Jameson Inns, Inc. Reports First Quarter 2006 Financial Results

Jameson Inn Brand RevPAR Up 15.2%

Jameson Inns Jameson Inns, Inc. (NASDAQ:JAMS) , owner and operator of Jameson Inn hotels and Signature Inn ("the Inns to-be-converted") hotels, today announced financial results for the quarter ended March 31, 2006.

First Quarter Highlights

• Jameson Inn Brand RevPAR Up 15.2%
• RevPAR for All Inns Increases 13.5%
• RevPAR for Five Inns Converted in 2005 to Jameson Inns Grows 47.6%
• Jameson Inn Brand Occupancy Up 6.0 Percentage Points
• Total Revenue Increases $2.3 Million
• Adjusted EBITDA Rises 24.3% to $5.7 million
• Additional Four Hotels Convert to the Jameson Inn Brand

  Three Months Ended March 31,       2006            2005    Net Change
Jameson Inn Brand RevPAR $36.43 $31.63 +15.2%
All Inns RevPAR $33.26 $29.30 +13.5%
Five Inns Converted in 2005
to Jameson Inns RevPAR(1) $26.50 $17.95 +47.6%
Jameson Inn Brand Occupancy 56.3% 50.3% +6.0
Total Revenue $21.4 $19.0 +12.2%
million million
Adjusted EBITDA for
Continuing Operations $5.7 $4.6 +24.3%
million million

First Quarter Results

For the quarter ended March 31, 2006, total revenue was $21.4 million, net loss totaled $2.8 million or ($0.05) per common share, and adjusted EBITDA was $5.7 million.

Lodging revenues grew by approximately $2.3 million, or 12.4%, to $21.3 million in the first quarter 2006 from $18.9 million in the same period in 2005. The improvement resulted from an increase in average daily rate (ADR) of $1.57, or 2.5%, and an increase in occupancy of 5.0 percentage points, to 51.5%. This combination drove a 13.5% increase in revenue per available room (RevPAR) for combined brands.

Occupancy for the Company's core brand, Jameson Inn, increased 6.0 percentage points to 56.3% in first quarter 2006 from 50.3% in the same period in 2005, while ADR increased 2.7% to $64.66 in the first quarter 2006 as compared to $62.96 in the same period in 2005. This combination drove RevPAR 15.2% higher to $36.43, or $4.80 better than the same period in 2005.

Gross operating profit, defined as total revenues less direct lodging expenses, improved to $9.6 million in first quarter 2006 from $8.4 million in the same period of 2005. As a percentage of revenues, gross operating profit improved to 44.8% in first quarter 2006 from 44.1% in the same period of 2005.

Inns to-be-converted

The Company continues to increase its focus on the stronger performing proprietary Jameson Inn brand through the conversion of its Signature Inn brand. The conversions include a significant renovation and upgrade to the physical property. Thomas W. Kitchin, Chairman and Chief Executive Officer of Jameson Inns, Inc., stated, "The transformation of this Company continues to progress. We grew our Jameson Inn brand room base by 11% on a year-over-year basis to 6,225 rooms from 5,609 rooms with five Inns being converted to Jameson Inns in 2005. During the first quarter 2006, we also converted four Signature Inns located in Indianapolis, Indiana, adding 404 more rooms to the Jameson Inn brand. These hotels officially became Jameson Inns on April 1, 2006."

ADR for the Inns to-be-converted was $63.75 in first quarter 2006 compared to $63.19 in the same period in 2005, while occupancy was 30.6% compared to 30.4%, in the same period in 2005. This resulted in a RevPAR increase of 1.6%. The renovation and conversion of four Inns to the Jameson Inn brand was completed on April 1, 2006, causing an overall decrease in performance of these Inns during the first quarter. Our plan remains to convert the remaining eight Inns to-be-converted to Jameson Inns by the end of 2007, with two of those Inns expected to be completed during 2006.

In February 2006, as part of the Company's ongoing divestiture strategy, the Company sold the two remaining Signature Inns that had been classified as held-for-sale.

Mr. Thomas Kitchin concluded, "Our ongoing strategy of converting our entire portfolio to the Jameson Inn brand continues to provide us with confidence that we have a product that is in demand and well-positioned to benefit along with the rising tide of the industry. Each day we become more confident that our transition from two brands to our stronger performing Jameson Inn brand will enhance our opportunity to increase market share and improve performance in the coming years."

Balance Sheet

At March 31, 2006, variable rate debt as a percentage of total outstanding debt was reduced to approximately 43% from 82% at March 31, 2005. The weighted average interest rate of the Company's debt was 7.3% in the first quarter 2006 as compared to 5.6% in the same period of 2005.

Mr. Craig Kitchin, President and Chief Financial Officer of Jameson Inns, Inc. commented, "We continued to strengthen the capital structure of the Company by making significant improvements to our balance sheet by fixing the interest rates on a large portion of our outstanding variable rate debt. We also maintained our financial flexibility by keeping 31 Inns unencumbered as of March 31, 2006. During the balance of the year, we will continue to focus on refinancing variable interest rates to fixed interest rates and extending maturities."

The Company invested approximately $4.9 million in the first quarter of 2006 for its capital refurbishment program, renovation and conversion projects. The 2006 budget for capital improvement projects is approximately $19.5 million, which includes the renovation and conversion of Inns to-be- converted and refurbishment of existing Jameson Inns.

April 2006 Update

For April 2006, occupancy for all continuing operations hotels was 57.8% versus 56.7% in the same period in 2005. The ADR for these hotels was $66.23 compared to $64.34 in the same period in 2005. Consequently, RevPAR was $38.31, up 5.1% over RevPAR of $36.46 in the same period in 2005.

"Our RevPAR gains in April would have been stronger had it not been for the fact that the Easter holiday fell in April this year as opposed to March last year," said Mr. Craig Kitchin.

For the five Inns converted to Jameson Inns in 2005, RevPAR was up 8.5% for April 2006. Two of the five Inns were in the construction stage during all or a substantial part of the second quarter 2005.

For the four Inns converted to Jameson Inns on April 1, 2006, RevPAR was up 33.0% in April 2006. None of those four Inns was in the construction stage until the fourth quarter of 2005.

Collectively, RevPAR was up 18.7% in April 2006 for the nine Inns converted to the Jameson Inn brand in 2005 and 2006.

Total Inns

At March 31, 2006, the Company owned 95 Jameson Inns and 12 Inns to-be- converted (including four that were converted to Jameson Inns on April 1, 2006) in the southeastern and midwestern United States, and franchised the use of the Jameson brand to the owners of 12 other Jameson Inns.

The Company's 107 owned and 12 franchised Inns are located in the following states:
                                                       All Inns
Inns to-be- Percentage
Jameson Inns converted of Total
State Hotels Rooms Hotels Rooms Hotels Rooms Rooms

Georgia 31 1,599 -- -- 31 1,599 21.2%
Indiana 2 246 9 954 11 1,200 15.9%
Alabama 18 967 -- -- 18 967 12.8%
Tennessee 12 780 -- -- 12 780 10.3%
N. Carolina 14 679 -- -- 14 679 9.0%
S. Carolina 10 575 -- -- 10 575 7.6%
Florida 6 390 -- -- 6 390 5.2%
Illinois -- -- 3 371 3 371 4.9%
Mississippi 6 349 -- -- 6 349 4.6%
Kentucky 3 305 -- -- 3 305 4.1%
Louisiana 3 213 -- -- 3 213 2.8%
Virginia 2 122 -- -- 2 122 1.6%
Total 107 6,225 12 1,325 119 7,550 100.0%

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