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

(1) FFO is a non-GAAP financial measure. The Company considers FFO to be a market accepted measure of an equity REIT's operating performance, which is necessary, along with net earnings, for an understanding of the Company's operating results. FFO, as defined under the National Association of Real Estate Investment Trusts (NAREIT) standards, consists of net income computed in accordance with U.S. generally accepted accounting principles ("GAAP"), excluding gains (or losses) from sales of real estate assets, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. The Company believes its 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) as an indicator of the Company's liquidity, nor is it indicative of funds available to fund the Company's cash needs, including its ability to pay dividends or make distributions. All REITs do not calculate FFO in the same manner; therefore, the Company's calculation may not be the same as the calculation of FFO for similar REITs.

The Company uses FFO as a performance measure to facilitate a periodic evaluation of its operating results relative to those of its peers, who like Supertel Hospitality, Inc., are typically members of NAREIT. The Company considers FFO a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, the Company believes that FFO provides a meaningful indication of our performance.

The following table sets forth the continuing operations of the Company's hotel properties for the three and six months ended June 30, 2006 and 2005, respectively. The continuing operations comparisons below include the Company's 79 and 69 hotels for the respective periods. This presentation includes non-GAAP financial measures. The Company believes that the presentation of hotel property operating income (POI) on a continuing operations basis is helpful to investors, and represents a more useful description of its core operations, as it better communicates the comparability of its hotels' results.


Unaudited - In thousands, except per share data:

                                       Three Months         Six Months
                                      Ended June 30,      Ended June 30,
                                    ------------------  ------------------
                                      2006      2005      2006      2005
                                    --------  --------  --------  --------
Continuing operations:
    Revenue per available room
     (RevPAR)                       $  39.25  $  36.76  $  35.40  $  32.53
    Average daily room rate (ADR)   $  57.60  $  54.33  $  56.44  $  53.06
    Occupancy percentage                68.2%     67.7%     62.7%     61.3%

Room rentals and other hotel
 services from continuing
 operations
  69 Hotels owned 12 months and
   longer                           $ 16,379  $ 16,084  $ 29,256  $ 28,347
  10 Hotels owned less than 12
   months                              3,739         -     6,552         -
                                    --------  --------  --------  --------
    Total room rental and other
     hotel services                 $ 20,118  $ 16,084  $ 35,808  $ 28,347
                                    ========  ========  ========  ========

Hotel and property operations
 expense from continuing operations
  69 Hotels owned 12 months and
   longer                           $ 11,035  $ 10,696  $ 20,713  $ 20,057
  10 Hotels owned less than 12
   months                              2,435         -     4,453         -
                                    --------  --------  --------  --------
    Total hotel and property
     operations expense             $ 13,470  $ 10,696  $ 25,166  $ 20,057
                                    ========  ========  ========  ========

Property Operating Income ("POI")
  69 Hotels owned 12 months and
   longer                           $  5,344  $  5,388  $  8,543  $  8,290
  10 Hotels owned less than 12
   months                              1,304         -     2,099         -
                                    --------  --------  --------  --------
    Total property operating
     income                         $  6,648  $  5,388  $ 10,642  $  8,290
                                    ========  ========  ========  ========

POI as a percentage of continuing
 operations revenue from room
 rentals and other hotel services
 ("POI Margin")
  69 Hotels owned 12 months and
   longer                               32.6%     33.5%     29.2%     29.2%
  10 Hotels owned less than 12
   months                               34.9%        -      32.0%        -
    Total POI as a percentage of
     revenue                            33.0%     33.5%     29.7%     29.2%


RECONCILIATION OF POI TO NET INCOME
POI                                 $  6,648  $  5,388  $ 10,642  $  8,290
Depreciation and amortization         (2,077)   (1,651)   (4,133)   (3,315)
Gain (Loss) on disposition of
 assets                                   (1)        1        (5)        -
Interest expense                      (1,867)   (1,406)   (3,623)   (2,799)
Minority interest                       (103)      (55)     (151)     (108)
General and administrative expense      (708)     (646)   (1,387)   (1,248)
Income tax (expense) benefit            (317)     (239)        7       137
Other revenues                            31        42        61        87
                                    --------  --------  --------  --------
Net income                          $  1,606  $  1,434  $  1,411  $  1,044
                                    ========  ========  ========  ========

Net income as a percentage of
 continuing operations revenue
 from room rentals and other hotel
 services                                8.0%      8.9%      3.9%      3.7%