Prime Hospitality Corp.

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International Guild of Hospitality & Restaurant Managers

Prime Hospitality Corp. (PDQ)

Prime Hospitality Corp. is an owner, manager and franchisor of hotels, with 233 hotels in operation containing 29,641 rooms located in 33 states as of December 31, 2001. Prime controls two hotel brands, AmeriSuites and Wellesley Inns & Suites, and operates a portfolio of upscale, full-service hotels under franchise agreements with national hotel chains. The Company owns and operates 131 hotels, operates 28 hotels under lease agreements primarily with real estate investment trusts, manages 38 hotels for third parties, and franchises 36 hotels which it does not operate. The Portfolio is comprised of 139 AmeriSuites hotels, 74 Wellesley Inns & Suites hotels and 20 non-proprietary brand hotels.

AmeriSuites

Prime owns and operates 65 AmeriSuites hotels, operates and leases 27 hotels from third parties and franchises the operation of the remaining 47 hotels, 25 of which are operated by Prime. As of December 31, 2001 , there were also eight AmeriSuites under construction (one of which opened in February 2002), with an additional 57 signed franchise agreements for new AmeriSuites to be built. AmeriSuites are upscale, all-suite hotels containing approximately 128 suites and are located in 31 states. The hotels are situated primarily near suburban commercial centers, corporate office parks and other travel destinations, within close proximity to dining, shopping and entertainment amenities.

AmeriSuites are positioned in the upscale segment of the lodging industry, competing predominantly with other upscale and mid-price brands such as Courtyard by Marriott, Hilton Garden Inns, Hampton Inns & Suites and Holiday Inn. The average age of the AmeriSuites hotels is approximately 4.9 years.

AmeriSuites are all-suite, upscale hotels that offer guests an attractively designed suite, a complimentary continental breakfast in a spacious lobby cafe, remote-control cable television, fitness centers and pool facilities. The hotels provide group meeting space, but do not include restaurant or lounge facilities. AmeriSuites attract customers principally because of the size and quality of the guest suites, which contain approximately 420 square feet, approximately 30% larger than a standard hotel room. The suites offer distinct living, sleeping and kitchen areas with microwaves, refrigerators, in-room coffee makers, ironing boards and hair dryers. AmeriSuites hotels also offer business suites marketed under the name "TCB (Taking Care of Business) Suites". TCB Suites were developed specifically for the business traveler and feature a well-equipped, in-suite office, including an oversized desk with executive chair, easy chair and ottoman, in addition to technology features such as dual phone lines, voice mail, data ports, speakerphones and other amenities. The typical AmeriSuites contains approximately 128 suites, including 20-30 TCB Suites, and two to four meeting rooms. AmeriSuites are primarily located near suburban commercial centers, corporate office parks and other travel destinations, within close proximity to dining, shopping and entertainment facilities.

Wellesley Inns & Suites

Prime owns and operates 55 Wellesley Inns & Suites hotels and franchises 19 hotels, five of which are managed by Prime. There are also ten signed franchise agreements for new Wellesley Inns & Suites to be built. Wellesley Inns & Suites are mid-price limited service hotels containing between 100-130 rooms and are located in 22 states primarily in the Southeast, Northeast and Southwest. In 2001, Wellesley Inns & Suites contributed approximately 24.4% of the Company's Hotel EBITDA.

The Wellesley Inns & Suites brand is comprised of 33 Wellesley Inns and 41 Wellesley Inns & Suites that, in addition to Wellesley Inn features, also contain suite rooms. In the past year, five hotels have been converted from other brands to the Wellesley Inns & Suites brand.

Wellesley Inns & Suites are positioned in the mid-price segment of the industry and compete with other chains such as Hampton Inn & Suites, La Quinta Inn & Suites, Holiday Inn Express and Comfort Inn & Suites. The average age of the chain's hotels is 9.6 years.

Of the Company's 33 Wellesley Inns, 16 are located in Florida and the remainder in the Middle Atlantic and Northeast United States. The prototypical Wellesley Inn has approximately 100 rooms and is distinguished by a stucco exterior, spacious lobby and amenities such as pool facilities, complimentary continental breakfast, remote control cable television with free movie channels and in-room coffee makers.

Non-Proprietary Brands

As of December 31, 2001, there were 20 hotels operated under national franchises. Prime owns 11 of these hotels (one of which was sold in January 2002), leases one hotel and manages eight of these hotels for third parties. The non-proprietary branded hotels operate primarily in the upscale full-service segment under national franchises such as Hilton, Radisson, Sheraton, Holiday Inn and Ramada and generally provide food and beverage service and banquet facilities. The hotels are primarily located in the Northeast. In 2001, the non-proprietary brand hotels contributed approximately 21.2% of the Company's Hotel EBITDA.

The Company's non-proprietary brand hotels primarily operate in the upscale full-service segment. The full-service hotels provide food and beverage outlets, contain meeting and banquet facilities and are operated under franchise agreements primarily with Hilton, Radisson, Sheraton, Holiday Inn and Ramada. The full-service hotels are concentrated in the Northeast. The hotels are generally positioned along major highways within close proximity to corporate headquarters, office parks, airports, convention or trade centers and other major facilities.

The Company's full-service hotels generally have between 150 and 300 rooms and pool, restaurant, lounge, banquet and meeting facilities. Other amenities include fitness rooms, room service, remote-control cable television and business centers. In order to enhance guest satisfaction, the Company also has theme concept lounges in a number of its hotels.

On January 1, 2002, the Company converted its existing lease agreements on 19 AmeriSuites hotels with Equity Inns, Inc. to management agreements. The management agreements provide for a subsidiary of Prime to share in the cash flow above and to fund deficits below certain thresholds. The agreements also require the Prime subsidiary to guarantee a minimum return to Equity Inns equal to the minimum rent under the prior lease agreement.

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