Red Lion Reports Third Qtr 2006 Results

Strong Growth in RevPAR and EBITDA

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. October 14, 2008

November 1, 2006. Red Lion Hotels Corporation (NYSE:RLH) today announced results for the third quarter and nine months ended September 30, 2006.

Key Third Quarter Operating Results:

o RevPAR (revenue per available room) increased 9.9% to $62.73 at system-wide hotels

o ADR (average daily rate) increased 9.0% to $87.01 at system-wide hotels

o Occupancy increased 0.6 percentage points to 72.1% at system-wide hotels

o RevPAR from continuing hotel operations increased 11.0%

o Total revenues from continuing operations increased 10.5% to $51.6 million

o Hotel segment direct operating margin improved 300 basis points

o Net income from continuing operations increased 60.2% to $4.5 million, excluding an expense for early extinguishment of debt

o EPS from continuing operations were $0.23 per share, excluding an expense for early extinguishment of debt

o EBITDA from continuing operations increased 21.0% to $12.9 million, excluding an expense for early extinguishment of debt

o Including the expense for early extinguishment of debt, reported net income from continuing operations was $1.3 million, reported EPS from continuing operations were $0.07 per share and reported EBITDA from continuing operations was $7.9 million

Significant Events:

o Obtained a new $50 million revolving credit facility

o Repaid approximately $34 million in secured debt

o Completed the sale of two non-core hotels for gross proceeds of $10.1 million: the WestCoast Ridpath Hotel in Spokane, Washington and the Red Lion Hotel in Idaho Falls, Idaho

Arthur M. Coffey, President and CEO of Red Lion Hotels Corporation, said, "This was a great quarter for Red Lion. We delivered excellent results and achieved our key strategic goals. Our operating performance this quarter validates our decision to renovate our hotels. Our increased ADR reflects guests' support for the enhanced Red Lion brand. We also improved our balance sheet this quarter by using the proceeds from our recent public common stock offering to pay down debt. Our resulting financial position gave us the ability to obtain a new credit facility. This new facility and the strengthened Red Lion brand give us the financial flexibility and room product necessary to continue with the execution of our strategy to expand to 100 markets by the end of 2010."

The company's total revenues from continuing operations during the quarter were $51.6 million, up 10.5% from the same quarter of 2005. Revenues in the hotel segment were up 11.0% over the prior year period to $47.8 million. Franchise and management revenues increased 4.6% to $0.9 million. Revenues in the entertainment segment increased 37.8% to $0.7 million.

The company's repayment of debt to increase its financial flexibility resulted in two charges for early extinguishment of debt. In the third quarter, the Company booked an expense of $4.9 million related to the early extinguishment of $34 million in debt secured by one of its hotels. In the second quarter, the Company booked an expense of $0.9 million for the early repayment of $16.6 million of debentures in connection with its public offering.

Excluding the after-tax impact of the expense for early extinguishment of debt, EBITDA from continuing operations in the third quarter increased 21.0% to $12.9 million, and net income from continuing operations increased 60.2% to $4.5 million, or $0.23 per fully diluted share, compared to $0.22 per share in the prior period. Reported EBITDA from continuing operations for the quarter was $7.9 million, and reported net income from continuing operations was $1.3 million or $0.07 per fully diluted share. Overall reported net income was $1.5 million or $0.07 per share.

The company's total revenues from continuing operations for the nine months ended September 30, 2006, were $131.6 million, up 4.1% from last year. Excluding the after-tax impact of the expense for early extinguishment of debt, EBITDA from continuing operations for the nine months ended September 30, 2006 increased 20.9% to $24.3 million, and net income from continuing operations increased to $4.2 million, or $0.26 per fully diluted share, compared to $0.05 per share in the prior period. Reported EBITDA for the nine months ended September 30, 2006 was $18.6 million, and reported net income was $0.5 million, or $0.03 per fully diluted share. Overall reported net income was $0.6 million, or $0.03 per fully diluted share.

Hotel Operations:

In the third quarter of 2006, RevPAR for comparable system-wide hotels increased 9.9% over the same quarter of the previous year, to $62.73. This increase was primarily the result of a 9.0% increase in ADR to $87.01. Average occupancy improved to 72.1%, from 71.5% in the 2005 period.

At the beginning of the third quarter of 2006, room renovations at the company's owned and leased hotels were substantially complete. RevPAR from continuing hotel operations at the company's owned and leased hotels increased 11.0% in the third quarter of 2006, driven by an increase of 12.3% in ADR and offset by a 0.9 percentage point decrease in occupancy.

Revenues from continuing operations for owned and leased hotels increased 11.0% to $47.8 million during the third quarter of 2006. This increase was primarily driven by a 12.4% increase in hotel room revenues, as well as a 9.4% increase in food and beverage revenues. The hotels segment direct operating margin improved 300 basis points to 30.0% in the third quarter of 2006 from 27.0% in the third quarter of 2005.

"It is evident by the increased profit margin this quarter that our ADR growth is having a very favorable impact on operating income," commented John Taffin, Executive Vice President, Hotel Operations. "The investments we are making in renovating our hotels are substantially strengthening the Red Lion brand and are delivering excellent results at the company's hotels."

Highlights and Recent Events:

The company announced at the end of last quarter that it had substantially completed planned rooms renovations at its hotels. With rooms renovations substantially complete, the company is now focused on completing renovations of public guest contact areas such as lobbies and meeting rooms, which it expects to complete during the upcoming winter months.

In the third quarter, the company closed the sale of the Red Lion Hotel in Idaho Falls, Idaho and the WestCoast Ridpath Hotel in Spokane, Washington. The company received $10.1 million in aggregate proceeds from these sales. The total sale proceeds from the company's previously announced disposition program now stands at $68.3 million. In connection with these hotel sales, Red Lion has paid off a total of $20.0 million in associated secured debt. The company continues to actively pursue the disposition of one remaining non-core hotel and surplus undeveloped land previously identified as assets held for sale.

On September 14, 2006, the company announced the closing of a $50 million revolving credit facility with Calyon Corporate and Investment Bank as Administrative Agent, Key Bank as Documentation Agent, and CIBC, Union Bank of California and Wells Fargo Bank as participants. The company intends to use the credit facility for general corporate purposes and to finance anticipated future growth.

"Our team is doing an exceptional job of leveraging our enhanced Red Lion brand to create value for our shareholders. We plan to continue our efforts to grow our existing operations while at the same time using the enhanced Red Lion brand and our financial flexibility to expand into new markets," Mr. Coffey concluded.