Interstate Hotels & Resorts Completes Discounted Repayment of Note Payable to MeriStar Hospitality

Interstate financed the repayment with proceeds from a $40.0 million subordinated term loan obtained from Lehman Brothers that matures in January 2007 and carries a coupon rate of LIBOR plus 850 basis points. The remaining $2.1 million will be paid out of available cash.

"The early repayment of our note to MeriStar Hospitality provides a number of benefits, including a reduction in long-term debt and future interest expense, as well as an improvement to our financial covenant ratios," said John Emery, Interstate president and chief operating officer.

For financial statement purposes, the transaction will produce a gain from early repayment of debt of approximately $13.5 million, and the remaining costs of the transaction will be amortized over the life of the new subordinated term loan. Following the one-time gain to be recognized in the first quarter of 2003, there will be no material effect on earnings per share thereafter.

Interstate Hotels & Resorts operates approximately 400 hospitality properties with nearly 86,000 rooms in 45 states, the District of Columbia, Canada and Russia, including 55 properties managed by Flagstone Hospitality Management, a subsidiary of Interstate Hotels & Resorts. BridgeStreet Corporate Housing Worldwide, an Interstate Hotels & Resorts subsidiary, is one of the world's largest corporate housing providers, offering upscale, fully furnished corporate housing throughout the United States, Canada, the United Kingdom, France and 39 additional countries through its network partners. For more information about Interstate Hotels & Resorts, visit the company's Web site: www.ihrco.com.

This press release contains "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995, about Interstate Hotels & Resorts, including those statements regarding future operating results and the timing and composition of revenues, among others, and statements containing words such as "expects," "believes" or "will," which indicate that those statements are forward-looking. Except for historical information, the matters discussed in this press release are forward-looking statements that are subject to certain risks and uncertainties that could cause the actual results to differ materially, including the current slowdown of the national economy, economic conditions generally and the real estate market specifically, the impact of the events of September 11, 2001, governmental actions, legislative and regulatory changes, availability of debt and equity capital, interest rates, competition, supply and demand for lodging facilities in our current and proposed market areas, and the company's ability to manage integration and growth. Additional risks are discussed in Interstate Hotels & Resorts' filings with the Securities and Exchange Commission, including MeriStar Hotels & Resorts' and Interstate Hotels Corporation's annual reports on Form 10-K for the year ended December 31, 2001 and joint proxy statement and prospectus, filed on July 2, 2002.