GENERAL

The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q.

We own the sole general partner's interest in the Partnership. Our principal source of cash flows is from the operations of the Hotels and management and licensing contracts with affiliated and third-party hotels.

HOTEL PROPERTIES HELD FOR SALE

We reclassified all of our hotel properties from "held for sale" to "held and used" in the third quarter ended October 31, 2008. Due to the economic conditions, the funds were not available to potential buyers to finance a purchase of one or more of our hotels. As a result of this reclassification, we recorded $1.9 million depreciation expense.

We continue to seek qualified buyers for our hotels and will continue to migrate our primary business from a hotel owner to a hospitality service company providing trademark licensing and management services.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 10" ("FIN 48"), which became effective for years beginning on January 1, 2007. FIN 48 addressed the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, we must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. We are subject to U.S. federal income taxes as well as numerous state tax jurisdictions. We adopted FIN 48 on February 1, 2008. Our assessments of our tax positions in accordance with FIN 48 did not result in changes that had a material impact on results of operations, financial condition or liquidity. While we do not have any interest and penalties related to income taxes, our policy is to recognize such expenses as tax expense.

The tax years 2005 through 2008 remain open to examination by the federal and state taxing jurisdictions to which the we are subject.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We adopted SFAS No. 157 on February 1, 2008 and such adoption did not have a material impact on financial condition, results of operations or liquidity.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities," which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 was effective for us on February 1, 2008 and did not have an impact on our consolidated financial statements.

In June 2006, the FASB issued Emerging Issues Task Force ("EITF") Issue No. 06-03, "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That is, Gross Versus Net Presentation)," which permits entities to present certain taxes assessed by a governmental authority on either a gross basis (included in revenues and costs) or a net basis (excluded from revenues). An entity is not required to reevaluate its existing policies related to taxes assessed by a governmental authority but may choose to do so. EITF issue No. 06-03 is effective for interim and annual reporting periods beginning after December 15, 2006. We report our revenue net of sales taxes and our management plans to continue to report revenue net of sales tax.

In December 2007, the FASB issued Statement No. 141(Revised 2007), Business Combinations ("SFAS 141(R)") and Statement No. 160, "Accounting and Reporting of Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51" ("SFAS 160"). These statements will significantly change the financial accounting and reporting of business combination transactions and non-controlling (or minority) interests in consolidated financial statements. SFAS 141(R) requires companies to: (i) recognize, with certain exceptions, 100% of the fair values of assets acquired, liabilities assumed, and non-controlling interests in acquisitions of less than a 100% controlling interest when the acquisition constitutes a change in control of the acquired entity; (ii) measure acquirer shares issued in consideration for a business combination at fair value on the acquisition date; (iii) recognize contingent consideration arrangements at their acquisition-date fair values, with subsequent changes in fair value generally reflected in earnings; (iv) with certain exceptions, recognize pre-acquisition loss and gain contingencies at their acquisition-date fair values; (v) capitalize in-process research and development (IPR&D) assets acquired; (vi) expense, as incurred, acquisition-related transaction costs;
(vii) capitalize acquisition-related restructuring costs only if the criteria in SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities," are met as of the acquisition date; and (viii) recognize changes that result from a business combination transaction in an acquirer's existing income tax valuation allowances and tax uncertainty accruals as adjustments to income tax expense. SFAS 141(R) is required to be adopted concurrently with SFAS 160 and is effective for business combination transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption of these statements is prohibited. Our management is presently evaluating the effect of adopting these statements.

RESULTS OF OPERATIONS

Our expenses consist primarily of hotel operating expenses, property taxes, insurance, corporate overhead, interest on mortgage debt, professional fees and depreciation of the Hotels. Our operating performance is principally related to the performance of the Hotels. Therefore, management believes that a review of the historical performance of the operations of the Hotels, particularly with respect to occupancy, calculated as rooms sold divided by the number of rooms available, average daily rate ("ADR"), calculated as total room revenue divided by number of rooms sold, and revenue per available room ("REVPAR"), calculated as total room revenue divided by the number of rooms available, is appropriate for understanding revenue from the Hotels. Occupancy was 64.6% for the nine months ended October 31, 2008, a decrease of 9.1% from the prior year same period. ADR increased $4.74, or 6.2%, to $81.69. The increase in ADR, offset by reduced occupancy, resulted in a decrease of $3.97, or 7.0%, in REVPAR to $52.74 from $56.71 in the prior year period. The current decrease in occupancy is due to the downward trend in our economy causing less vacation and business travelers. We project that this trend will continue through late 2009.

The following table shows occupancy, ADR and REVPAR for the periods indicated:

                                                 October 31,
                                               2008              2007
OCCUPANCY                                               64.6 %      73.7 %
AVERAGE DAILY RATE (ADR)              $                81.69     $ 76.95
REVENUE PER AVAILABLE ROOM (REVPAR)   $                52.74     $ 56.71

No assurance can be given that the trends reflected in this data will continue or that occupancy, ADR or REVPAR will not decrease as a result of changes in national or local economic or hospitality industry conditions. The current global recession that we are experiencing is expected to negatively affect our business through late 2009.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 31, 2008 COMPARED TO THE
NINE MONTHS ENDED OCTOBER 31, 2007

A summary of the operating results for the nine months ended October 31, 2008
and 2007 is:

                                   2008            2007          Change        % Change
Revenue                        $ 16,016,370    $ 16,950,270   $   (933,900 )      (5.5) %
Operating Income               $    258,510    $  2,500,723   $ (2,242,213 )     (89.7) %
Net Income (Loss)
Attributable to Shares of
Beneficial Interest            $   (645,213 )  $  1,094,461   $ (1,739,674 )     >(100) %
Net Income (Loss) Per Share
- Basic                        $      (0.07 )  $       0.12   $      (0.19  )    >(100) %
Net Income (Loss) Per Share
- Diluted                      $      (0.07 )  $       0.08   $      (0.15  )    >(100) %

Our total revenue was $16.0 million for the nine months ended October 31, 2008, a decrease of $934,000, or 5.5%, when compared with the prior year period total of $17.0 million. Revenues from hotel operations, which include Room, Food and Beverage, Telecommunications and Other revenues, decreased 5.8% to $13.4 million from $14.3 million when comparing the nine months ended October 31, 2008 and 2007, respectively, primarily due to lower occupancy at our hotels. Hotel operations, including Food and Beverage operations, experienced a significant decrease in revenues during the third quarter due to lower occupancy. Due to a high degree of operational and financial leverage in our hotel business, expenses may not decline proportionately with a decline in revenues.

Total expenses were $16.9 million for the nine months ended October 31, 2008, an increase of $1.1 million, or 6.9%, compared to the prior year period. Total operating expenses increased $1.3 million, or 9.1%, to $15.8 million from $14.4 million for the nine months ended October 31, 2008 and 2007, respectively. The increases were primarily a result of recording one year's depreciation of $1.9 million on hotels reclassified from "held for sale" to "held and used."

General and administrative expenses of $2.5 million were consistent with the prior year nine-month period.

Hotel property depreciation expense was $2.4 million for the nine months ended October 31, 2008, an increase of $1.4 million, or 143%, from the prior year period. The increases were primarily a result of recording one year's depreciation of $1.9 million on hotels reclassified from "held for sale" to "held and used." The increase was a result of the the catch-up of unbooked depreciation on the hotel properties that were held for sale.

Total interest expense was $1.1 million for the nine months ended October 31, 2008, a decrease of $222,000, or 16.4%, compared to prior year period total of $1.4 million. Interest expense on mortgage notes decreased $112,000, or 9.3%, to $1.1 million for the nine months ended October 31, 2008, due primarily to the effect of the reduced prime rate on the Tucson St. Mary's variable rate mortgage. Interest expense on notes payable to banks decreased $88,000, or 80.4%, to $21,000 for the nine months ended October 31, 2008, due primarily to consolidating and refinancing of the bank line of credit with the Tucson St. Mary's mortgage discussed above. Interest expense on related party notes payable decreased $19,000, or 82.7%, to $3,000 for the nine months ended October 31, 2008, due primarily to the line of credit due to Rare Earth Financial, L.L.C., an affiliate of Mr. Wirth, being satisfied before the beginning of fiscal year 2009.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2008 COMPARED TO
THE THREE MONTHS ENDED OCTOBER 31, 2007

A summary of the operating results for the three months ended October 31, 2008
and 2007 is:

                                   2008           2007          Change       % Change
Revenue                        $  4,245,129    $ 5,506,632   $ (1,261,503 )    (22.9) %
Operating Income (Loss)        $ (2,390,268 )  $ 1,085,403   $ (3,475,671 )    >(100) %
Net Income (Loss)
Attributable to Shares of
Beneficial Interest            $ (2,290,734 )  $   547,442   $ (2,838,176 )    >(100) %
Net Income (Loss) Per Share
- Basic                        $      (0.25 )  $      0.06   $      (0.31 )    >(100) %
Net Income (Loss) Per Share
- Diluted                      $      (0.25 )  $      0.04   $      (0.29 )    >(100) %

Our total revenue was $4.2 million for the three months ended October 31, 2008, a decrease of $1.3 million or 22.9% compared with the prior year period of $5.5 million. Revenues from hotel operations, which include Room, Food and Beverage, Telecommunications and Other revenues, decreased 25.1% to $3.4 million from $4.6 million when comparing the three months ended October 31, 2008 and 2007, respectively, primarily due to lower occupancy at our hotels. Hotel operations, including Food and Beverage operations, experienced a significant decrease in revenues during the third quarter due to lower occupancy. Due to a high degree of operational and financial leverage in our hotel business, expenses may not decline proportionately with a decline in revenues.

Total expenses were $7.0 million for the three months ended October 31, 2008, an increase of $2.1 million, or 43.6%, compared to the prior year period of $4.9 million. Total operating expenses increased $2.2 million, or 50.1%, to $6.6 million from $4.4 million for the three months ended October 31, 2008 and 2007, respectively. The increases were primarily a result of recording one year's depreciation of $1.9 million on hotels reclassified from "held for sale" to "held and used."

General and administrative expenses increased $179,000, or 26.2%, to $862,000 from $684,000 when comparing the three months ended October 31, 2008 and 2007, respectively. This is primarily due to $85,000 of workers' compensation expense incurred by InnSuites Hotels, Inc. relating to a prior year policy audit and additional professional fees incurred at the corporate location.

Hotel property depreciation expenses was $2.4 million the three months ended October 31, 2008 compared to $16,000 for the prior year period. The increase of $2.4 million was a result of recording one year's depreciation of $1.9 million on hotels reclassified from "held for sale" to "held and used.

Total interest expense was $372,000 for the three months ended October 31, 2008, a decrease of $86,000, or 18.8%, from the prior year period total of $458,000. The decrease in interest expense is primarily due to the refinancing of our Tucson St. Mary's property at a lower interest rate, decreases in principal balances on our hotels and the payoff of the Rare Earth Financial line of credit in January 2008.

FUNDS FROM OPERATIONS (FFO)

We recognize that industry analysts and investors use Funds From Operations ("FFO") as a financial measure to evaluate and compare equity REITs. We also believe it is meaningful as an indicator of net income, excluding most non-cash items, and provides information about our cash available for distributions, debt service and capital expenditures. We follow the March 1995 interpretation of the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO, as amended January 1, 2000, which is calculated (in our case) as net income or loss (computed in accordance with GAAP, excluding gains (or losses) from sales of property, depreciation and amortization on real estate property and extraordinary items. FFO does not represent cash flows from operating activities in accordance with GAAP and is not indicative of cash available to fund all of our cash needs. FFO should not be considered as an alternative to net income or any other GAAP measure as an indicator of performance and should not be considered as an alternative to cash flows as a measure of liquidity. In addition, our FFO may not be comparable to other companies' FFO due to differing methods of calculating FFO and varying interpretations of the NAREIT definition.

                                         For the Nine Months Ended October
                                                        31,                  For the Three Months Ended October 31,
                                              2008               2007               2008           2007

Net Income (Loss) Attributable to
Shares of Beneficial Interest            $   (645,213 )     $  1,094,461      $  (2,290,734 )     $       547,422
Hotel Property Depreciation                 2,412,974            993,981          2,377,983                15,528
Loss (Gain) on Disposition of Hotels           31,493              4,182            (65,306 )               3,409
Minority Interest Share of
Depreciation and (Gain) Loss on
Dispositions                                 (566,923 )         (230,511 )         (558,716 )              (4,872 )
Funds from Operations                    $  1,232,331       $  1,862,113      $    (406,161 )     $       561,487

Funds from Operations decreased approximately $630,000 for the nine month period ended October 31, 2008 reflecting a decrease of 33.8 %, when compared to the prior year period. Funds from Operations decreased approximately $968,000 for the three month period ended October 31, 2008 reflecting a decrease of more than 100.0% from the prior year period. The decreases were primarily due to lower occupancies resulting in less revenue during the third quarter.

LIQUIDITY AND CAPITAL RESOURCES

Through our ownership interest in the Partnership, Yuma Hospitality LP and InnSuites Hotels, we have our proportionate share of the benefits and obligations of the Partnership's and Yuma Hospitality LP's ownership interests, as well as InnSuites Hotels' operational interests, in the Hotels. Our principal source of cash to meet our cash requirements, including distributions to our shareholders, is our share of these cash flows. Our liquidity, including our ability to make distributions to our shareholders, will depend upon the ability to generate sufficient cash flows from hotel operations.

We have principal of $249,336 due and payable for the remainder of fiscal year 2009 under mortgage notes payable. For the period between November 1, 2008 and October 31, 2009, we have principal of $1,005,266 due and payable under mortgage notes payable. We anticipate that cash flows from operations will be sufficient to satisfy these obligations as they become due. In the event cash flows from operations is insufficient to satisfy these obligations as they become due, we may seek to negotiate additional credit facilities or issue debt instruments. We are currently in negotiations to refinance our mortgage note payable on our Yuma hotel. See below.

We have no principal due and payable for the remainder of fiscal year 2009 under notes and advances payable to Mr. Wirth and his affiliates. The Trust had $400,000 due to Rare Earth Financial, L.L.C., an affiliate of Mr. Wirth, in March 2006. The Trust satisfied this note using the line of credit established by the Partnership with Rare Earth Financial in March 2006. On December 1, 2006, the Partnership amended this line of credit agreement to increase the maximum amount the Partnership can borrow under the line of credit from $700,000 to $1.0 million. The Trust has $424,000 due on this line of credit as of October 31, 2008. For the twelve months between November 1, 2008 and October 31, 2009, the Trust has principal due and payable under notes payable of $424,000 to Mr. Wirth and his affiliates.

We entered into an agreement for an unsecured bank line of credit on August 18, 2006. Under the agreement, we could draw $750,000, bearing interest at prime plus 0.5%, with interest-only payments due monthly. During specified times over the duration of the line of credit, we must pay the line of credit down to zero and are unable to borrow against the line of credit for a period of 30 days. The line of credit matured on May 18, 2008 and was replaced by a new $850,000 revolving line of credit, as discussed below. As of October 31, 2008, this $750,000 line of credit was paid in full.

On March 3, 2008, we established a new $850,000 revolving line of credit. The new line of credit has no financial covenants, bears interest at Wall Street Journal prime (4.0% as of October 31, 2008) and matures on July 15, 2009. As of October 31, 2008, we had drawn $850,000 of the funds available under the line of credit.

We may seek to negotiate additional credit facilities or issue debt instruments. Any debt incurred or issued by us may be secured or unsecured, long-term, medium-term or short-term, bear interest at a fixed or variable rate and be subject to such other terms as we consider prudent.

Due to the current economic conditions, we are in negotiations to refinance our mortgage note payable on our Yuma hotel in the amount of $4.0 million to supplement our cash flows from operations during fiscal year 2010. If our cash flows from operations are not sufficient to meet our obligations during fiscal year 2010, we project that the proceeds from this refinancing will be sufficient to satisfy our obligations as they become due during fiscal year 2010.

We continue to contribute to a Capital Expenditures Fund (the "Fund") an amount equal to 4% of the InnSuites Hotels' revenues from operation of the Hotels. The Fund is restricted by the mortgage lender for four of our properties. As of October 31, 2008, $108,297 was held in restricted capital expenditure funds and is included on our Balance Sheet as "Restricted Cash." The Fund is intended to be used for capital improvements to the Hotels and for refurbishment and replacement of furniture, fixtures and equipment, in addition to other uses of amounts in the Fund considered appropriate from time to time. During the nine months ended October 31, 2008, the Hotels spent $1,122,942 for capital expenditures. We consider the majority of these improvements to be revenue producing. Therefore, these amounts have been capitalized and are being depreciated over their estimated useful lives. The Hotels also spent $1,129,404 and $1,045,304 during the nine-month periods ended October 31, 2008 and October 31, 2007, respectively, and spent $379,121 and $337,288 during the three-month periods ended October 31, 2008 and October 31, 2007, respectively, on repairs and maintenance and these amounts have been charged to expense as incurred.

As of October 31, 2008, we have no commitments for capital expenditures beyond the 4% reserve for refurbishment and replacements set aside annually for each hotel property.

OFF-BALANCE SHEET FINANCINGS AND LIABILITIES

Other than lease commitments and legal contingencies incurred in the normal course of business, we do not have any off-balance sheet financing arrangements or liabilities. We do not have any majority-owned subsidiaries that are not included in the consolidated financial statements. (See Note 2 - "Summary of Significant Accounting Policies.")

SEASONALITY

The Hotels' operations historically have been seasonal. The three southern Arizona hotels experience their highest occupancy in the first fiscal quarter and, to a lesser extent, the fourth fiscal quarter. The second fiscal quarter tends to be the lowest period of occupancy at those three southern Arizona hotels. This seasonality pattern can be expected to cause fluctuations in our quarterly revenue. The two hotels located in California and New Mexico historically experience their most profitable periods during the second and third fiscal quarters (the summer season), providing some balance to the general seasonality of our hotel business. To the extent that cash flows from operations are insufficient during any quarter, because of temporary or seasonal fluctuations in revenue, we may utilize other cash on hand or borrowings to make distributions to our shareholders or to meet operating needs. No assurance can be given that we will make distributions in the future.

FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-Q, including statements containing the phrases "believes," "intends," "expects," "anticipates," "predicts," "will be," "should be," "looking ahead," "may" or similar words, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend that such forward-looking statements be subject to the safe harbors created by such Acts. These forward-looking statements include statements regarding our intent, belief or current expectations in respect of (i) the declaration or payment of dividends; (ii) the leasing, management or operation of the Hotels;
(iii) the adequacy of reserves for renovation and refurbishment; (iv) our financing plans; (v) our position regarding investments, acquisitions, developments, financings, conflicts of interest and other matters; and
(vi) trends affecting our or any Hotel's financial condition or results of operations.

These forward-looking statements reflect our current views in respect of future events and financial performance, but are subject to many uncertainties and factors relating to the operations and business environment of the Hotels that may cause our actual results to differ materially from any future results expressed or implied by such forward-looking statements. Examples of such uncertainties include, but are not limited to:

• local or national economic and business conditions, including, without limitation, conditions which may affect public securities markets generally, the hospitality industry or the markets in which we operate or will operate.

• fluctuations in hotel occupancy rates;

• changes in room rental rates that may be charged by InnSuites Hotels in response to market rental rate changes or otherwise;

• seasonality of our business;

• interest rate fluctuations;

• changes in government regulations, including federal income tax laws and regulations;

• competition;

• any changes in our financial condition or operating results due to acquisitions or dispositions of hotel properties;

• insufficient resources to pursue our current strategy;

• concentration of our investments in the InnSuites Hotelsฎ brand;

• loss of franchise contracts;

• real estate and hospitality market conditions;

• hospitality industry factors;

• our ability to meet present and future debt service obligations;

• terrorist attacks or other acts of war;

• outbreaks of communicable diseases;

• natural disasters; and

• loss of key personnel;

We do not undertake any obligation to update publicly or revise any forward-looking statements whether as a result of new information, future events or otherwise. Pursuant to Section 21E(b)(2)(E) of the Securities Exchange Act of 1934, the qualifications set forth hereinabove are inapplicable to any forward-looking statements in this Form 10-Q relating to the operations of the Partnership.