company's 1999 initial public offering. The Common dividend represents a yield of approximately 7.7% based upon the closing price of Hersha Hospitality Trust stock on May 9, 2006. The Board of Trustees also declared a cash dividend of $0.50 per Series A Preferred Share.

Subsequent Events

The Company closed on the sale of 7,497,500 common shares, receiving net proceeds of approximately $63.5 million. The Company used or will use the proceeds to repay outstanding indebtedness under its revolving credit line, to fund acquisitions and development loans and for general corporate purposes.