Second Quarter   Year-to-Date (YTD)                                        2009(4)   2008   2009(4)   2008(5)   Total revenue (1)                    $34.0    $40.5    $64.5    $79.4   Net (loss) income                    $(6.7)    $0.1   $(19.2)   $(0.2)   Diluted (loss) earnings per share   $(0.21)   $0.00   $(0.60)   $0.00   Adjusted EBITDA (2)(3)               $10.3    $10.2    $16.2    $17.9   Adjusted net income (loss)(2)         $0.6     $0.1    $(1.3)   $(1.0)   Adjusted diluted EPS (2)             $0.02    $0.00   $(0.04)  $(0.03)   

(1) Total revenue excludes other revenue from managed properties (reimbursable costs).

(2) Adjusted EBITDA, Adjusted net income (loss), and Adjusted diluted EPS are non-GAAP financial measures and should not be considered as an alternative to any measures of operating results under GAAP. See the definition of and further discussion of non-GAAP financial measures and reconciliation to net (loss) income later in this press release.

(3) Includes the company's share of EBITDA from investments in unconsolidated entities in the amounts of $1.8 million and $2.5 million in the second quarters of 2009 and 2008, respectively, and $3.0 million and $4.2 million in the first six months of 2009 and 2008, respectively.

(4) The second quarter 2009 and YTD 2009 results include (i) a $3 million non-cash impairment charge related to the company's investment in a joint venture, (ii) $0.1 million and $0.9 million charges, respectively, for restructuring primarily related to severance costs as a part of the company's 2009 cost reduction program, (iii) $0.7 million of write-offs of intangible assets related to the termination of certain management contracts and other asset impairments, and (iv) income tax expense related to the full valuation allowance against our deferred tax assets offset by a change in the company's effective tax rate, both described in more detail in footnote 9 to the financial tables later in this press release. These charges are excluded from the calculation of Adjusted EBITDA, Adjusted net income (loss), and Adjusted diluted EPS.

(5) The YTD 2008 results include (i) a $2.4 million gain on the sale of the Doral Tesoro Hotel & Golf Club, and (ii) $1.1 million of write-offs of intangible assets related to the sale of certain hotels. These charges are excluded from the calculation of Adjusted EBITDA, Adjusted net income (loss), and Adjusted diluted EPS.

   Highlights for the second quarter and through today include:   --  Maintained year over year Adjusted EBITDA in a difficult economy;       generated growth in Adjusted Net Income;   --  Extended senior secured credit facility to March 2012;   --  Added seven properties to third-party management portfolio, including       three hotels from its signed management contract pipeline of       properties under development or construction;   --  Signed first management contract with the Duet Hotel Fund in India;        the second contract for JHM Interstate Hotels India;    --  Common stock resumed trading on the NYSE effective July 29, 2009.    

"I am very pleased with the significant progress we have made on our capital structure," said Thomas F. Hewitt, chairman and chief executive officer. "We extended our senior credit facility to March 2012 well in advance of its original expiration date. This, along with our successful appeal of the NYSE's ruling to suspend the trading of our stock, has provided stability to our capital structure in an extremely volatile market.

"With these hurdles behind us, we continue to focus our efforts on growing our third party management business while preserving our capital and liquidity and maximizing profits," Hewitt added. "Despite the challenging operating climate and RevPAR declines in excess of 20 percent, we maintained our second quarter Adjusted EBITDA year over year, which is a result of the cost reduction initiatives we implemented in January."

Hotel Management

Same-store(6) RevPAR for all managed hotels in the second quarter decreased 21.4 percent to $81.81. Average daily rate (ADR) was $122.30, down 12.8 percent, and occupancy fell 9.8 percent to 66.9 percent.

Same-store RevPAR for all full-service managed hotels declined 22.2 percent to $93.35. ADR was off 13.9 percent to $133.78, while occupancy decreased 9.7 percent to 69.8 percent.

Same-store RevPAR for all select-service managed hotels declined 19.0 percent to $59.68, led by a 10.1 percent decline in occupancy to 61.4 percent and a 9.8 percent drop in ADR to $97.25.

"During the second quarter, we saw a continuation of the difficult economic conditions and deteriorating lodging fundamentals that prevailed in the first quarter and much of last year, " Hewitt said. "We continue to focus on top-line revenues and reducing costs wherever possible. These are indeed unprecedented times, but we have the experience and expertise to operate effectively in these conditions."

Hewitt added that Interstate's new contract flow has remained steady in 2009, a fact that he attributes to the company's proven operating performance in all economic cycles, deep relationships in the industry, high owner loyalty and a broad network of contacts.

"We recently added two Courtyard by Marriott hotels in Virginia owned by the same group for whom we've been managing two hotels and two first-class restaurants in Gettysburg, Pa. We also added the Holiday Inn Laredo Civic Center and the Crowne Plaza Milwaukee Airport, and opened the Lancaster Marriott at Penn Square and Lancaster County Convention Center, a $177 million project with which we have been involved for more than a decade. We opened the TownePlace Suites by Marriott in Easton/Bethlehem (Pa.), and last week, our wholly-owned subsidiary, Sunstone Hospitality Management, signed an agreement to manage the Doubletree Austin-University Area in Texas, the second property we now manage for that ownership group."

After opening three under-construction properties this summer, Interstate currently has 13 management contracts signed for hotels under development or construction. The majority of these properties are expected to open in 2010.

(6) Please see footnote 11 to the financial tables within this press release for a detailed explanation of "same-store" hotel operating statistics.

International

"We continue to move forward with our management and development plans in India," Hewitt added. "Our management company joint venture, JHM Interstate Hotels India, signed its first management contract with the Duet Fund, a U.K.-based real estate fund dedicated to India hotel development that we invested in last year."

The 115-room hotel, scheduled to open in the fall of 2009, is located in Jaipur, which is the capital of the state of Rajasthan and part of India's Golden Triangle (Delhi, Jaipur and Agra). Brand affiliations for this property and the under-construction property in Vizag (Visakhapatnam), are expected to be finalized during the third quarter.

Wholly Owned Hotel Results

EBITDA from the company's seven owned hotels was $6.0 million in the 2009 second quarter as outlined below (in millions):

   Owned Hotels                       Second Quarter      Year-to-Date   ------------                       --------------      ------------                                       2009     2008      2009     2008                                       ----     ----      ----     ----   Net income                          $0.0     $1.3     $(1.3)    $1.5   Interest expense                     3.1      3.2       6.0      6.8   Depreciation and amortization        2.9      3.8       5.8      7.0                                        ---      ---       ---      ---   EBITDA                              $6.0     $8.3     $10.5    $15.3                                       ====     ====     =====    =====   

"RevPAR for our owned portfolio declined 16.4 percent, better than the industry average of 19.5 percent," Hewitt said. "These results were driven by our two recently renovated properties. The Westin Atlanta Airport property performed exceptionally well with a RevPAR gain of 3.9 percent. Also, at the Sheraton Columbia Town Center Hotel, after completing our $12 million renovation, the hotel outperformed its competitive set and the industry with a 13.2 percent RevPAR decline.

"We did experience weakness at our hotels in Concord, Calif., and Houston and Arlington, Texas," Hewitt noted. "However, I am very pleased with the results of the cost-cutting initiatives carried out by all of our hotels. Despite a RevPAR decrease of 16.4 percent, of which 12.6 percent was ADR, we were able to offset nearly 50 percent of this revenue decline with expense savings."

   Balance Sheet   On June 30, 2009, Interstate had:    --  Total unrestricted cash of $22.8 million.    --  Total debt of $243.7 million, consisting of $161.2 million of senior       debt and $82.5 million of non-recourse mortgage debt.    

Effective July 10, the company extended the maturity of its senior credit facility to March 2012 by converting the facility's outstanding balance of $161.2 million to a new term loan. The agreement also provides the company with an $8 million revolving line of credit.

"The recent extension of our credit facility to 2012 gives us a solid platform from which we can continue to focus on our core business," said Bruce Riggins, chief financial officer. "We are in the process of securing a mortgage on the Westin Atlanta Airport Hotel and expect to choose a lender in the near term. The expected mortgage proceeds of approximately $20 million will be used to pay down the credit facility in accordance with its amortization requirements. We are also in the process of exploring the sale of a wholly-owned asset. Upon the completion of these two transactions, we will be well on our way to meeting the second $20 million amortization hurdle by March 2011."

Guidance

The company has updated its 2009 guidance based on a current projected RevPAR decline of 19 percent for all hotels and 15 percent for owned hotels:

       -- Total Adjusted EBITDA of $34.0 million which includes the          following:          -- EBITDA from wholly owned hotels of $18.0 million;          -- The company's share of EBITDA from unconsolidated joint             ventures of $5.5 million; and          -- EBITDA from the hotel management business of $10.5 million.       -- Adjusted net loss of $(7.2) million or $(0.22) per share.    Earnings Conference Call  

Interstate will hold a conference call to discuss its second-quarter results today, August 5, at 9 a.m. Eastern Time. To hear the webcast, interested parties may visit the company's Web site at http://www.ihrco.com/ and click on Investor Relations and then Second-Quarter Conference Call. A replay of the conference call will be available until midnight on Wednesday, August 12, 2009, by dialing (800) 406-7325, reference number 4117565, and an archived webcast of the conference call will be posted on the company's Web site through September 5, 2009.

Interstate Hotels & Resorts has ownership interests in 56 hotels and resorts, including seven wholly owned assets. Together with these properties, the company and its affiliates manage a total of 224 hospitality properties with approximately 45,700 rooms in 37 states, the

District of Columbia, Russia, Mexico, Belgium, Canada and Ireland. Interstate Hotels & Resorts also has contracts to manage 13 to be built hospitality properties with approximately 3,000 rooms.