Candlewood Hotel Company Announces First Quarter Results.

WICHITA, Kan.--(BUSINESS WIRE)--May 11, 1998--Candlewood Hotel Company, Inc. (Nasdaq NM: CNDL), owner, developer, manager and franchisor of value-oriented, business extended-stay hotels, today announced results for the quarter ended March 31, 1998.

For the quarter, the Company reported net income before dividends to preferred stockholders of $469,000 on hotel operating revenues of $7.1 million, compared to a net loss in the first quarter of 1997 of $374,000 on revenues of $0.5 million. Net loss to common stockholders for the 1998 first quarter, after preferred stock dividends, was eight cents per share compared to a per share loss of four cents for the same quarter of 1997 in which there were no preferred stock dividends.

In September and October of 1997, the Company completed a $65 million offering of Series A Cumulative Preferred Stock with a base dividend of 7.50% per annum. While dividends on the preferred stock are not payable until August 31, 1998, the Company has included, for the calculation of earnings per share, amounts accrued for future payment.

"We feel that our first quarter results provide further affirmation of our concept and strategy," said Jack DeBoer, Candlewood chairman and Chief Executive Officer. "We are especially encouraged by the performance of our 23 company-operated hotels. With 74% of these hotels open less than six months, we posted an average occupancy of 60 percent and an average daily room rate of $53.83. Such performance is notably impressive given the youth of these properties," DeBoer said.

In November 1997, the Company entered into an agreement with Hospitality Properties Trust ("HPT") to sell and leaseback 15 hotels. The Company completed the sale and leaseback of five hotels in December 1997, nine hotels in the first quarter of 1998 and one in April, 1998. "This transition accelerates our growth capabilities as we continue to aggressively expand our brand nationally," DeBoer said. The total sale price on the nine hotels sold in the first quarter was $56 million.

During the first quarter, the Company opened two new company-operated hotels and franchisees opened two new hotels. At the end of the quarter, the system consisted of 23 company-operated hotels and five franchised hotels in operation. The Company also began construction on 10 additional company-owned properties and franchisees began construction on one new property during the quarter. At the end of the quarter, there were 30 company-owned hotels and five franchised hotels under construction. Thirty-eight potential company development sites were under contract.

"We have opened five hotels in the second quarter already and continue to meet our internal development goals. We are very excited about our growing nationwide presence," DeBoer said. "But more importantly, we are pleased with the overwhelming positive feedback from our guests regarding the value we provide. We believe this level of guest satisfaction will propel Candlewood to the top as the leading brand in our sector."

Candlewood targets mid-market, extended-stay business travelers. Room rates range from approximately $45 to $75 per night for Studio Suites and $65 to $95 per night for one-bedroom suites, depending on market location and length of stay. Candlewood Hotel Company, Inc., was formed in late 1995 as a joint venture between Jack DeBoer and the former Doubletree Corporation (now Promus Hotel Corporation). DeBoer, who founded Residence Inns in the 1970s, is recognized in the hotel industry as the creator of the extended-stay concept. The Candlewood Suites hotel system now has 28 corporate hotels and five franchised hotels open, 30 corporate hotels and five franchised hotels under construction, and 34 sites under contract in a total of 29 states. -0-

Please note: Except for historical information, this press release contains forward-looking statements that involve risks and uncertainties, including but not limited to timing and management of growth, the competitive environment and other risk factors as detailed in the company's filing with the Securities and Exchange Commission. Actual results may differ materially from the management's expectations. -0-

                     CANDLEWOOD HOTEL COMPANY, INC.
                    FIRST QUARTER OPERATING RESULTS
                  (in thousands, except per share data)


                                         For the Three Months Ended
                                                 March 31,

                                             1998         1997

Revenues:
Hotel operations                           $6,917         $539
Other income                                  174            -
  Total hotel operating revenues            7,091          539
Proceeds from sale of hotels (net of
  deferred gain of $7,126)                 48,922            -
Gain recognized on sale of hotels              40            -
  Total Revenues                           56,053          539

Operating costs and expenses:
Hotel operating expenses                    4,409          535
Corporate operating expenses                  808          411
Depreciation and amortization                 347          191
Rent expense on leased hotels               1,422            -
  Total operating costs and expenses        6,986        1,137
Cost of hotels sold                        48,922            -
                                              145         (598)

Interest income                               362          375
Interest expense                              (38)        (151)
  Net income (loss)                           469         (374)

Preferred stock dividends                  (1,202)           -
  Net loss to common stockholders           $(733)       $(374)

Per share data:
  Net loss per share of common
  stock - basic and diluted                $(0.08)      $(0.04)

Average weighted shares of common stock
  outstanding (in thousands)                9,025        9,025


Development Highlights as of May 8, 1998:

Number of hotels open:
  Company                                                   28
  Franchised                                                 5
Number of hotels under construction:
  Company                                                   30
  Franchised                                                 5
Potential Company sites under contract                      34
Franchise agreements signed for hotels
 not yet under construction                                  2

CONTACT: Candlewood Hotel Company, Inc.

Warren Fix, Chief Financial Officer, [phone]

or

Daly Gray Public Relations 

Jerry Daly, [phone]