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 quarter ended October 31, 2008. Due to the economic conditions and credit market restraints, 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 in depreciation expense during the quarter ended October 31, 2008 that was previously suspended while the assets were "held for sale."

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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In our Annual Report on Form 10-K for the year ended January 31, 2009, we identified the critical accounting policies that affect our more significant estimates and assumptions used in preparing our consolidated financial statements. Those policies include accounting for property, plant and equipment, cash and cash equivalents, restricted cash, revenue recognition, receivables and allowance for doubtful accounts, stock based compensation, income taxes, dividends and distributions, minority interest, income (loss) per share and fair value of financial instruments, new accounting pronouncements, segment reporting and advertising cost. We have not changed these policies from those previously disclosed in our Annual Report.

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 70.2% for the three months ended April 30, 2009, a decrease of 8.7% from the prior year same period. ADR decreased $7.35, or 8.2%, to $82.35. The decreases in ADR and reduced occupancy resulted in a decrease of $12.98, or 18.3%, in REVPAR to $57.83 from $70.81 in the prior year period. The decrease in occupancy is due to the downward trend in our economy causing less vacation and fewer business travelers. We project that this trend will continue through late 2009.

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

                                                April 30,
                                           2009             2008
OCCUPANCY                                       70.2 %          78.9 %
AVERAGE DAILY RATE (ADR)              $        82.35      $    89.70
REVENUE PER AVAILABLE ROOM (REVPAR)   $        57.83      $    70.81

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. We expect the current global recession to negatively affect our business through late 2009.

A summary of the operating results for the three months ended April 30, 2009 and 2008 is:

                                      2009          2008          Change       % Change
Revenue                            $ 5,487,261   $ 6,772,478   $ (1,285,217 )    (19.0) %
Operating Income                   $   941,889   $ 2,211,221   $ (1,269,332 )    (57.4) %
Net Income Attributable to
Controlling Interest               $   531,666   $ 1,506,460   $   (974,794 )    (64.7) %
Net Income Per Share - Basic       $      0.06   $      0.16   $      (0.10 )    (62.5) %
Net Income Per Share - Diluted     $      0.04   $      0.14   $      (0.10 )    (71.4) %

For the three months ended April 30, 2009, our total revenue was $5.5 million, a decrease of $1.3 million, or 19.0%, compared with the prior year period of $6.8 million. Revenues from hotel operations, which include Room, Food and Beverage, Telecommunications and Other revenues, decreased 19.2% to $4.8 million for the three months ended April 30, 2009, from $5.9 million for the three months ended April 30, 2008. Hotel operations, including Food and Beverage operations, experienced a significant decrease in revenues during the first quarter of fiscal 2010 due to lower occupancy and increased rate pressure. Expenses may not decline proportionately with a decline in revenues due to a high degree of operational and financial leverage in our hotel business.

Total expenses of $4.9 million for the three months ended April 30, 2009 were consistent with the prior year period total of $4.9 million. Total operating expenses of $4.5 million were also consistent with the prior year period total operating expenses. The majority of the hotel operating expenses decreased due to lower occupancy, offset by an increase of $479,000 in hotel property depreciation expense for the current quarter, due to the reclassification of the hotel properties from "held for sale" to "held and used" during the third quarter of fiscal year 2009.

General and administrative expenses was $851,000 for the three months ended April 30, 2009, consistent with the prior year period total of $836,000.

Total interest expense was $382,000 for the three months ended April 30, 2009, consistent with the prior year period total of $385,000.

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. The following table shows the reconciliation of FFO to Net Income Attributable to Shares of Beneficial Interest:

                                                                 For the Three Months Ended
                                                                         April 30,
                                                                  2009             2008

Net Income Attributable to Controlling Interest                $   531,666       $  1,506,460
Hotel Property Depreciation                                        494,903             16,037
Loss on Disposition of Hotels                                          590              2,720
Non-Controlling Interest Share of Depreciation and Loss on
Dispositions                                                      (109,965 )           (5,046 )
Funds from Operations                                          $   917,194       $  1,520,171

FFO decreased approximately $603,000 for the three month period ended April 30, 2009, reflecting a decrease of 39.7% when compared to the prior year period. The decrease was primarily due to lower occupancies and room rates resulting in less revenue during the quarter.

Through our ownership interest in the Partnership, Yuma Hospitality LP and InnSuites Hotels, we have a 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 $606,886 due and payable for the remainder of fiscal year 2010 under mortgage notes payable. For the period between May 1, 2009 and April 30, 2010, we have principal of $820,482 due and payable under mortgage notes payable. We anticipate that current cash balances and future cash flows from operations will be sufficient to satisfy these obligations as they become due. In the event cash flows from operations are insufficient to satisfy these obligations as they become due, we may seek to negotiate additional credit facilities or issue debt instruments.

We have no principal due and payable for the remainder of fiscal year 2010 or thereafter under notes and advances payable 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, was paid in full, and was replaced by a new $850,000 revolving line of credit, as discussed below.

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 (3.25% as of April 30, 2009) and matures on July 15, 2009. As of April 30, 2009, we had drawn $227,515 of the funds available under the line of credit. On April 6, 2009, the revolving line of credit was lowered to $650,000 due to the bank's lending limits. We are currently in negotiations with the bank to renew this 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.

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 April 30, 2009, $163,635 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 three months ended April 30, 2009, the Hotels spent $253,946 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 $288,190 and $364,006 during the three-month periods ended April 30, 2009 and April 30, 2008, respectively, on repairs and maintenance and these amounts have been charged to expense as incurred.

As of April 30, 2009, 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.

• 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.