MeriStar Hospitality Corporation Reports Second Quarter 2005 Results, Increases Adjusted FFO per Share Guidance.

ARLINGTON, Va. -- MeriStar Hospitality Corporation (NYSE: MHX), one of the nation's largest hotel real estate investment trusts (REIT), today announced financial results for the second quarter ended June 30, 2005. Highlights of the company's strong quarterly performance include(1):

--Net income increased to $0.9 million or $0.01 per diluted share compared to a net loss of $(11.6) million or $(0.14) per diluted share for the 2004 second quarter;

--Adjusted funds from operations (FFO) per share of $0.32 increased 33 percent compared to $0.24 per share for the 2004 second quarter;

--Adjusted EBITDA of $62.0 million increased over 19 percent compared to $51.9 million in the 2004 second quarter;

--Revenue per available room (RevPAR) increased 9.9 percent for the comparable hotels, as the average daily rate (ADR) rose 9.6 percent and occupancy improved 0.3 percent;

--Comparable hotel gross operating profit margins improved 196 basis points and comparable hotel EBITDA margins improved 209 basis points; and

--Business interruption (BI) insurance gain of $2.0 million (based on insurer recognition to date from losses resulting from the 2004 Florida hurricanes) included in net income, adjusted FFO and adjusted EBITDA.

(1)FFO, Adjusted FFO, Adjusted EBITDA, and comparable hotel EBITDA margins are non-GAAP financial measures. See the notes to financial information for further discussion of these non-GAAP financial measures.

"The positive operating trends produced by our portfolio in recent quarters carried over into the second quarter, and our hotels continue to gain operating momentum," said Paul W. Whetsell, chairman and chief executive officer. "We continue to realize returns from our ongoing renovation program, reflected in higher rate levels achieved at those properties. Our ability to raise rate was the primary contributor to the 209 basis point expansion in our comparable hotel EBITDA margins. With the improved asset quality of our portfolio, we plan to continue aggressively driving rate to take advantage of the additional upside potential we see in this area," he added.

"We realized double-digit RevPAR gains in several of our key markets, including a 19.8 percent increase in Southern California and a 12.0 percent increase in Washington D.C. Significantly, our 49.99 percent equity investment in the Radisson Lexington in Midtown Manhattan, although not included in our comparable hotel results, achieved a RevPAR gain of 30 percent in the second quarter. The strong performance of the property resulted in distributable cash on our equity intere...

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