Supertel Hospitality, Inc. Reports Increased Revenues for the Second Quarter 2006

Market Wire, August, 2006

Supertel Hospitality, Inc. (NASDAQ: SPPR), a real estate investment trust which owns 79 hotels in 17 mid-western and eastern states, today announced its results for the second quarter ended June 30, 2006. The Company posted revenue of $20.1 million and net income of $1.6 million for the quarter ended June 30, 2006 compared to revenue of $16.1 million and net income of $1.4 million for the year ago period. The Company posted revenue of $35.9 million and net income of $1.4 million for the six months ended June 30, 2006 compared to revenue of $28.4 million and net income of $1.0 million for the year ago period.

"Our controlled growth acquisition strategy focuses on the revenue and earning potential of individual properties which results in increased value for our shareholders," said Paul J. Schulte, chairman, president and chief executive officer of Supertel Hospitality, Inc. "Supertel has added 10 hotels and 894 rooms to our portfolio since September 2005. We will continue to seek hotel acquisitions which fit our model of providing, clean, friendly and affordable accommodations while simultaneously providing opportunities to implement operational efficiencies to improve the bottom line."

Second Quarter Results

The Company had net income of $1.6 million for the three months ended June 30, 2006 compared to net income of $1.4 million from continuing operations for the year ago period. Net income available to common shareholders was $1.3 million, or $0.11 per diluted share, for the three months ended June 30, 2006, compared with net income available to common shareholders of $1.4 million, or $0.12 per diluted share, for the year ago period. The net income available to common shareholders was reduced by a $305,000 preferred stock dividend which was not incurred in the year ago period.

Revenues for the three months ended June 30, 2006 compared to the three months ended June 30, 2005, increased $4.0 million or 24.9%. In the last four months of 2005, the Company acquired seven additional hotels. In the first quarter of 2006, the Company purchased a Super 8 located in Clarinda, Iowa. The second quarter of 2006 two additional hotels were added, one located in Erlanger, Kentucky was acquired on May 7, 2006 and on June 30, 2006 a 41-unit Supertel Inn and Conference Center located in Creston, Iowa was opened. The additional hotel revenue generated by these ten additional hotels, was $3.7 million during the second quarter of 2006. The increase in room revenues was also due, in part, to an increase in average daily rate (ADR) of $3.27 or 6.0% and a 0.7% increase in occupancy, which resulted in a $2.49 or 6.8% increase of revenue per available room (RevPAR) for the second quarter of 2006, compared to the year ago period.

Hotel and property operations expenses for the three months ended June 30, 2006 increased $2.8 million or 25.9%. The expenses generated by the ten additional hotels for the second quarter of 2006 were $2.4 million. The remaining increase of $400,000 is primarily due to advertising, maintenance and utilities expense.

Interest expense increased by $461,000, due primarily to increased debt used for hotel acquisitions. The depreciation and amortization expense increased $426,000 for the second quarter of 2006 over the same period in 2005, which is primarily related to the ten additional hotels as well as asset additions outpacing the amount of assets exceeding their useful life.

The Company believes property operating income, which is revenue from room rentals and other hotel services less hotel and property operations expenses, is a useful measure of the Company's operating efficiency of its hotel properties. Property operating income increased by $1.3 million or 23.4% for the second quarter of 2006, compared to the year ago period.

The general and administration expense for the three months ended June 30, 2006 increased $62,000 or 9.6%. This is primarily related to professional consulting fees.

Funds from operations (FFO) available to common shareholders were $3.4 million, or $0.28 per basic share and $0.25 per diluted share for the second quarter of 2006, compared to $3.1 million or $0.26 for both the basic and diluted share calculations, for the same quarter of 2005.

Six Months Results

The Company had net income of $1.4 million for the six months ended June 30, 2006 compared to net income of $1.0 million from continuing operations for the year ago period. Net income available to common shareholders was $802,000, or $0.07 per diluted share, for the six months ended June 30, 2006, compared with net income available to common shareholders of $1.0 million, or $0.09 per diluted share, for the year ago period. The net income available to common shareholders was reduced by a $609,000 preferred stock dividend which was not incurred in the year ago period.

Revenues for the six months ended June 30, 2006 compared to the year ago period, increased $7.4 million or 26.1%. The additional hotel revenue generated by the ten hotels acquired since September 2005 was $6.6 million during the six months ended June 30, 2006. The increase in room revenues was also due, in part, to an increase in ADR of $3.38 or 6.4% and a 2.3% increase in occupancy, which resulted in a $2.87 or 8.8% increase in RevPAR for the six months ended June 30, 2006, compared to the year ago period.