Homegate Hospitality Inc. completes acquisition of InnHome America.

AUSTIN, Texas--(BUSINESS WIRE)--January 20, 1997--Homegate Hospitality Inc. (Nasdaq: HMGT) announced today that it has completed the previously announced acquisition of InnHome America, a Dallas, Texas-based extended stay hotel company.

The acquisition includes InnHome's property management contracts, licenses, trademarks, and all related corporate assets, bringing the total number of hotels and facilities that Homegate operates to seven. Homegate has another ten properties under development in Phoenix, AZ, Denver, CO, Kansas City, KS, Austin, TX, and Dallas, TX, and has 16 sites under contract.

The assets of InnHome America are all located in Austin, one of Homegate's target markets, and include one operating hotel and two projects currently under development which are scheduled to open in late summer of 1997. Homegate will acquire the projects under three separate agreements for a total of approximately $22 million and re-flag them under the Homegate Studios & Suites brand name. The acquisition of the two properties under development will be finalized upon the completion of construction. The three properties will be financed with $14.8 million of assumable debt.

Commenting on the transaction, Robert Faith, Chairman and Chief Executive Officer, said, "This acquisition gives a us total of four sites in the growing Austin market and provides us a geographic presence as we focus on our strategy to build Homegate into a national brand. Our development and construction plans for 1997 are on schedule for an additional 25 facilities by year end."

Town Lake is an existing three story facility with 149 units located in close proximity of downtown Austin on the Southeast corner of I-35 and Riverside Drive on Town Lake. The hotel is situated on Town Lake, with a lakeside lounge and numerous lakefront rooms and is within five blocks of the Austin Convention Center. The hotel was renovated in early 1995 and flagged as an extended stay hotel under the InnHome America name. The hotel has generated a trailing 12 month EBITDA of over $1 million with a weekly rack rate of $327 per week.

The Rutherford Lane project will consist of 120 rooms and is located on Interstate 35 at Rutherford Lane just North of the intersection of I-35 and Highway 183. This North Austin location provides quick and easy access to the airport, the University of Texas and numerous area businesses. Highway 183 is the major thoroughfare linking the major residential areas of North and West Austin with I-35. The second development property, Jollyville Road will total 120 rooms and is located in Northwest Austin with frontage on Highway 183 and Jollyville Road just south of the intersection of 183 and Oak Knoll Road. This site is situated in the rapidly expanding Northwest Austin submarket and is proximate to the areas numerous high tech companies. Each facility will have weekly rates ranging from $275 for a studio to $499 for a deluxe guest room. The properties combine the convenience and value of a limited service hotel with the features and comfort of an apartment including: a fully equipped kitchen in every suite, laundry facilities, twice weekly terry services, business center, exercise rooms, etc.

Homegate's goal is to become a national producer of high quality mid priced ($250-$500 week) extended stay hotels in strategically selected markets throughout the United States under the Homegate Studios & Suites brand. Extended stay hotels serve guests who require accommodations for five or more nights with specially designed rooms featuring separate living, sleeping and dining areas. The market for extended stay lodging includes business travelers, temporary workers, people who are relocating or purchasing a home and people between domestic situations.

CONTACT: Robert Faith

Chairman and Chief Executive Officer

Joel (Kin) Oldham IV

Senior Vice President

Homegate Hospitality Inc.

[phone]

or

Robert P. Jones/James Cappuccio

Stan Froelich/Leslie Feldman - Media Relations

Morgen-Walke Associates

[phone]