During the third quarter, Candlewood's growth was slowed by the weak economy. The effects of the softer market were offset by Candlewood's strength in the extended-stay business, and a stronger, focused direct sales force. As a result, the Company reported revenue per available room (RevPAR) down just 2.7 percent from the year-ago third quarter compared with the lodging industry's RevPAR decline of 11.2 percent as reported by Smith Travel Research.

"We are saddened by the tragic events of September 11, 2001. Our thoughts and prayers are with those so deeply affected," said Jack P. DeBoer, chairman and chief executive officer. "At Candlewood, excluding the summer holidays, we saw weekly occupancy rates of over 80 percent on average during the first two months of the quarter. Comparatively, our occupancy has averaged 75 percent since the tragedy. However, we are encouraged by our strong base of extended-stay business, which has held up very well post-September 11. Our focus on relationship selling has become a significant competitive advantage, now more than ever. We've allocated greater resources to our sales efforts. And, in the third quarter, we benefited from a successful marketing promotion with Amazon.com. Simply put, we believe we increased market share versus our competitors in a difficult market through increased sales efforts and new marketing initiatives. Our distinct operating strategy served us well going into September and should give us an advantage as we continue to navigate in this challenging economic environment."

DeBoer continued, "Our brand achieved a significant milestone recently, as we opened our 100th hotel, located in Rogers, Arkansas, near the headquarters of JB Hunt, Tyson Foods, and Wal Mart. This hotel represents much of what Candlewood's growth will be about in the near future, as it was built by an existing, multi-unit value partner. The hotel has 78 rooms to accommodate a smaller market, and to-date has achieved strong results."

Third Quarter 2001 Results
The revenue results of the Candlewood hotels owned, leased and managed by the Company for the third quarter of 2001 were: RevPAR of $45.01, average daily rate (ADR) of $58.94 and average occupancy of 76.4 percent. For the third quarter of 2000: RevPAR was $46.24, ADR was $59.92 and average occupancy was 77.2 percent.

Total hotel-operating revenues for the latest three-month period were $34.6 million, essentially unchanged from a year ago. Due to significant investment in sales efforts, the loss before preferred dividends was $525,000, and the net loss after preferred stock dividends was $2.5 million, or $0.28 per share. For the 2000 third quarter, income before preferred dividends was $3.1 million, and net income after preferred stock dividends was $1.1 million, or $0.12 per share.

The reduced income in the 2001 third quarter from the prior year primarily was attributable to three factors: a same store decrease in total hotel revenue of 5.9 percent; the costs of the promotional campaign with Amazon.com; and the increased expense of the Company's enhanced sales organization. Candlewood also reported higher employee insurance costs during the latest quarter.

For the 2001 third quarter, the Company opened five franchise hotels -- two Cambridge Suites and three Candlewood Suites. The Company had 104 hotels open at September 30, 2001, including 26 franchised and 78 owned, leased or managed by the Company. At September 30, 2000, the Company had 88 hotels open; including 15 franchised and 73 owned, leased or managed by the Company.

Nine Month Results
The revenue results of the Candlewood hotels owned, leased and managed by the Company for the first nine months of 2001 were: RevPAR of $44.86, ADR of $60.83 and average occupancy of 73.8 percent. For the first nine months of 2000: RevPAR was $44.93, ADR was $57.99 and average occupancy was 77.5 percent.

Total hotel-operating revenues for the latest nine-month period were up slightly to $100.9 million from $100.0 million the prior year. The loss before preferred dividends for the year-to-date period was $319,000, and the net loss after preferred stock dividends was $6.3 million, or $0.70 per share. For the 2000 nine months, income before preferred dividends was $6.4 million, and net income after preferred stock dividends was $344,000, or $0.04 per share.

Financial Position
Commenting on the financial position of the Company, Warren D. Fix, chief financial officer, said, "We ended the quarter with a cash balance of $23.9 million. This change from the June 30, 2001, cash balance of $16.6 million is primarily due to the sale and leaseback of two hotels to Hospitality Properties Trust. Cash proceeds of approximately $29 million from the transaction were used to pay down debt and increase our corporate cash position. In the third quarter we saw the continuing benefits of interest rate reductions on our floating rate debt. Since this time last year, 30-day LIBOR has decreased over 400 basis points, to approximately 2.3 percent today. This benefit will be realized in future months. We now have approximately $193 million of debt, of which 90 percent is floating rate tied to 30-day LIBOR. We intend to continue to conserve cash and, as discussed in our SEC filings, continue to discuss with our lenders the extension or modification of our short-term debt."

Outlook
The fourth quarter is typically the weakest quarter for the Company as business travel slows during the holidays. This, coupled with the uncertain economy and reduced consumer and business travel following the September 11 attacks makes it difficult to predict performance levels for the balance of 2001.

While the Company's backlog of franchise applications is stronger than last year, potential partners are having difficulty in obtaining construction financing.

"This is a difficult operating climate, but we are staying the course. We will continue to focus on franchising over development. We will continue to target suburban office market locations versus urban locations or central business districts. We will pursue national accounts such as government agencies and the ancillary business they bring. We will renew our outreach to the senior citizen demographic, who finds our quality and value very attractive. We will continue allocating additional resources for our marketing and sales efforts to gain market share and new customers. And, we will continue to review opportunities to raise efficiencies and reduce costs," said DeBoer.

Early in the fourth quarter, Candlewood implemented a more efficient operating structure by eliminating a middle management layer, providing a direct line of communication between senior management and hotel staff. After separation payments, the new structure is expected to reduce overhead costs and provide for faster communication to and from the hotels.

Third quarter Conference Call
Candlewood's third quarter investor conference call is scheduled for 11 a.m. ET today. This call will be simulcast and available over the Internet via the web site www.vcall.com. The webcast will be available for replay for a period of 30 days.

About the Company
Candlewood Hotel Company, headquartered in Wichita, Kansas, owns, operates and franchises Candlewood Suites and Cambridge Suites -- hotel properties that offer high-quality accommodations for all guests, while catering to mid-market and upscale business and personal travelers seeking multiple night stays. Candlewood Hotel Company was founded in late 1995 by Chairman and CEO Jack DeBoer - founder of Residence Inn.

The financial results reported in this press release are unaudited. The results may not be indicative of results for future periods. The matters in this press release include "forward looking statements" within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are qualified by cautionary statements contained herein and in Candlewood Hotel Corporation filings with the Securities and Exchange Commission. Factors which may affect the Company's results include: the impact of terrorist attacks or general economic recession on the Company's results from operations, the inability to extend or modify the terms of the Company's outstanding indebtedness, the inability to secure additional market share due to competition and other factors, the inability to improve RevPAR through the management of occupancy levels and pricing, the risk that overbuilding in the hospitality industry will adversely affect occupancy levels and pricing, the Company's ability to lower operating expenses and gain market share through sales efforts, operating performance of the Company's hotels and general economic conditions, the availability of financing to franchisees on acceptable terms, the market acceptance of the Candlewood brand, the ability to attract and retain franchisees, the risk that signed franchise agreements may not result in the construction or opening of hotels, the ability to attract and retain quality personnel and the risk that openings may be delayed. Actual results may differ materially from management's expectations.

The forward-looking statements made in this release reflect the opinion of management as of the date of the release. Please be advised that subsequent developments are likely to cause these statements to become outdated with the passage of time. We do not intend, however, to update this press release or any statement made herein prior to our next quarterly earnings release. The results of operations for the quarter and nine months of 2001 are not necessarily indicative of the results that may be expected for the entire year.

                          CANDLEWOOD HOTEL COMPANY, INC.
                         THIRD QUARTER OPERATING RESULTS
           (Unaudited) (In thousands, except share and per share data)


                                            For the three-    For the nine
                                             months ended      months ended
                                            September 30,     September 30,
                                            2001     2000     2001     2000

    Revenues:
    Hotel operations                       $33,493  $33,624  $98,046  $97,704
    Other income                             1,097    1,091    2,842    2,288
      Total hotel operating revenues        34,590   34,715  100,888   99,992
    Proceeds from sales of hotels, net of
     deferred gain of $64 and $0,
     respectively                           28,850      -     28,850      
    Deferred gain recognition on sales of
     hotels                                    357      550    1,049    1,587
      Total revenues                        63,797   35,265  130,787  101,579

    Operating costs and expenses:
    Hotel operating expenses                19,615   16,807   55,760   51,028
    Corporate operating expenses             1,509    1,648    4,884    4,604
    Rent expense on leased hotels            6,807    6,294   19,468   18,852
    Hotel opening costs                        -         44      230      157
    Depreciation and amortization            3,203    2,714    8,833    7,877
      Total operating costs and expenses    31,134   27,507   89,175   82,518
    Costs of hotels sold                    29,064      -     29,064      
                                             3,599    7,758   12,548   19,061

    Interest income                            219      335      600      834
    Interest expense                        (4,343)  (5,011) (13,467) (13,543)
      Income (loss) before preferred
       dividends                              (525)   3,082     (319)   6,352

    Preferred stock dividends               (2,023)  (2,017)  (6,002)  (6,008)
      Net loss available to common
       stockholders                         (2,548)   1,065   (6,321)     344

    Per share data:
      Net income (loss) per share of
       common stock - basic and diluted     $(0.28)   $0.12   $(0.70)   $0.04

      Average weighted shares of common
       stock outstanding                     9,025    9,025    9,025    9,025


                          CANDLEWOOD HOTEL COMPANY, INC.


                                             For the three-     For the nine
                                              months ended      months ended
                                              September 30,     September 30,
                                              2001     2000     2001     2000

    Hotel statistics (Candlewood owned,
     leased or managed)
        # of Hotels                            77       72       77       72
        Average occupancy %                 76.4%    72.2%    73.8%    77.5%
        Average daily rate                 $58.94   $59.92   $60.83   $57.99
        Revenue per available room         $45.01   $46.24   $44.86   $44.93
          Growth                            -2.7%             -0.2%

    Hotel statistics - comparable hotels
     (owned, leased or managed open as
     of beginning of period)
        # of Hotels                            72       72       66       66
        Average occupancy %                 76.6%    77.2%    74.3%    77.8%
        Average daily rate                 $56.64   $59.92   $57.71   $56.94
        Revenue per available room         $43.40   $46.24   $42.86   $44.32
          Growth                            -6.1%             -3.3%



                                                        As of September 30,
                                                       2001             2000

    Open Hotels
          Owned                                         31                32
          Leased                                        36                34
          Managed (A)                                    2                 2
          Joint Venture                                  9                 5
          Franchised                                    26                15
            Total Open                                 104                88

    Under Construction
          Owned                                        -                   1
          Leased                                       -                 
          Managed                                      -                 
          Joint Venture                                -                   4
          Franchised                                     3                 6
            Total Under Construction                     3                11

          Total Hotels                                 107                99

    Open Rooms
          Owned                                      3,786             3,968
          Leased                                     4,292             3,893
          Managed (A)                                  179               179
          Joint Venture                              1,159               636
          Franchised                                 2,637             1,652
            Total Open                              12,053            10,328

    Under Construction Rooms
          Owned                                        -                 214
          Leased                                       -                 
          Managed                                      -                 
          Joint Venture                                -                 522
          Franchised                                   303               661
            Total Under Construction                   303             1,397

          Total Rooms                               12,356            11,725

    Signed Franchise Agreements                         23                15

       (A)  Includes two managed hotels not under the Candlewood brand.