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 except for the following:

Under the guidance set forth in Accounting Standards Codification 360-10-45-9, the Trust will classify a hotel property as "held for sale" in the period in which:
a. Management, having the authority to approve the action, commits to a plan to sell the asset (disposal group).
b. The asset (disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (disposal groups).
c. An active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) have been initiated.
d. The sale of the asset (disposal group) is probable, and transfer of the asset (disposal group) is expected to qualify for recognition as a completed sale, within one year, except as permitted by paragraph 360-10-45-11.
e. The asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value.
f. Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

If these criteria are met, the Trust will record an impairment loss if the fair value less the costs to sell is lower than the carrying amount of the hotel and will cease recording depreciation. The Trust has not classified its Hotels as "held for sale" because, at this time, we have not determined it probable that the sale of the hotel properties will be within one year. We are actively seeking a buyer or buyers for our hotel properties.

HOTEL PROPERTIES LISTED FOR SALE

On October 1, 2012 the Board of Trustees voted to list and/or present for sale all five of the Trust's hotel properties, which is part of the Trust's long-term strategic plan to migrate the focus of the Trust from a hotel owner to a hospitality service company by expanding its trademark license, management, reservation and advertising services. This plan is similar to strategies followed by international diversified hotel industry leaders, which over the last several years have been reducing real estate holdings and concentrating on hospitality services. The Trust began its long-term corporate strategy when it relinquished its REIT status in January 2004, which prevented the Trust from providing hospitality services to hotels. Then, in June 2004, the Trust acquired its trademark license and management agreements and began providing services to its Hotels. The sale of the Hotels will provide the Trust with additional capital, some of which will be needed to complete the transformation to a hospitality service company following the lead of other hotel chains.

Proceeds from the sale of the Hotels will be used as needed to support hospitality service operations as cash flows from current operations, primarily the sale of hotel rooms, declines with the sale of the Hotels.

The Trust is focusing its sales efforts in the Americas and concentrating its marketing efforts on unbranded hotels and hotels that are changing brands. The Trust expects its primary source of revenue to be from its reservation system. Reservation fees are expected to range from 10% to 15% of the revenue per reservation.

The table below lists the hotel properties, their respective carrying and mortgage value and the estimated sales value for the hotel properties.

                          Hotel Property Asset Values as of October 31, 2012
                                                                         Mortgage
                                                                         Balance
                                                                       (Tucson City      Listed Sales
Hotel Property                                        Book Value      Center, Total)         Price
Albuquerque                                          $  1,357,395     $    1,251,742     $   6,000,000
Ontario                                                 5,964,462          5,843,666 *      16,900,000
Tucson Oracle                                           4,274,162          1,816,889        12,500,000
Tucson City Center                                      7,729,639          5,273,489        10,600,000
Yuma                                                    5,515,430          5,496,609        14,000,000
                                                     $ 24,841,088     $   19,682,395     $  60,000,000

*The Ontario mortgage balance included on the balance sheet is $6,404,202 which is the accounting balance due to the modification agreement. See below "Liquidity and Capital Resources."

There is no assurance that the listed sales price for the individual hotel properties will be realized, however the Trust's management believes that these sales prices are reasonable based on local market conditions and comparable sales. Changes in market conditions may result in the Trust changing one or all of the sales prices and those changes could be material.

None of the above-listed properties are reported as discontinued operations in the Trust's financial statements. Based on criteria of EITF Abstract Issue No. 03-13, "Applying the Conditions of Paragraph 42 of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, in Determining Whether to Report Discontinued Operations," the Trust concluded that reporting any of the above-listed properties as discontinued operations is not necessary when the Trust reasonably expects to maintain significant continuing involvement. The Trust provides trademark licensing, management, reservation and advertising services to all the hotel properties listed above and expects to continue the trademark licensing services, which include the reservation and advertising services, and/or continue the management services, which also includes the reservation and advertising services, after the Hotels are sold. The Trust believes either of these services provides the Trust with the ability to significantly influence the operating and financial policies of these Hotels.

LIQUIDITY AND CAPITAL RESOURCES

The Trust's principal source of cash to meet our cash requirements, including distributions to our shareholders, is our share of the Partnership's cash flow, management and licensing contracts with affiliated and third-parties, 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 from the one hotel property it wholly owns in Tucson, Arizona, its 54.25% share in another hotel property in Tucson, Arizona, its 65.19% share of a hotel property in Ontario, California and quarterly distributions from the Tucson Foothills, Arizona property and Ontario, California 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 nine months of fiscal year 2012 to the first nine 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 $288,000 due and payable for the remainder of fiscal year 2013 under mortgage notes payable. For the period between November 1, 2012 and October 31, 2013, the Trust has principal of $1.2 million due and payable under mortgage notes payable.

During the third quarter of fiscal year 2013, the Trust refinanced its mortgage note payable secured by the Yuma, Arizona property. The new mortgage note payable is for $5.5 million. It bears variable interest based on the Wall Street Journal prime rate, plus 1.0%, and the interest rate cannot be lower than 5.0%. The note is due in 120 monthly principal and interest installments of $32,419 and matures on September 1, 2022. The Trust used the $5.5 million to fully satisfy its first and second mortgage notes payable of $5,329,845 secured by the Yuma, Arizona property and received $143,120 in net cash proceeds from the refinancing.

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 nine months ended October 31, 2012, principal and interest payments of $1,285,000 were paid, $43,000 of interest expense was recognized and the carrying value of the old debt was reduced by $1,242,000.

For the remainder of fiscal year 2013 (November 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. In addition, the Trust has listed its Hotels for sale to provide additional future cash flows. 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", Part I, Item 1 - "Financial Statements", and the section titled "Hotel Properties Listed For Sale" above.

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, on September 14, 2012, the lender increased 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 $2.0 million during the first nine 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 65.05% for the nine months ended October 31, 2012, an increase of 3.29 % from the prior year period. ADR decreased $2.86, or 4.0%, to $67.98. The decrease in ADR and increased occupancy resulted in an increase of $0.47 in REVPAR to $44.22 from $43.75 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:

                                               October 31,
                                         2012               2011
OCCUPANCY                                     65.05 %            61.76  %
AVERAGE DAILY RATE (ADR)               $      67.98       $      70.84
REVENUE PER AVAILABLE ROOM (REVPAR)    $      44.22       $      43.75

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 economic conditions to positively affect our business levels for the remainder of this current fiscal year.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 31, 2012 COMPARED TO THE
NINE MONTHS ENDED OCTOBER 31, 2011

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

                                       2012           2011           Change      % Change
Revenue                            $ 11,426,312   $ 12,680,144    $ (1,253,832 )    (9.9) %
Operating Income (Loss)            $   (106,161 ) $     44,703    $   (150,864 )   >(100) %
Total Operating Expenses           $ 11,532,473   $ 12,635,441    $ (1,102,968 )    (8.7) %
Net Loss Attributable to
Controlling Interest               $   (627,731 ) $   (834,194 )  $    206,463       24.7 %
Net Loss Per Share - Basic and
Diluted                            $      (0.07 ) $      (0.10 )  $       0.03       30.0 %

For the nine months ended October 31, 2012, our total revenue was $11.4 million, a decrease of $1.25 million, compared with the prior year period total of $12.7 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 $1.6 million. Revenues from hotel operations, which include Room, Food and Beverage, Telecommunications and Other revenues, increased 3.6% to $11.4 million for the nine months ended October 31, 2012, from $11.0 million for the nine months ended October 31, 2011. Hotel operations, including Food and Beverage operations, experienced increases in revenues during the first nine months of fiscal year 2013 due to higher occupancy as a result of moderately improving economic conditions.

Total operating expenses were $11.5 million for the nine months ended October 31, 2012, a decrease of $1.1 million, or 8.7%, from the prior year period total of $12.6 million. The decrease was due to payroll reimbursement expense of $1.6 million in the nine months ended October 31, 2011 and no payroll reimbursement expense for the nine months ended October 31, 2012.

General and administrative expense of $2.4 million increased $120,000 for the nine months ended October 31, 2012, from $2.2 million, or 5.3%. The increase was due to higher occupancy at the hotels.

Repairs and maintenance expense of $1.1 million was consistent with the prior year.

Operating loss was $106,000 for the nine months ended October 31, 2012, an increase of $151,000, or greater than 100%, from operating income of $45,000 in 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 and third quarters 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 $206,000 for the nine month period ended October 31, 2012 to a loss of $628,000, or $0.07 per basic share, from a loss of $834,000, or $0.10 per basic share, during the nine months ended October 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 OCTOBER 31, 2012 COMPARED TO
THE THREE MONTHS ENDED OCTOBER 31, 2011

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

                                  2012          2011         Change     % Change
Revenue                        $ 3,235,185   $ 3,645,922   $ (410,737 )   (11.3) %
Operating Loss                 $  (333,532 ) $  (292,359 ) $  (41,173 )    (14.1 )%
Total Operating Expenses       $ 3,568,717   $ 3,938,281   $ (369,564 )    (9.4) %
Net Loss Attributable to
Controlling Interest           $  (398,120 ) $  (525,314 ) $  127,194       24.2 %
Net Loss Per Share - Basic
and Diluted                    $     (0.05 ) $     (0.06 ) $     0.01       16.7 %

For the three months ended October 31, 2012, our total revenue was $3.2 million, a decrease of $411,000, compared with the prior year period total of $3.6 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 $532,000. Revenues from hotel operations, which include Room, Food and Beverage, Telecommunications and Other revenues, increased 3.9% to $3.2 million for the three months ended October 31, 2012, from $3.1 million for the three months ended October 31, 2011. Hotel operations experienced increases in revenues during the third quarter of fiscal year 2013, primarily due to higher occupancy at the Hotels.

Total operating expenses were $3.6 million for the three months ended October 31, 2012, a decrease of $370,000, or 9.4%, from the prior year period total of $3.9 million. The decrease was due to payroll reimbursement expense of $532,000 in the three months ended October 31, 2011.

General and administrative expense increased $112,000 for the three months ended October 31, 2012, or 17.6%, to $749,000 from $637,000 in the prior year period primarily due to increased activity at the hotels.

Repairs and maintenance expense was $320,000 for the three months ended October 31, 2012, an increase of $7,000, or 2.3%, over the prior year period total of $313,000.

Operating loss was $334,000 for the three months ended October 31, 2012, an increase of $41,000 compared to the prior year period operating loss of $292,000. Hotel operations experienced increases in revenues during the third quarter of fiscal year 2013 due to higher occupancy, primarily at our Tucson, Arizona properties.

Net loss attributable to controlling interest decreased by $127,000 for the three month period ended October 31, 2012 to a loss of $398,000, or a loss of $0.05 per basic share, from $525,000, or a loss of $0.06 per basic share, during the three months ended October 31, 2011. Hotel operations experienced increases in revenues during the third quarter of fiscal year 2013 due to higher occupancy, primarily at our Tucson, Arizona properties.

ADJUSTED EBITDA

We reported earnings before non-controlling interest, interest, taxes, depreciation and amortization (Adjusted EBITDA) of $1.2 million for the nine months ended October 31, 2012, compared to $1.4 million in the prior year, a decrease of $153,000, or 11.3%. 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 nine-month periods ended October 31 follows:

                                                   2012            2011
Net Loss attributable to controlling interest   $  (627,731 )   $  (834,194 )
Add back:
Depreciation                                      1,307,203       1,308,764
Interest expense                                    736,664       1,156,992
Non-controlling interest                           (195,570 )      (276,391 )
Less:
Interest income                                     (19,524 )        (1,704 )
ADJUSTED EBITDA                                 $ 1,201,042     $ 1,353,467

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 ability to sell hotel properties at market value or listed sales price or at all;

• 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.