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, management and licensing contracts with affiliated and third-party hotels and distributions from the hotels.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In our Annual Report on Form 10-K for the year ended January 31, 2012, we identified the critical accounting policies that affect our more significant estimates and assumptions used in preparing our consolidated financial statements. We believe that the policies we follow for the valuation of our hotel properties, which constitute the majority of our assets, are our most critical policies. Those policies include methods used to recognize and measure any identified impairment of our hotel properties assets. There have been no material changes to our critical accounting policies since January 31, 2012.

LIQUIDITY AND CAPITAL RESOURCES

Our principal source of cash to meet our cash requirements, including distributions to our shareholders, is our share of the Partnership's cash flow, quarterly distributions from the Albuquerque, New Mexico hotel property and our direct ownership of the Yuma, Arizona property. The Partnership's principal source of revenue is hotel operations for the two hotel properties it owns and quarterly distributions from the Tucson Foothills, Arizona property. Our liquidity, including our ability to make distributions to our shareholders, will depend upon our ability and the Partnership's ability to generate sufficient cash flow from hotel operations.

Hotel operations are significantly affected by occupancy and room rates. Occupancy increased from the first six months of fiscal year 2012 to the first six months of fiscal year 2013, while rates decreased. Results are also significantly impacted by overall economic conditions and specifically conditions in the travel industry. Unfavorable changes in these factors could negatively impact hotel room demand and pricing, which would reduce the Trust's profit margins on rented suites.

The Trust has principal of $514,000 due and payable for the remainder of fiscal year 2013 under mortgage notes payable. For the period between August 1, 2012 and July 31, 2013, the Trust has principal of $1.1 million due and payable under mortgage notes payable.

The non-recourse mortgage note payable relating to our Ontario, California property, which is secured by the property and the rents, revenues and profits from the property, matured on May 11, 2011 and was modified on February 14, 2012. The lender reduced the principal balance by $500,000 and waived all penalties and accumulated interest in exchange for a $1.0 million pay down of the principal balance by the Trust. The interest rate was lowered from 8.28% to 5.0%, reducing the monthly principal and interest payments to $31,700 from $71,100. The note was extended for three years to January 14, 2015. The Trust accounted for the modification as a troubled debt restructure. Based on the terms of the modified mortgage note payable, the total future cash payments of $7,795,006 consist of $6,905,289 in principal payments and $889,717 in interest payments. As such, total future cash payments exceeded the carrying value of the note payable (including accrued interest) of $7,610,427 at the date of restructure by $184,579. As a result, there was no gain or loss recorded during the period. In addition, no adjustment was made to the carrying value of the note at the date of restructure. Instead, this requires the Trust to recognize interest expense using an effective interest rate on the debt after the restructuring, which results in $184,579 of interest expense being recognized over the remainder of the term. In addition, the carrying value is reduced over the remaining term by $705,138. For the six months ended July 31, 2012, principal and interest payments of $1,190,000 were paid, $29,000 of interest expense was recognized and the carrying value of the old debt was reduced by $1,161,000.

For the remainder of fiscal year 2013 (August 1, 2012 through January 31, 2013), the Trust's management has projected that cash flows from operations alone may not be sufficient to meet all of the Trust's financial obligations as they come due. Based on this projection, the Trust continues selling non-controlling ownership interests in its Ontario, California subsidiary, providing enough available liquidity for management to believe that the Trust will meet all of its financial obligations as they come due during fiscal year 2013. See Note 5 - "Note Payable to Bank", Note 6 - "Sale of Membership Interests in Albuquerque Suite Hospitality, LLC", Note 7 - "Sale of Partnership Interests in Tucson Hospitality Properties, LP", Note 8 - "Sale of Partnership Interests in Ontario Hospitality Properties, LP" and Part I, Item 1 - "Financial Statements."

We anticipate that current cash balances, future cash flows from operations, proceeds from sales of non-controlling interests in the Ontario subsidiary, and available credit will be sufficient to satisfy our obligations as they become due. The $500,000 bank line of credit was renewed on June 22, 2012, and we are in negotiations with the lender to increase the credit limit on the line to $600,000. In the event cash flows from operations are insufficient to satisfy our obligations as they become due, we may seek to refinance properties, negotiate additional credit facilities or issue debt instruments. From sales of non-controlling interests in the Ontario and Tucson Foothills subsidiaries, we received $1.6 million during the first six months of fiscal year 2013.

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 68.51% for the six months ended July 31, 2012, an increase of 3.66 % from the prior year period. ADR decreased $3.33, or 4.6%, to $69.58. The decrease in ADR and increased occupancy resulted in an increase of $0.39 in REVPAR to $47.67 from $47.28 in the prior year period. The increase in occupancy is due to the moderately improving trend in our economy, which caused more vacation and business travelers.

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

                                        FOR THE SIX MONTHS ENDED
                                                JULY 31,
                                         2012              2011
OCCUPANCY                                    68.51 %           64.85  %
AVERAGE DAILY RATE (ADR)               $     69.58       $     72.91
REVENUE PER AVAILABLE ROOM (REVPAR)    $     47.67       $     47.28

No assurance can be given that the trends reflected in this data will be maintained or improve 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 improving economic conditions to positively affect our business levels for the remainder of this current fiscal year.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JULY 31, 2012 COMPARED TO THE SIX
MONTHS ENDED JULY 31, 2011

A summary of the operating results for the six months ended July 31, 2012 and
2011 is:

                                  2012          2011           Change      % Change
Revenue                        $ 8,191,127   $ 9,034,223    $   (843,096 )    (9.3) %
Operating Income               $   227,371   $   337,061    $   (109,690 )   (32.5) %
Total Expenses                 $ 8,448,853   $ 9,468,616    $ (1,019,763 )   (10.8) %
Net Loss Attributable to
Controlling Interest           $  (221,777 ) $  (308,881 )  $     87,104     (28.2) %
Net Loss Per Share - Basic
and Diluted                    $     (0.03 ) $     (0.04 )  $       0.01     (25.0) %

For the six months ended July 31, 2012, our total revenue was $8.2 million, a decrease of $843,000, compared with the prior year period total of $9.0 million. The decrease was due to changing the employees at the Hotels from employees of the management company to employees of each hotel. The management company no longer receives payroll reimbursements, which in the prior year period was $1.1 million. Revenues from hotel operations, which include Room, Food and Beverage, Telecommunications and Other revenues, increased 3.4% to $8.2 million for the six months ended July 31, 2012, from $7.9 million for the six months ended July 31, 2011. Hotel operations, including Food and Beverage operations, experienced increases in revenues during the first six months of fiscal year 2013 due to higher occupancy as a result of moderately improving economic conditions.

Total operating expenses were $8.0 million for the six months ended July 31, 2012, a decrease of $733,000, or 8.4%, from the prior year period total of $8.7 million. The decrease was due to payroll reimbursement expense of $1.1 million in the six months ended July 31, 2011 and no payroll reimbursement expense for the six months ended July 31, 2012.

General and administrative expense of $1.6 million was consistent for the six months ended July 31, 2012, with the prior year period primarily due to effective cost controls.

Repairs and maintenance expense was $767,000 for the six months ended July 31, 2012, a decrease of $22,000 or 2.8% under the prior year period total of $789,000. The decrease was primarily due to lower maintenance labor and operating expenses at the Yuma, Arizona location due to significant maintenance projects at the property during the prior year period.

Operating income was $227,000 for the six months ended July 31, 2012, a decrease of $110,000, or 32.5%, from $337,000 compared to the prior year period. The decrease was primarily due to higher occupancy, which increased expenses, and lower rates, which decreased revenues, at the Hotels during the second quarter of fiscal year 2013. Management is continuing its evaluation of its sales and rate management program at the Hotels.

Net loss attributable to controlling interest improved by $87,000 for the six month period ended July 31, 2012 to a loss of $222,000, or $0.03 per basic share, from a loss of $309,000, or $0.04 per basic share, during the six months ended July 31, 2011. This increase was due to greater activity at the hotels and a successful debt restructure for our Ontario property.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JULY 31, 2012 COMPARED TO THE
THREE MONTHS ENDED JULY 31, 2011

A summary of the operating results for the three months ended July 31, 2012 and
2011 is:

                                  2012          2011         Change     % Change
Revenue                        $ 3,371,502   $ 4,035,441   $ (663,939 )   (16.5) %
Operating Loss                 $  (624,969 ) $  (106,141 ) $ (518,828 )     >100 %
Total Expenses                 $ 4,273,942   $ 4,525,815   $ (251,873 )    (5.6) %
Net Loss Attributable to
Controlling Interest           $  (683,865 ) $  (358,987 ) $ (324,878 )     90.5 %
Net Loss Per Share - Basic
and Diluted                    $     (0.08 ) $     (0.04 ) $    (0.04 )    100.0 %

For the three months ended July 31, 2012, our total revenue was $3.4 million, a decrease of $664,000, compared with the prior year period total of $4.0 million. The decrease was primarily due to changing the employees at the Hotels from employees of the management company to employees of each hotel. The management company no longer receives payroll reimbursements, which in the prior year period was $525,000. Revenues from hotel operations, which include Room, Food and Beverage, Telecommunications and Other revenues, decreased 3.9% to $3.4 million for the three months ended July 31, 2012, from $3.5 million for the three months ended July 31, 2011. Hotel operations experienced decreases in revenues during the second quarter of fiscal year 2013, primarily due to higher occupancy at three of our Hotels, which increased expenses, and lower rates, which decreased revenues, at the Hotels. Management is continuing its evaluation of its sales and rate management program at the Hotels. In addition, hotel operations experienced decreases in revenues during the second quarter of fiscal year 2013 due to lower occupancy and ADR at the Yuma hotel.

Total operating expenses were $4.0 million for the three months ended July 31, 2012, a decrease of $145,000, or 3.5%, from the prior year period total of $4.1 million. The decrease was due to payroll reimbursement expense of $525,000 in the three months ended July 31, 2011 and offset by a $380,000 increase in other operating expenses for the three months ended July 31, 2012, primarily due to increased occupancy at its Tucson St. Mary's property, increased tax and insurance expenses at the Hotels and an increased sales efforts at the Hotels.

General and administrative expense increased $49,000 for the three months ended July 31, 2012, or 6.4%, to $818,000 from $769,000 in the prior year period primarily due to increased activity at the hotels.

Repairs and maintenance expense was $371,000 for the three months ended July 31, 2012, an increase of $7,000, or 2.1%, over the prior year period total of $364,000.

Operating loss was $625,000 for the three months ended July 31, 2012, an increase of $519,000 compared to the prior year period operating loss of $106,000. Hotel operations experienced decreases in revenues during the second quarter of fiscal year 2013 due to lower occupancy and ADR at the Yuma hotel.

Net loss attributable to controlling interest increased by $325,000 for the three month period ended July 31, 2012 to $684,000, or a loss of $0.08 per basic share, from $359,000, or a loss of $0.04 per basic share, during the three months ended July 31, 2011. Hotel operations experienced decreases in revenues during the second quarter of fiscal year 2013 primarily due to lower occupancy and ADR at the Yuma hotel.

ADJUSTED EBITDA

We reported earnings before non-controlling interest, interest, taxes, depreciation and amortization (Adjusted EBITDA) of $1.1 million for the six months ended July 31, 2012, compared to $1.2 million in the prior year, a decrease of $129,000, or 10.5%. Adjusted EBITDA is a non-GAAP financial measure that management believes provides meaningful insight into the Trust's financial performance and its operating profitability before non-operating expenses (such as interest and "other" non-core expenses) and non-cash charges (depreciation and amortization).

A reconciliation of Adjusted EBITDA to net income (loss) attributable to Shareholders of Beneficial Interest for the six month periods ended July 31 follows:

                                                   2012            2011
Net Loss attributable to controlling interest   $  (221,777 )   $  (308,881 )
Add back:
Depreciation                                        867,187         886,550
Interest expense                                    485,097         771,454
Non-controlling interest                            (30,547 )      (124,952 )
Less:
Interest income                                      (5,402 )          (560 )
ADJUSTED EBITDA                                 $ 1,094,558     $ 1,223,611

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 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, 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 or membership contracts;

• real estate and hospitality market conditions;

• hospitality industry factors;

• our ability to have access to a line of credit;

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

• our inability to refinance indebtedness at or prior to the time it matures;

• terrorist attacks or other acts of war;

• outbreaks of communicable diseases;

• natural disasters;

• data breaches; 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.