Red Lion Hotels DEF 14A Definitive proxy

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a - 101)

INFORMATION REQUIRED PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

Filed by the Registrantþ
Filed by a Party other than the Registranto

Check the appropriate box:

o Preliminary Proxy Statement

o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ Definitive Proxy Statement

o Definitive Additional Materials

o Soliciting Material Pursuant to §240.14a-12

RED LION HOTELS CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

þ No fee required.

o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

CALCULATION OF FILING FEE

		Per unit price or other
		underlying value of	Proposed
Title of each class of	Aggregate number of	transaction computed	maximum
securities to which	securities to which	pursuant to Exchange	aggregate value
transaction applies:	transaction applies:	Act Rule 0-11:	of transaction:	Total fee paid:

o Fee paid previously with preliminary materials.

o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)	Amount Previously Paid:
(2)	Form, Schedule or Registration Statement No.:
(3)	Filing Party:
(4)	Date Filed:

Dear Shareholder: April 18, 2007

You are cordially invited to attend the 2007 Annual Meeting of Shareholders of Red Lion Hotels Corporation at 9:00 a.m. on Thursday, May 17, 2007, at the Red Lion Hotel at the Park, West 303 North River Drive, Spokane, Washington 99201.

The accompanying Notice of 2007 Annual Meeting of Shareholders and Proxy Statement describe the matters to be presented at the meeting. In addition, management will speak on our developments of the past year and respond to comments and questions of general interest to shareholders.

It is important that your shares be represented and voted whether or not you plan to attend the annual meeting in person. You may vote by completing and mailing the enclosed proxy card or the form forwarded by your bank, broker or other holder of record. Voting by written proxy will ensure your shares are represented at the meeting.

Sincerely,

Donald K. Barbieri

Chairman of the Board

IMPORTANT

A Proxy Statement and proxy card are enclosed. All shareholders are urged to complete and mail the proxy card promptly. The enclosed envelope for return of the proxy card requires no postage. Any shareholder of record attending the meeting may personally vote on all matters that are considered, in which event the signed proxy will be revoked.

IT IS IMPORTANT THAT YOUR STOCK BE VOTED.

RED LION HOTELS CORPORATION

NOTICE OF 2007 ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 17, 2007

To the Shareholders of Red Lion Hotels Corporation:

The 2007 Annual Meeting of Shareholders of Red Lion Hotels Corporation will be held at 9:00 a.m. on Thursday, May 17, 2007, at the Red Lion Hotel at the Park, West 303 North River Drive, Spokane, Washington 99201, for the following purposes:

(1) To elect three directors to the Board of Directors for a three-year term of office expiring at the 2010 Annual Meeting of Shareholders;

(2) To ratify the selection of BDO Seidman, LLP as our independent registered public accounting firm for 2007; and

(3) To transact such other business as may properly come before the meeting and any adjournments thereof.

The foregoing items of business are more fully described in the Proxy Statement accompanying this notice.

The Board of Directors has fixed March 31, 2007 as the record date for the meeting. Only shareholders of record at the close of business on that date will be entitled to notice of and to vote at the meeting.

PLEASE SUBMIT A PROXY AS SOON AS POSSIBLE SO THAT YOUR SHARES CAN BE VOTED AT THE MEETING IN ACCORDANCE WITH YOUR INSTRUCTIONS. FOR SPECIFIC INSTRUCTIONS ON VOTING, PLEASE REFER TO THE PROXY CARD OR THE INFORMATION PROVIDED BY YOUR BANK, BROKER OR OTHER HOLDER OF RECORD. EVEN IF YOU VOTE YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BANK, BROKER OR OTHER HOLDER OF RECORD AND YOU WISH TO VOTE IN PERSON AT THE MEETING, YOU MUST OBTAIN A PROXY ISSUED IN YOUR NAME FROM THE BANK, BROKER OR OTHER HOLDER OF RECORD.

By Order of the Board of Directors

Thomas L. McKeirnan

Secretary

Spokane, Washington

April 18, 2007

The 2006 Annual Report of Red Lion Hotels Corporation accompanies this

Proxy Statement.

TABLE OF CONTENTS

INFORMATION CONCERNING VOTING AND SOLICITATION	1
PROPOSAL 1: ELECTION OF DIRECTORS	2
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	6
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	7
CORPORATE GOVERNANCE	7
COMPENSATION DISCUSSION AND ANALYSIS	11
EXECUTIVE COMPENSATION	15
DIRECTOR COMPENSATION	21
REPORT OF THE AUDIT COMMITTEE	22
PRINCIPAL ACCOUNTANT FEES AND SERVICES	23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	24
PROPOSALS OF SHAREHOLDERS	25
ANNUAL REPORT ONFORM 10-K	26

RED LION HOTELS CORPORATION
201 West North River Drive, Suite 100
Spokane, Washington 99201

2007 PROXY STATEMENT

INFORMATION CONCERNING VOTING AND SOLICITATION

General

The enclosed proxy is solicited on behalf of the Board of Directors (the “Board”) of Red Lion Hotels Corporation, a Washington corporation, for use at the 2007 Annual Meeting of Shareholders to be held at 9:00 a.m. local time on Thursday, May 17, 2007, and at any adjournments thereof. The meeting will be held at the Red Lion Hotel at the Park, West 303 North River Drive, Spokane, Washington 99201.

Proxies are solicited to give all shareholders of record an opportunity to vote on matters properly presented at the meeting. This Proxy Statement and the accompanying proxy card are first being mailed on or about April 20, 2007 to all shareholders entitled to vote at the meeting.

Who Can Vote

You are entitled to vote at the meeting if you were a holder of record of our common stock, $.01 par value, at the close of business on March 31, 2007. Your shares may be voted at the meeting only if you are present in person or represented by a valid proxy.

For the ten days prior to the meeting, a list of shareholders entitled to vote at the meeting will be available during ordinary business hours for examination by any shareholder, for any purpose germane to the meeting, at our principal executive office at 201 West North River Drive, Suite 100, Spokane, Washington 99201. This list will also be available at the meeting.

Shares Outstanding and Quorum

At the close of business on March 31, 2007, there were 19,191,433 shares of our common stock outstanding and entitled to vote. A majority of the outstanding shares of our common stock, present in person or represented by proxy, will constitute a quorum at the meeting.

Proxy Card and Revocation of Proxy

You may vote by completing and mailing the enclosed proxy card. If you sign the proxy card but do not specify how you want your shares to be voted, your shares will be voted by the proxy holders named in the enclosed proxy (i) “FOR” election of all of the three director nominees named below; and (ii) “FOR” ratification of the selection of BDO Seidman, LLP as our independent registered public accounting firm for 2007. If one or more of the director nominees should become unavailable for election prior to the meeting, an event that currently is not anticipated by the Board, the proxies may be voted in favor of the election of a substitute nominee or nominees proposed by the Board.

The proxy holders named in the enclosed proxy are authorized to vote in their discretion on any other matters that may properly come before the meeting or any adjournments thereof. At the time this Proxy Statement went to press, management was not aware of any matter that may properly be presented for action at the meeting other than those described in this Proxy Statement. In addition, no shareholder proposal or director nomination was received on a timely basis, so no such matters may be brought to a vote at the meeting.

If you vote by proxy, you may revoke that proxy at any time before it is voted at the meeting. Shareholders of record may revoke a proxy by delivering to our Secretary at our principal executive office at 201 West North River Drive, Suite 100, Spokane, Washington 99201, a written notice of revocation or a duly executed proxy bearing a

1

later date, or by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy. If your shares are held in the name of a broker, bank or other holder of record, you may change your vote by submitting new voting instructions to that holder of record. Please note that if your shares are held of record by a broker, bank or other holder of record, and you decide to attend and vote at the meeting, your vote in person at the meeting will not be effective unless you present a legal proxy issued in your name from that holder of record.

Voting of Shares

Shareholders of record as of the close of business on March 31, 2007 are entitled to one vote for each share of our common stock held on all matters to be voted upon at the meeting. You may vote by attending the meeting and voting in person or by completing and mailing the enclosed proxy card or the form forwarded by your bank, broker or other holder of record. If your shares are held by a bank, broker or other holder of record, please refer to the instructions they provide for voting your shares. All shares entitled to vote and represented by properly executed proxies that are received before the polls are closed at the meeting and are not revoked or superseded will be voted at the meeting in accordance with the instructions indicated on those proxies. YOUR VOTE IS IMPORTANT.

Counting of Votes

All votes will be tabulated by the inspector of election appointed for the meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes. Shares held by persons attending the meeting but not voting, shares represented by proxies that reflect abstentions on one or more proposals and broker non-votes will be counted as present for purposes of determining a quorum. Abstentions will not count as votes “cast”. A broker non-vote occurs when a bank, broker or other holder of record holding shares for a beneficial owner does not receive voting instructions from the beneficial owner and does not have discretionary authority to vote the shares without such instructions. Brokers generally have discretionary authority to vote on each of the two proposals scheduled for consideration at the meeting.

Solicitation of Proxies

We will bear the expense of preparing, printing and distributing proxy materials to our shareholders. We will also furnish copies of the proxy materials to banks, brokers and other holders of record holding in their names shares of our common stock that are beneficially owned by others, so that the proxy materials can be forwarded to those beneficial owners. We will reimburse these banks, brokers and other holders of record for costs incurred in forwarding the proxy materials to the beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, facsimile, electronic mail or personal solicitation by our directors, officers or employees. No additional compensation will be paid to our directors, officers or employees for such services. In addition, we may retain others on behalf of the Board to assist in the solicitation of proxies by telephone, facsimile, electronic mail or personal solicitation, although, at the time this Proxy Statement went to press, we had no intention of doing so.

PROPOSAL 1:

ELECTION OF DIRECTORS

Under our Articles of Incorporation and By-Laws, the Board consists of from three to 13 directors, as determined from time to time by resolution of the Board. The number of directors that currently constitutes the Board is seven. The Board is divided into three classes. Each class consists, as nearly as possible, of one-third of the total number of directors, with members of each class serving for a three-year term. Each year only one class of directors is subject to a shareholder vote. The current directors are as follows:

Class A (two positions with terms expiring in 2009):

Ryland P. “Skip” Davis
Peter F. Stanton

2

Class B (three positions with terms expiring in 2007):

Donald K. Barbieri
Arthur M. Coffey
Ronald R. Taylor

Class C (two positions with terms expiring in 2008):

Richard L. Barbieri
Jon E. Eliassen

Based upon the recommendation of the Nominating and Corporate Governance Committee, Donald K. Barbieri, Arthur M. Coffey and Ronald R. Taylor are nominees for re-election to the Board. If elected at the annual meeting, each will serve until the 2010 annual meeting of shareholders and until his successor is elected and qualified, or until his earlier retirement, resignation, disqualification, removal or death.

Each share of common stock is entitled to one vote for each of the three nominees and will be given the option to vote “FOR” or “AGAINST” each nominee or to “ABSTAIN.” Cumulative voting is not permitted. It is the intention of the proxy holders named in the enclosed proxy to vote the proxies received by them in favor of the election of the three nominees unless a shareholder directs otherwise. If any nominee should become unavailable for election prior to the meeting, an event that currently is not anticipated by the Board, the proxies will be voted in favor of the election of a substitute nominee or nominees proposed by the Board or the number of directors may be reduced accordingly. Each nominee has agreed to serve if elected and the Board has no reason to believe that any nominee will be unable to serve.

The three nominees for the Board who receive the greatest number of votes cast in the election of directors by the shares entitled to vote and present in person or by proxy at the meeting will be elected directors. An abstention from voting for a nominee may make it less likely that the nominee will be one of the three nominees who receive the greatest number of votes cast. Although brokers generally have discretionary authority to vote in the election of directors, if a broker submits a non-vote, that will also make it less likely that the nominee will be one of the three nominees who receive the greatest number of votes cast.

Set forth below is biographical information for each nominee and for each director whose term of office will continue after the meeting. Except as disclosed in these biographies, there are no family relationships among any of our directors or among any of our directors and our executive officers.

NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2010 ANNUAL MEETING OF SHAREHOLDERS

Donald K. Barbieri, age 61, Mr. Barbieri has been a director since 1978 and Chairman of the Board since 1996. He served as President and Chief Executive Officer from 1978 until 2003. Mr. Barbieri joined us in 1969 and was responsible for our development activities in the hotel, entertainment and real estate areas. Mr. Barbieri has served as a Trustee of Gonzaga University, Chairman of the Board for the Spokane Regional Chamber of Commerce, President of the Spokane Chapter of the Building Owners and Managers Association, President of the Spokane Regional Convention and Visitors Bureau, and Chairman of the Spokane United Way Campaign. Mr. Barbieri chaired the State of Washington’s Quality of Life Task Force. He has served as board Chairman for the Inland Northwest’s largest hospital system, Sacred Heart Medical Center, and was founding president of the Physician Hospital Community Organization. He has served three governors on the Washington Economic Development Board and currently chairs the Spokane County Democratic Election Committee after being a candidate for the Fifth District US Congressional Seat from the State of Washington. Mr. Barbieri is the brother of Richard L. Barbieri.

Arthur M. Coffey, age 51, has been a director since 1990 and has served as our President and Chief Executive Officer since 2003. Mr. Coffey has over 30 years experience in the hospitality industry and has been with us since 1981. He has held a variety of management positions with us, including Executive Vice President, Chief Financial Officer, and Chief Operating Officer. Mr. Coffey played a key role in our initial public offering and listing on the

3

New York Stock Exchange in 1998. He possesses a unique combination of expertise in development, operations and financial disciplines and during his tenure we have grown from ownership of three hotels into a multi-division hospitality company that owns, manages and franchises more than 50 hotels. He previously served as trustee of the Spokane Area Chamber of Commerce, director of the Washington State Hotel Association, and President of the Spokane Hotel Association. Mr. Coffey is a past director of the Association of Washington Business. He currently serves on the board of the Inland Northwest Council, Boy Scouts of America, and on the Board of Trustees of Greater Spokane Incorporated, a non-profit economic development organization

Ronald R. Taylor, age 59, has been a director since 1998. Mr. Taylor is President of Tamarack Bay, LLC, a private consulting firm and is currently a director of two other public companies, Watson Pharmaceuticals, Inc. (a pharmaceutical manufacturer) and ResMed, Inc. (a manufacturer of equipment relating to the management of sleep-disordered breathing). At Watson Pharmaceuticals, Inc., Mr. Taylor is chairman of the Compensation Committee and a member of the Audit Committee and the Nominating and Corporate Governance Committee. At ResMed, Inc., Mr. Taylor is chairman of the Compensation Committee and a member of the Nominating and Corporate Governance Committee. Mr. Taylor is also Chairman of the Board of three privately held companies. From 1998 to 2002, Mr. Taylor was a general partner of Enterprise Partners, a venture capital firm. From 1996 to 1998, Mr. Taylor worked as an independent business consultant. From 1987 to 1996, Mr. Taylor was Chairman, President and Chief Executive Officer of Pyxis Corporation (a health care service provider), which he founded in 1987. Prior to founding Pyxis, he was an executive with both Allergan Pharmaceuticals and Hybritech, Inc.

THE BOARD RECOMMENDS A VOTE “FOR” EACH OF THE THREE NAMED NOMINEES.

Directors Continuing in Office Until the 2008 Annual Meeting of Shareholders

Richard L. Barbieri, age 64, has been a director since 1978. From 1994 until he retired in 2003, he served as our full-time General Counsel, first as Vice President and later as Senior Vice President and Executive Vice President. He currently serves as Chairman of the Board of Puget Sound Neighborhood Health Centers and as a member of the Board of Directors of the Pike Market Foundation, both non-profit organizations. From 1978 to 1995, Mr. Barbieri served as our legal counsel and Secretary, during which time he was first engaged in the private practice of law at Edwards and Barbieri, a Seattle law firm, and then at Riddell Williams P.S., a Seattle law firm. Mr. Barbieri has also served as chairman of various committees of the Washington State Bar Association and the King County (Washington) Bar Association, and as a member of the governing board of the King County bar association. He also served as Vice Chairman of the Citizens’ Advisory Committee to the Major League Baseball Stadium Public Facilities District in Seattle in 1996 and 1997. Mr. Barbieri is the brother of Donald K. Barbieri.

Jon E. Eliassen, age 60, has been a director since 2003. Mr. Eliassen was President and Chief Executive Officer of the Spokane Area Economic Development Council from 2003 to 2007. Mr. Eliassen retired in 2003 from his position as Senior Vice President and Chief Financial Officer of Avista Corp., a publicly-traded diversified utility. Mr. Eliassen spent 33 years at Avista, including the last 16 years as its Chief Financial Officer. While at Avista, Mr. Eliassen was an active participant in the development of a number of successful subsidiary company operations, including technology related startups Itron, Avista Labs and Avista Advantage. Mr. Eliassen serves on the Board of Directors of Itron Corporation and IT Lifeline, Inc, and is the principal of Terrapin Capital Group, LLC. Mr. Eliassen’s corporate accomplishments are complemented by his extensive service to the community in roles that have included director and President of the Spokane Symphony Endowment Fund, director of The Heart Institute of Spokane, Washington State University Research Foundation, Washington Technology Center, and Spokane Intercollegiate Research and Technology Institute, and past director of numerous other organizations and energy industry associations.

Directors Continuing in Office Until the 2009 Annual Meeting of Shareholders

Ryland P. “Skip” Davis, age 66, has been a director since 2005. He has served as Chief Executive, Providence Health Care Eastern Washington Service Area, since 1998. From 1993 to 1996, Mr. Davis was Senior Vice President for the Hunter Group, a hospital management firm specializing in healthcare consulting and management nationally. From 1988 to 1993, he was Chairman and Chief Executive Officer of Synergos Neurological Centers,

4

Inc., in Santa Ana and Sacramento, California. From 1987 to 1988, he was President of Diversified Health Group, Inc., of Sacramento. From 1982 to 1987, he worked for American Health Group International as President and Chief Executive Officer of Amerimed in Burbank, California, and as Executive Vice President of Operations. From 1981 to 1982, he worked for Hospital Affiliates International as Group Vice President in Sacramento, California and as Chief Executive Officer of Winona Memorial Hospital in Indianapolis, Indiana. From 1972 to 1975, he was Associate Administrator of San Jose Hospital and Health Care Center in San Jose, California and from 1968 to 1971, Assistant Administrator of Alta Bates Hospital in Berkeley, California. He has been involved in numerous private business ventures related to healthcare. Mr. Davis is a Fellow of the American College of Health Care Executives and has published articles inModern Healthcare, Health Weekand other business publications regarding healthcare issues and perspectives. Mr. Davis previously served as Chair of the Spokane Area Chamber of Commerce and is currently on the Board of Trustees of Greater Spokane Incorporated. He also serves on the board of the Inland Northwest Council, Boy Scouts of America, and as a member of the Washington State University Advisory Council.

Peter F. Stanton, age 50, has been a director since 1998. Mr. Stanton has served as the Chief Executive Officer of Washington Trust Bank since 1993 and its Chairman since 1997. Mr. Stanton previously served as President of Washington Trust Bank from 1990 to 2000. Mr. Stanton is also Chief Executive Officer, President and a director of W.T.B. Financial Corporation (a bank holding company). In addition to serving on numerous state and local civic boards, Mr. Stanton was President of the Washington Bankers Association from 1995 to 1996 and served as Washington state chairman of the American Bankers Association in 1997 and 1998. He currently serves on the Board of Trustees of Gonzaga University and as a National Trustee for the Boy’s and Girl’s Club of America. He also serves on the board of the Inland Northwest Council, Boy Scouts of America, and on the Board of Trustees of Greater Spokane Incorporated, a non-profit economic development organization.

PROPOSAL 2:

RATIFICATION OF SELECTION OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board has selected BDO Seidman, LLP to serve as our independent registered public accounting firm for 2007 and has further directed that this selection be submitted for ratification by our shareholders at the annual meeting. BDO Seidman, LLP has audited our financial statements since 2001. Representatives of the firm are expected to be present at the meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions from shareholders. Unless instructed to the contrary, the proxy solicited hereby will be voted for the ratification of the selection of BDO Seidman, LLP as our independent registered public accounting firm for 2007.

Shareholder ratification of the selection of BDO Seidman, LLP as our independent registered public accounting firm is not required by our By-laws or otherwise. However, the Board is submitting the selection of the firm to the shareholders for ratification as a matter of corporate practice. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in our best interests and that of our shareholders.

Each share of common stock is entitled to one vote on the proposal to ratify the selection of BDO Seidman, LLP and will be given the option to vote “FOR” or “AGAINST” the proposal or to “ABSTAIN.” In order to approve this proposal, the affirmative vote of a majority of the votes cast by the holders of shares entitled to vote and present in person or by proxy at the meeting is required. Abstention from voting on this proposal will have no effect, since approval of the proposal is based solely on the number of votes cast. Although brokers generally have discretionary authority to vote on this proposal, a non-vote on the proposal will have no effect, since approval of the proposal is based solely on the number of votes cast.

THE BOARD RECOMMENDS A VOTE “FOR” RATIFICATION OF THE SELECTION OF BDO SEIDMAN, LLP.

5

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 31, 2007 by: (i) each of our directors and nominees; (ii) each of our executive officers; (iii) all of our directors, nominees and executive officers as a group; and (iv) each person known by us to beneficially own more than 5% of our common stock.

	Number of		Percentage of
Beneficial Owner	Shares Owned (1)		Common Stock (1)
Heather H. Barbieri (2) (3)		1,628,513		8.5	%
Donald K. Barbieri (2) (4)		1,625,602		8.5	%
Wells Fargo & Company (5)		1,477,773		7.7	%
Keeley Asset Management Corp. (6)		1,400,000		7.3	%
WM Advisors, Inc. (7)		1,354,345		7.1	%
Dimensional Fund Advisors Inc. (8)		1,330,570		6.9	%
Richard L. Barbieri		215,778		1.1	%
Arthur M. Coffey (9)		158,998		*
John M. Taffin (10)		37,911		*
Ronald R. Taylor (11)		35,574		*
Anupam Narayan (12)		34,190		*
Thomas L. McKeirnan (13)		22,659		*
Peter F. Stanton (14)		20,574		*
Jon E. Eliassen		15,048		*
Ryland P. “Skip” Davis		4,047		*
All directors and executive officers as a group (10 persons)(15)		2,170,381		11.2	%

*	Represents less than 1% of the outstanding common stock.
(1)	For purposes of this table, a person is deemed to have “beneficial ownership” of shares of common stock if such person has the right to acquire beneficial ownership of such shares within 60 days. For purposes of computing the percentage of outstanding shares held by each person named above, any security that such person has the right to acquire within 60 days after March 31, 2007 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
(2)	The shares shown for each of these beneficial owners include 593,066 shares held by the DKB & HHB Unity Trust, an irrevocable trust of which these beneficial owners are co-trustees. Each of these beneficial owners disclaims beneficial ownership of the trust’s shares.
(3)	Ms. Barbieri’s address is 201 West North River Drive, Suite 180, Spokane, Washington 99201. Includes 558,700 shares held by the Heather M. Barbieri Family LLC of which Ms. Barbieri is a beneficiary but disclaims beneficial ownership except to the extent of her beneficial interest therein. Also includes 22,418.5 shares that may be issued to Ms. Barbieri if she elects to have Red Lion Hotels Limited Partnership (“RLHLP”) redeem a like number of limited partnership units (“OP Units”) that she holds in RLHLP. Also includes 2,500 shares subject to options exercisable within 60 days of March 31, 2007.
(4)	Mr. Barbieri’s address is 201 West North River Drive, Suite 370, Spokane, Washington 99201. Includes 22,418.5 shares that may be issued to Mr. Barbieri if he elects to have RLHLP redeem a like number of OP Units that he holds in RLHLP.
(5)	The address for this beneficial owner is 420 Montgomery Street, San Francisco, California 94104. The shares shown for this beneficial owner are based solely on the Schedule 13G filed by this beneficial owner on February 7, 2007.
(6)	The address for this beneficial owner is 401 South LaSalle Street, Chicago, Illinois 60605. The shares shown for this beneficial owner are based solely on the Schedule 13G filed by this beneficial owner on February 13, 2007.
(7)	The address for this beneficial owner is 1201 Third Avenue, 8th Floor, Seattle, Washington 98101. The shares shown for this beneficial owner are based solely on the Schedule 13G filed by this beneficial owner on January 3, 2007.
(8)	The address for this beneficial owner is 1299 Ocean Avenue, Santa Monica, California 90401. The shares shown for this beneficial owner are based solely on the Schedule 13G filed by this beneficial owner on February 9, 2007.
(9)	Includes 126,691 shares subject to options exercisable within 60 days of March 31, 2007.
(10)	Includes 30,310 shares subject to options exercisable within 60 days of March 31, 2007.
(11)	Includes 11,000 shares subject to options exercisable within 60 days of March 31, 2007.
(12)	Includes 20,000 shares subject to options exercisable within 60 days of March 31, 2007.

6

(13)	Includes 14,088 shares subject to options exercisable within 60 days of March 31, 2007.
(14)	Includes 11,000 shares subject to options exercisable within 60 days of March 31, 2007.
(15)	Includes 213,089 shares subject to options exercisable within 60 days of March 31, 2007. Also includes 22,418.5 shares that may be issued to a member of the group if he elects to have RLHLP redeem a like number of OP Units that he holds in RLHLP.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers, principal accounting officer and directors, and persons who own more than 10% of our common stock (collectively, “Reporting Persons”), to file reports of ownership and changes in ownership of our common stock with the Securities and Exchange Commission. Based solely on our review of the reports filed by Reporting Persons, and written representations from certain Reporting Persons that no other reports were required for those persons, we believe that, during the year ended December 31, 2006, the Reporting Persons met all applicable Section 16(a) filing requirements, except that, due to clerical errors, Donald K. Barbieri inadvertently filed a late report disclosing a December 2005 gift of shares and Richard L. Barbieri inadvertently filed a late report disclosing his sale of shares in our May 2006 public offering and his acquisition in February 2006 of shares of our common stock in exchange for OP Units.

CORPORATE GOVERNANCE

Corporate Governance Documents

The Board has adopted the following corporate governance documents:

•  Corporate Governance Guidelines;

•  Code of Business Conduct and Ethics;

•  Accounting and Audit Complaints and Concerns Procedures;

•  Statement of Policy with respect to Related Party Transactions; and

•  charters for each of its standing committees, which include the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee.

A copy of the Amended and Restated Audit Committee Charter is included as Appendix A to this Proxy Statement. To view this charter or any of the other corporate governance documents online, please visit the Investor Relations section of our website atwww.redlion.com.¹ We will provide copies of these documents to any shareholder upon written request to our Secretary at our principal executive office at 201 West North River Drive, Suite 100, Spokane, WA 99201.

Director Independence

The Board has determined that each of the following four members of the Board is “independent” within the meaning of applicable listing standards of the New York Stock Exchange (the “NYSE”): Ryland P. “Skip” Davis, Jon E. Eliassen, Peter F. Stanton and Ronald R. Taylor. Under the NYSE listing standards, a director is considered “independent” if the Board affirmatively determines that he or she has no material relationship with our company, either directly or as a partner, shareholder or officer of an organization that has a relationship with our company. The NYSE listing standards permit the Board to adopt categorical standards to assist it in making determinations of independence. The Board has adopted such standards, which are set forth in our Corporate Governance Guidelines. A copy of the categorical standards is included in Appendix B to this Proxy Statement. The Board has made an affirmative determination that each of the four directors named above satisfies these categorical standards.

¹ This website is not intended to function as a hyperlink, and the information contained on the website is not intended to be part of this Proxy Statement.

7

Mr. Davis is the Chief Executive Officer of Providence Health Care, a regional delivery network of healthcare organizations that includes Sacred Heart Medical Center, Holy Family Hospital and other affiliated organizations. We make significant payments to these organizations each year under our self-insured medical plan on account of services they provide to participants in the plan. However, because it is the participants who choose to seek these services from these organizations, the Board determined that the existence of these payments did not affect the independence of Mr. Davis.

Meetings of the Board of Directors

The Board met seven times in 2006. All directors attended at least 75% of the total number of meetings of the Board and its committees on which they serve.

We encourage all of our directors to attend each annual meeting of shareholders. All of our directors attended our 2006 annual meeting of shareholders.

Executive Sessions of the Board

Following regularly scheduled meetings of the Board, the non-management directors, which consist of the independent directors identified above and Messrs. Donald K. Barbieri and Richard L. Barbieri, generally meet in executive session without Mr. Coffey or other members of management. Donald K. Barbieri, as Chairman of the Board, serves as the presiding director for these executive sessions. In addition, at least once each year, and generally at each quarterly meeting of the Board, the independent directors meet in executive session without any of the non-independent directors or members of management present.

Committees of the Board of Directors

Audit Committee

The Audit Committee engages our independent registered public accounting firm, reviews with the firm the plans and results of the audit engagement, approves the audit and non-audit services provided by the firm, reviews our financial statements, reviews our compliance with laws and regulations, receives and reviews complaints relating to accounting or auditing matters, considers the adequacy of our internal accounting controls, and produces a report for inclusion in our annual proxy statement. The members of the Audit Committee are Peter F. Stanton, Chairman, Ryland P. “Skip” Davis, Jon E. Eliassen and Ronald R. Taylor. The Audit Committee met nine times during 2006.

The Board has determined that each member of the Audit Committee is financially literate under the current listing standards of the NYSE. The Board also has determined that each member of the Audit Committee qualifies as an “audit committee financial expert” as defined by applicable rules of the Securities and Exchange Commission. The audit committee financial experts are Ryland P. “Skip” Davis, Jon E. Eliassen, Peter F. Stanton and Ronald R. Taylor. All members of the Audit Committee are considered independent because they satisfy the independence requirements for Board members prescribed by the NYSE listing standards, including those set forth inRule 10A-3 under the Securities Exchange Act of 1934, as amended.

Compensation Committee

The Compensation Committee discharges the responsibilities of the Board relating to compensation and evaluation of our President and Chief Executive Officer, or CEO, and other executive officers, recommends to the Board the compensation of Board members, oversees the administration of our equity incentive plans and produces an annual report on executive compensation for inclusion in our annual proxy statement. The members of the Compensation Committee are Ronald R. Taylor, Chairman, Ryland P. “Skip” Davis and Peter F. Stanton. The Compensation Committee met five times in 2006.

The processes and procedures of the Compensation Committee for considering and determining compensation for our executive officers and directors are as follows:

•  Compensation for our executive officers is generally determined annually in February.

8

•  The Compensation Committee reviews director compensation and benefits annually and makes recommendations to the Board with respect thereto.

•  With respect to our CEO, during the first calendar quarter of each year, the Compensation Committee reviews and approves company and individual performance goals for the current year, evaluates his performance in light of the goals established for the prior year, considers competitive market data and establishes his compensation based on this evaluation. As part of the evaluation process, the Compensation Committee Chairman solicits comments from other Board members. Final determinations regarding our CEO’s performance and compensation are made during an executive session of the Compensation Committee and reported to the Board.

•  Our Compensation Committee determines compensation for the other executive officers based on the recommendations of our CEO and competitive market data. Final determinations of their compensation are made during an executive session of the Compensation Committee and reported to the Board.

•  During 2006, the Compensation Committee directly engaged Towers Perrin, an independent compensation consulting firm, to review total compensation levels of our directors, executive officers and other top management personnel. The firm reviewed various sources of data available regarding the compensation practices of hospitality industry and other companies, assessed the competitiveness of our compensation in comparison to that of the other companies, and provided the Compensation Committee with written reports and recommendations.

•  The Compensation Committee has no authority to delegate any of the functions described above to any other persons.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is responsible for identifying and recommending to the Board for selection or nomination those individuals qualified to become members of the Board under the criteria established by our Corporate Governance Guidelines, periodically reviewing and making recommendations to the Board with regard to size and composition of the Board and its committees, recommending and periodically reviewing for adoption and modification by the Board our Corporate Governance Guidelines and overseeing the evaluation of the Board and management. The members of the Nominating and Corporate Governance Committee are Jon E. Eliassen, Chairman, Peter F. Stanton and Ronald R. Taylor. The Nominating and Corporate Governance Committee met five times in 2006.

Directors may be nominated by the Board or by shareholders in accordance with our By-Laws. The Nominating and Corporate Governance Committee will review all proposed nominees for the Board, including those recommended by shareholders, in accordance with its charter, our By-Laws and our Corporate Governance Guidelines. The committee will review age (a minimum age of 21 is prescribed for directors under the By-Laws), desired experience, mix of skills and other qualities to assure appropriate Board composition, taking into account the current Board members and the specific needs of our company and the Board. The committee will generally look for individuals who have displayed high ethical standards, integrity and sound business judgment. This process is designed to ensure that the Board includes members with diverse backgrounds, skills and experience, including appropriate financial and other expertise relevant to our business.

While the committee is authorized to retain a third party to assist in the nomination process, we have not paid a fee to any third party to identify or assist in identifying or evaluating potential nominees.

A shareholder of record can nominate a candidate for election to the Board by complying with the procedures in Section 3.3 of our By-Laws. Any shareholder of record who wishes to submit a nomination should review the By-Law requirements on nominations by shareholders, which are included in the excerpt from the By-Laws attached as Appendix C to this Proxy Statement. Any nomination should be sent to our Secretary at our principal executive office, 201 West North River Drive, Suite 100, Spokane, WA 99201. Any recommendations from shareholders regarding director nominees should be sent to the Nominating and Corporate Governance Committee in care of our Secretary at the same address.

9

Communications with the Board of Directors

Our annual meeting of shareholders provides an opportunity each year for shareholders to ask questions of, or otherwise communicate directly with, members of the Board on appropriate matters. Shareholders or other interested parties may contact the Chairman of the Board at any time by sending ane-mail tochairman@redlion.com. In addition, shareholders may communicate in writing with any particular director, any committee of the Board, or the directors as a group, by sending such written communication to our Secretary at our principal executive office, 201 West North River Drive, Suite 100, Spokane, WA 99201. Copies of written communications received at such address will be provided to the Board or the relevant director unless such communications are considered, in the reasonable judgment of our Secretary, to be inappropriate for submission to the intended recipient(s). Examples of shareholder communications that would be considered inappropriate for submission to the Board include, without limitation, customer complaints, solicitations, communications that do not relate directly or indirectly to our business or communications that relate to improper or irrelevant topics. Communications concerning potential director nominees submitted by any of our shareholders will be forwarded to the Chairman of the Nominating and Corporate Governance Committee.

Compensation Committee Report²

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis provided below with management, and based on the review and discussions, recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our Annual Report onForm 10-K.

Respectfully submitted,

Compensation Committee of the Board of Directors

Ronald R. Taylor, Chairman

Ryland P. “Skip” Davis

Peter F. Stanton

April 12, 2007

Compensation Committee Interlocks and Insider Participation.

We have a banking relationship with Washington Trust Bank. One of the members of the Compensation Committee, Peter F. Stanton, is a director and the chief executive officer of this bank. We have the following related party transactions with this bank:

•  We had various amounts of cash on deposit and other investments with the bank ranging during 2006 from approximately $375,000 to $1,176,000 in the aggregate. During 2006 the bank paid us interest on these investments of approximately $28,000. We expect to continue to have these types of investments with the bank in the future.

•  At the beginning of 2006, the bank held two promissory notes secured by certain of our properties that had an aggregate principal amount of approximately $7,900,000. During 2006, we made principal and interest payments on these notes of approximately $4,500,000 and $500,000, respectively. These payments retired one of these notes, and the principal amount owed on the remaining note at the end of 2006 was

² The material in this report is not soliciting material, is not deemed filed with the Securities and Exchange Commission and is not incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made on, before, or after the date of this Proxy Statement and irrespective of any general incorporation language in such filing.

10

approximately $3,400,000. The bank continues to hold this second note and we will make principal and interest payments on the note in the future.

•  Goodale & Barbieri Company (“G&B”) was previously a wholly owned subsidiary through which we conducted the management, leasing, brokerage and development portion of our former real estate division. We sold all of our stock of G&B on April 30, 2006. G&B manages the bank’s corporate office building under a written management agreement. During the portion of 2006 prior to our divestment of G&B, the bank paid G&B management fees of approximately $43,000.

COMPENSATION DISCUSSION AND ANALYSIS

This section discusses the compensation of our executive officers. Compensation to the executive officers is determined by the Compensation Committee of our Board. The Compensation Committee is composed entirely of independent directors, as defined under NYSE rules, and none of its members is a current or former employee of our company. All decisions of the Compensation Committee are reported to our Board.

There are no material differences in the compensation policies or decisions with respect to the executive officers, except that our compensation for our President and Chief Executive Officer, or CEO, is determined exclusively by the Compensation Committee, while the compensation of the other executive officers is determined by the Compensation Committee based on similar criteria, but also takes into account the recommendations of our CEO.

Compensation Program Objectives and Rewards

We believe that our executive compensation program should:

•  Attract, motivate and retain highly qualified executives by paying them competitively, consistent with our success and their contributions to this success; and

•  Pay for performance by rewarding and encouraging superior company and individual performance, on both a short- and long-term basis, in a way that promotes alignment with long-term shareholder interests.

All of the compensation and benefits for our executive officers have as a primary purpose our need to attract, retain and motivate the highly talented individuals who will engage in the behaviors necessary to enable us to succeed in our mission while upholding our values in a highly competitive marketplace. Beyond that, different elements are designed to engender different behaviors.

•  Base salary and benefits are designed to attract and retain executives over time.

•  Annual cash awards under the Executive Officers Variable Pay Plan (“VPP”) are designed to focus executives on specific company and individual performance goals established each year by the Compensation Committee. Executive officers may also receive discretionary bonuses based on performance not otherwise measured by the VPP or for other reasons.

•  Long-term equity incentives — stock options and restricted stock units (“RSUs”) under the shareholder-approved 2006 Incentive Stock Plan (“ISP”) — focus executives’ efforts on the behaviors within their control that they believe are necessary to ensure our long-term success, as reflected in increases to our stock price over a period of years.

•  Severance and change of control arrangements are designed to facilitate our ability to attract and retain executives as we compete for talent in a marketplace where such protections are commonly offered. These arrangements ease an executive’s transition due to an unexpected employment termination. In the event of rumored or actual fundamental corporate changes, these arrangements will also allow executives to remain focused on our business interests.

11

Elements of Our Compensation Program

Base Salaries

The Compensation Committee determines base salaries for the executive officers early each year, based on job responsibilities and individual contribution as well as base salary levels of executives at peer hospitality companies. In determining the base salaries of executive officers other than the CEO, the Compensation Committee takes into consideration recommendations made by the CEO.

In establishing base salaries for 2006, the Compensation Committee obtained peer company base salary data from the Hospitality Compensation ExchangeLodging Corporate Annual Reportand determined that, as a guideline, it would target base salaries for our executives at the 50th percentile. In February 2006, the Compensation Committee approved base salary increases of approximately 10% for each of the executive officers.

In November 2006, the Compensation Committee retained an independent compensation consulting firm to review total compensation levels for our senior management team. The firm provided a report and recommendations based on a peer group of nine hospitality companies. The Compensation Committee relied in part on this report in establishing executive officer base salaries for 2007.

Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), base salaries paid to executive officers are deductible for federal income tax purposes except to the extent that they exceed $1 million. No executive received base salary in excess of $1 million in 2006.

VPP and Other Annual Cash Awards

Early each year, the Compensation Committee determines company and individual performance goals for each executive officer under the VPP, as well as the various levels of cash awards that each executive will receive based on the extent to which his goals are achieved. Company goals are generally related to our company’s overall financial performance. Individual goals may be subjective or objective, but they are generally based on performance in areas of our business that the Compensation Committee believes are important to our success. The goals and award levels are initially proposed by the CEO, and the final goals and award levels are determined following a dialogue between the Compensation Committee and the CEO. Award levels are specified as a percentage of base salary. The award levels that are potentially available under the VPP are, as a guideline, targeted at the 50th percentile of peer company annual incentive compensation.

In February 2006, the Compensation Committee determined VPP goals for 2006. The company goals were based on achievement of specified levels of earnings per share and EBITDA as well as a specified ratio of funds from operations (FFO) to prior year end equity. Individual goals varied among the executives. At the same time, the following award levels were established:

VPP Award Levels for 2006

	Percentage of Base Salary									Possible Award Payouts ($)
	Threshold (1)			Target			Maximum			Threshold (1)		Target		Maximum		Actual
Arthur M. Coffey		0	%		60	%		100	%		0		214,500		357,500		233,547
Anupam Narayan		0	%		40	%		60	%		0		99,000		148,500		99,406
John M. Taffin		0	%		30	%		50	%		0		59,021		98,368		45,914
Thomas L. McKeirnan		0	%		30	%		36	%		0		47,850		57,420		42,351

(1) Award payouts under the VPP have historically been based on up to three company performance goals and up to five individual performance goals for each executive, and neither the goals nor their weightings have been uniform among the executives. As a result, we do not consider the VPP to have any “Threshold” award level. If each of the executives had achieved in 2006, for each of his individual and company goals under the VPP, the minimum level of performance required for that achievement to result in some contribution to award payout under the VPP, the respective percentages of base salary and award payouts that the executives would have

12

received would have been as follows: Mr. Coffey, 34.4% and $122,980; Mr. Narayan, 22.9% and $56,678; Mr. Taffin, 14.7% and $28,920; and Mr. McKeirnan, 17.0% and $27,115.

Under the VPP, there is an overriding discretionary analysis of each executive’s eligibility to receive variable pay. For example, if an executive fails to follow company policy and procedures, exposes the company to legal liability, or exhibits behavior inappropriate for a leadership position, he may be disqualified from receiving his variable pay, even if his specified performance goals are achieved.

Awards paid in 2007 for 2006 performance exceeded the targeted amounts for two of our four executive officers and were slightly less than targeted amounts for the other two officers. Awards paid in 2006 for 2005 performance were less than the targeted amounts for all of our executive officers.

In establishing VPP award levels for 2007, the Compensation Committee relied in part on the report that, as described above, it obtained from an independent compensation consulting firm in November 2006.

In addition to awards under the VPP, the Compensation Committee has on occasion granted discretionary bonuses to executive officers based on performance not otherwise measured by the VPP or for other reasons. One such bonus in the amount of $13,280 was granted to Mr. Taffin for services performed in 2006 inasmuch as he missed a performance goal under the VPP only slightly due to circumstances beyond his control.

We generally intend that executive officer compensation be fully deductible for federal income tax purposes, taking into account Section 162(m) of the Code, provided that other compensation objectives are met. We have not sought shareholder approval of the VPP, which would ensure deductibility under the Code, because we anticipate that, for the foreseeable future, no executive officer will have aggregate base salary and annual incentive awards of more than $1 million during any calendar year.

Long-Term Equity Incentives

We provide long-term incentives to our executive officers in the form of stock options and restricted stock units (“RSUs”). This combination of equity incentives is intended to benefit shareholders by enabling us to better attract and retain top talent in a marketplace where such incentives are prevalent. Both stock options and RSUs closely align our executives with the achievement of our longer-term financial objectives that enhance shareholder value.

Historically, we have not had a set annual process for the granting of long-term equity incentives. The compensation consulting firm retained by the Compensation Committee in November 2006 has recommended that, in order to be more consistent with practices at our peer companies, we adopt specific guidelines for annual grants of equity incentives to our executive officers. In November 2006, based on these recommendations, the Compensation Committee awarded the executive officers stock options and RSUs having a total value, as determined using Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment,” equal to from 40% to 100% of the base salaries of the executive officers. The value of the stock option component constituted 75% of this total, while the value of the RSU component was 25% of the total. The Compensation Committee has determined that all future awards of long-term equity incentives to continuing executive officers will be made once each year on the date of our annual meeting of shareholders.

•  Stock Options

Stock options provide for financial gain derived from the potential appreciation in stock price from the date that the option is granted until the date that the option is exercised. The exercise price of our stock options is set at fair market value, which is the closing selling price of our common stock on the NYSE on the grant date. The vesting provisions of the stock options we have granted in the past have varied. The stock options granted to the executive officers in November 2006 will vest in equal annual increments over a period of four years from the date of grant.

Under the shareholder-approved Incentive Stock Plan, we may not grant stock options at a discount to fair market value or with a so-called “reload” feature, and we may not reduce the exercise price of outstanding stock options except in the case of a stock split or other similar event. We do not lend funds to employees to enable them to exercise stock options.

13

We do not backdate options or grant options retroactively. In addition, we do not plan to coordinate grants of options so that they are made before announcement of favorable information, or after announcement of unfavorable information. Our options are granted at fair market value on a fixed date or event, with all required approvals obtained in advance of or on the actual grant date. All grants to executive officers require the approval of the Compensation Committee.

Our long-term performance ultimately determines the value of stock options, because gains from stock option exercises are entirely dependent on the long-term appreciation in the price of our common stock. As a result, we believe stock option grants encourage executives and other employees to focus on behaviors and initiatives that should lead to an increase in the price of our common stock, which benefits all our shareholders.

Under Section 162(m) of the Code, we generally may not deduct compensation paid to an executive officer in a calendar year if it exceeds $1 million. Certain compensation that is considered “performance-based” is deductible without regard to this $1 million limitation. We believe that any compensation attributable to stock options held by our executive officers will be considered performance-based, so Section 162(m) of the Code should not limit our ability to deduct it for federal income tax purposes.

•  RSUs

RSU grants provide for the issuance of shares of our common stock if the recipient has met certain continued service requirements. Under the RSUs granted to our executive officers in November 2006, an executive will receive one-fourth of the shares subject to his award on each of the first four anniversaries of the date of grant so long as he remains continuously employed with us until the applicable anniversary.

Unlike stock options, RSUs may have value even if the price of our common stock does not increase. Nevertheless, we award RSUs because they promote retention and we believe they also create incentives for executives to focus on increased share prices so that the common stock subject to the award will be as valuable as possible when it is eventually issued. Although we do not impose any restriction on the sale of common stock issued pursuant to RSUs, we expect that our executives will continue to hold some if not all of the shares issued, which will also keep their interests aligned with those of our shareholders.

Our RSUs do not qualify as performance-based compensation under Section 162(m) of the Code. As a result, the value of common stock ultimately issued to an executive officer pursuant to an RSU will not be deductible to the extent that value, when aggregated with the executive officer’s other aggregate compensation that is subject to Section 162(m), exceeds $1 million.

14

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth summary information concerning the compensation awarded to, paid to or earned by each of our four executive officers for all services rendered in all capacities to us in 2006.

											Non-Equity
											Incentive
							Stock		Option		Plan		All Other
			Salary		Bonus		Awards		Awards		Compensation		Compensation		Total
Name and Principal Position	Year		($)		($)		($)(1)		($)(1)		($)(2)		($)(3)		($)
Arthur M. Coffey President, Chief Executive Officer and Director		2006		354,791		—		1,862		240,984		233,547		14,252		845,436
Anupam Narayan Executive Vice President, Chief Investment Officer and Chief Financial Officer		2006		245,625		—		19,648		75,855		99,406		8,565		449,099
John M. Taffin Executive Vice President, Hotel Operations		2006		195,244		13,280		512		66,431		45,914		9,335		330,717
Thomas L. McKeirnan Senior Vice President, General Counsel and Corporate Secretary		2006		158,291		—		332		27,742		42,351		9,594		238,310

(1)	Represents compensation expense recognized in 2006 for financial reporting purposes under Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment,” for restricted stock units and stock options held by our executive officers. See Note 10 to our consolidated financial statements in our Annual Report onForm 10-K for the year ended December 31, 2006 for information regarding the assumptions underlying the valuation of these equity awards.
(2)	Represents amounts that were earned under our Executive Officers Variable Pay Plan for 2006 performance and that were determined and paid in February 2007. This plan is further discussed under the caption “VPP and Other Annual Cash Awards” in the Compensation Discussion and Analysis.
(3)	Includes the following matching contributions made by us under our 401(k) Savings Plan: Mr. Coffey, $7,500; Mr. Narayan, $3,750; Mr. Taffin, $2,583; and Mr. McKeirnan, $2,842. Also includes the following discounts accorded the executive officers from contributions otherwise required for participation in our self-insured medical, dental and vision plan: Mr. Coffey, $6,752; Mr. Narayan, $4,815 Taffin, $6,752; and Mr. McKeirnan, $6,752. The total value of all perquisites and personal benefits received by each executive officer in 2006 was less than $10,000.

15

2006 Grants of Plan-Based Awards

The following table sets forth summary information regarding all grants of plan-based awards made to our executive officers for the year ended December 31, 2006.

All Other

All Other

Stock

Option

Grant

Awards:

Awards:

Exercise

Date Fair

Estimated Possible Payouts Under

Number

Number of

or Base

Value of

Non-Equity Incentive Plan

of Shares

Securities

Price of

Stock and

Awards (1)

of Stock

Underlying

Option

Option

Threshold

Target

Maximum

or Units

Options

Awards

Awards

Name

Type of Award

Grant Date

($)(2)

($)

($)

(#)(3)

(#)(4)

($/Sh)

($/Sh)(5)

Arthur M. Coffey

Annual Incentive Award

0

214,500

357,500

Restricted Stock Award

11/21/2006

7,320

89,375

Option Award

11/21/2006

64,145

12.21

268,126

Anupam Narayan

Annual Incentive Award

0

99,000

148,500

Restricted Stock Award

11/21/2006

3,801

46,406

Option Award

11/21/2006

33,306

12.21

139,219

John M. Taffin

Annual Incentive Award

0

59,021

98,368

Restricted Stock Award

11/21/2006

2,014

24,592

Option Award

11/21/2006

17,650

12.21

73,777

Thomas L. McKeirnan

Annual Incentive Award

0

47,850

57,420

Restricted Stock Award

11/21/2006

1,306

15,950

Option Award

11/21/2006

11,447

12.21

47,848

(1)	These represent the “Threshold”, “Target” and “Maximum” award payouts that were available for the 2006 performance period under our Executive Officers Variable Pay Plan (the “VPP”). This plan is further discussed under the caption “VPP and Other Annual Cash Awards” in the Compensation Discussion and Analysis. The actual award payouts are reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.
(2)	Award payouts under the VPP have historically been based on up to three company performance goals and up to five individual performance goals for each executive, and neither the goals nor their weightings have been uniform among the executives. As a result, we do not consider the VPP to have any “Threshold” award level. If each of the executives had achieved in 2006, for each of his individual and company goals under the VPP, the minimum level of performance required for that achievement to result in some contribution to award payout under the VPP, the respective award payouts that the executives would have received would have been as follows: Mr. Coffey, $122,980; Mr. Narayan, $56,678; Mr. Taffin, $28,920; and Mr. McKeirnan, $27,115.
(3)	These awards are restricted stock units awarded under our 2006 Stock Incentive Plan. These units will vest in equal installments on the first four anniversaries of the grant date, subject to continuous service with us or one of our affiliates. When restricted stock units vest, we will issue one share of our common stock for each unit that vests as soon as is administratively practicable.
(4)	These awards are nonqualified options under our 2006 Stock Incentive Plan. Each option has a term of ten years and an exercise price equal to the closing market price of our common stock on the date of grant. The options will vest in equal installments on the first four anniversaries of the grant date, subject to continuous service with us or one of our affiliates.
(5)	Represents the grant date fair value of these stock awards ($12.21 per share) and option awards ($4.18 per underlying share) computed in accordance with Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment.”

16

2006 Outstanding Equity Awards at Fiscal Year End

The following table sets forth summary information regarding the outstanding equity awards held by each of our executive officers at December 31, 2006.

	Option Awards (1)									Stock Awards (1)
													Market
	Number of		Number of							Number of			Value of
	Securities		Securities							Shares or			Shares or
	Underlying		Underlying							Units of			Units of
	Unexercised		Unexercised							Stock That			Stock That
	Options		Options			Option		Option		Have Not			Have Not
	(#)		(#)			Exercise Price		Expiration		Vested			Vested
Name	Exercisable		Unexercisable			($)		Date		(#)			($)(2)
Arthur M. Coffey		1,052		0			10.94		1/4/2009
		5,000		0			7.50		11/8/2009
		9,624		0			8.31		1/3/2010
		20,758		0			6.07		12/31/2011
		27,757		0			5.26		2/4/2013
		0		250,000	(3)		5.10		11/19/2014
		0		100,000	(4)		7.46		11/10/2015
		0		64,145	(5)		12.21		11/21/2016
											7,320	(6)		93,257
Anupam Narayan		0		80,000	(7)		5.10		11/22/2014
		0		30,000	(4)		7.46		11/10/2015
		0		33,306	(5)		12.21		11/21/2016
											7,414	(8)		94,454
											3,801	(6)		48,425
John M. Taffin		10,545		3,515	(9)		5.69		10/20/2013
		0		65,000	(3)		5.10		11/19/2014
		0		20,000	(4)		7.46		11/10/2015
		0		17,650	(5)		12.21		11/21/2016
											2,014	(6)		25,658
Thomas L. McKeirnan		7,838		2,613	(10)		5.98		7/1/2013
		0		25,000	(3)		5.10		11/19/2014
		0		7,500	(4)		7.46		11/10/2015
		0		11,447	(5)		12.21		11/21/2016
											1,306	(6)		16,638

(1)	The vesting of unvested options and restricted stock units is subject to continuous service with us or one of our affiliates through the respective scheduled dates of vesting disclosed in the footnotes to this table. Under certain circumstances, these vesting dates may be accelerated. See —Employment Agreements; Severance and Change of Control Arrangements.
(2)	The value of these restricted stock units is calculated by multiplying the number of unvested units by $12.74, the closing market price of our common stock on December 29, 2006.
(3)	Each of these options will vest in two equal installments on November 19, 2008 and November 19, 2009. However, each of these options will vest earlier (a) as to one-fourth of the shares if, prior to November 19, 2008, the market price of our common stock reaches $10.20 for 60 consecutive trading days (this vesting benchmark was in fact achieved in 2007), and (b) as to an additional one-fourth of the shares if, prior to November 19, 2008, the market price of our common stock reaches $15.30 for 60 consecutive trading days.
(4)	Each of these options will vest in two equal installments on November 10, 2009 and November 10, 2010. However, each of these options will vest earlier (a) as to one-fourth of the shares if, during the period from

17

	November 10, 2007 to November 10, 2009, the market price of our common stock reaches $14.92 for 60 consecutive trading days, and (b) as to an additional one-fourth of the shares if during that period the market price of our common stock reaches $22.38 for 60 consecutive trading days.
(5)	Each of these options will vest in four equal installments on November 21, 2007 and the next three anniversaries of that date.
(6)	Each of these restricted stock unit awards will vest in four equal installments on November 21, 2007 and the next three anniversaries of that date.
(7)	This option will vest in two equal installments on November 22, 2008 and November 22, 2009. However, this option will vest earlier (a) as to one-fourth of the shares if, prior to November 22, 2008, the market price of our common stock reaches $10.04 for 60 consecutive trading days, and (b) as to an additional one-fourth of the shares if, prior to November 22, 2008, the market price of our common stock reaches $15.06 for 60 consecutive trading days.
(8)	This restricted stock unit award will vest in two equal installments on November 22, 2007 and November 22, 2008.
(9)	This option will vest in full on October 20, 2008 or such earlier date on which the market price of our common stock has reached $11.38 for 60 consecutive trading days.
(10)	This option will vest on July 1, 2008 or such earlier date on which the market price of our common stock has reached $11.96 for 60 consecutive trading days.

2006 Option Exercises and Stock Vested

The following table summarizes the option exercises and vesting of stock awards for each of our executive officers for the year ended December 31, 2006.

	Option Awards				Stock Awards
	Number of				Number of
	Shares		Value		Shares
	Acquired		Realized		Acquired		Value Realized
	on Exercise		on Exercise		on Vesting		on Vesting
Name	(#)		($)		(#)		($)(1)
Arthur M. Coffey		0		0		0		0
Anupam Narayan		0		0		3,707		45,337
John M. Taffin		0		0		0		0
Thomas L. McKeirnan		0		0		0		0

(1) The value of the shares of common stock acquired upon vesting of these restricted stock units is calculated by multiplying the number of shares by $12.23, the closing market price of our common stock on the date the units vested.

Employment Agreements; Severance and Change of Control Arrangements

Employment Agreements

We have written employment agreements with Arthur M. Coffey, Anupam Narayan, John Taffin and Thomas L. McKeirnan, which provide for 2007 base salaries of $390,000, $260,000, $210,000 and $190,000, respectively, subject in each case to periodic increases. The following is a summary of the other material terms of these agreements.

Term of Agreements; Restrictive Covenants

Each executive will serve in his current position through December 31, 2007, unless his agreement terminates earlier in accordance with its terms. Thereafter, each agreement automatically renews for additional one-year periods, unless terminated by either party upon120-days’ notice (a “Non-renewal Notice”) prior to the end of the initial or any renewal period. Following termination of an agreement for any reason, the executive will generally be

18

prohibited from competing with us for a period of one year or soliciting any of our employees for a period of two years.

Annual Bonuses

If an executive officer other than Mr. Coffey attains the target performance measures determined under the Executive Officers Variable Pay Plan (“VPP”) for a particular year, he must be eligible, subject to any discretion accorded the Compensation Committee under the terms of the VPP to withhold a bonus otherwise payable, for a bonus equal to a percentage of his base salary for that year, as set forth in the following table (Mr. Coffey’s agreement does not specify any particular level of bonus entitlement):

	Bonus
Name	Percentage
Anupam Narayan		40	%
John M. Taffin		30	%
Thomas L. McKeirnan		30	%

The bonuses awarded under the VPP for 2006 are reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. The maximum bonuses available under the VPP for 2007, measured as a percentage of base salary, are 100% for Mr. Coffey, 60% for Mr. Narayan, and 50% for each of Mr. Taffin and Mr. McKeirnan.

Severance Arrangements

If we deliver a Non-Renewal Notice to an executive or terminate his agreement without cause, or if an executive terminates his agreement for good reason within six months following the occurrence of the event that constitutes good reason, then:

•  any stock options held by the executive will immediately vest and be exercisable, any stock granted to the executive will immediately vest, all restrictions on restricted stock issued to the executive will terminate, and any restricted stock awarded but not yet issued to the executive will be issued;

•  in the case of Mr. Coffey, we must provide a lump-sum severance payment equal to two times his total compensation for the prior year, plus the target award amount available under the VPP for the year in which the termination occurs (prorated for the portion of the year elapsed at the time of termination), plus a continuation of all life, health and insurance benefits for a two-year period;

•  in the case of each of Messrs. Narayan and Taffin, we must provide a lump-sum severance payment equal to two times his cash compensation for the prior year, plus the target award amount available under the VPP for the year in which the termination occurs (prorated for the portion of the year elapsed at the time of termination), plus a continuation of all life, health and insurance benefits for a two-year period;

•  in the case of Mr. McKeirnan, we must provide a lump-sum severance payment equal to his cash compensation for the prior year, plus the target award amount available under the VPP for the year in which the termination occurs (prorated for the portion of the year elapsed at the time of termination), plus a continuation of all life, health and insurance benefits for a one-year period; and

•  to the extent that the foregoing severance payments or benefits received by an executive are deemed “excess parachute payments” within the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), and thereby result in the imposition upon the executive of the excise tax imposed by Section 4999 of the Code, we must pay the executive an additional amount (the“Gross-Up Payment”) such that the net amount retained by the executive, after deduction of (i) any excise tax payable on such excess parachute payments and theGross-Up Payment, and (ii) any federal, state and local income and employment taxes payable on theGross-Up Payment, is the same as it would have been if such excise tax had not been imposed.

The circumstances that constitute “good reason” entitling an executive to severance benefits following a voluntary termination of employment vary among the executives’ agreements but generally relate to: (i) assignment

19

to the executive of duties materially inconsistent with the executive’s positions and responsibilities as described in the agreement; (ii) the removal of the executive from such positions; (iii) any material continuing breach of the agreement;and/or (iv) a change in our headquarters office location. However, the executive will not have good reason unless the executive gives us written notice that the specified conduct or event has occurred giving rise to his having good reason, and we fail to cure such conduct or event within 30 days after receipt of such notice (this notice provision does not apply to Mr. Coffey).

If the employment of the executive officers had terminated immediately following the end of our fiscal year ended December 31, 2006 under circumstances entitling them to the severance benefits described above, the lump-sum severance payments payable to the executive officers, and the value of the other severance benefits they would have received, would have been as follows:

Table of Severance Payments and Benefits (1)

			Accelerated		Accelerated		Life, Health
	Severance		Stock		Restricted		and Insurance		Gross-Up
Name	Payment (2) (3) (4)		Options (5)		Stock Units (6)		Benefits (7)		Payment (8)		Total (9)
Arthur M. Coffey	$	1,920,182	$	2,471,997	$	93,257	$	23,088	$	1,360,501	$	5,869,025
Anupam Narayan	$	697,562	$	793,652	$	142,879	$	16,632	$	440,309	$	2,091,034
John M. Taffin	$	514,042	$	636,335	$	25,658	$	23,088	$	303,784	$	1,502,907
Thomas L. McKeirnan	$	203,484	$	254,331	$	16,638	$	11,544	$	0	$	485,997

(1)	The information presented in this table assumes that the terms of the recently amended employment agreements with our executive officers were in effect immediately following the end of our fiscal year ended December 31, 2006.
(2)	The severance payment for Mr. Coffey equals two times his total compensation for 2006. “Total compensation” for this purpose equals the sum of (a) his total cash compensation for 2006, plus (b) the grant date fair value of stock and option awards made to him in 2006 (computed in accordance with Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment”), plus (c) the matching contributions we made for 2006 to his account under our 401(k) Savings Plan, plus (d) the discount accorded him in 2006 from contributions otherwise required for participation in our self-insured medical, dental and vision plan.
(3)	The severance payment for each of Messrs. Narayan and Taffin equals two times his total cash compensation for 2006, and the severance payment for Mr. McKeirnan equals his total cash compensation for 2006. “Total cash compensation” for this purpose equals the sum of (a) the executive’s total cash compensation for 2006, plus (b) the matching contributions we made for 2006 to the executive’s account under our 401(k) Savings Plan.
(4)	If the termination of employment entitling an executive officer to a severance payment and other severance benefits occurs other than at the beginning of a fiscal year, the executive officer would receive, in addition to the amount set forth in this column, the target award amount available to him under the VPP for the year in which the termination occurs (prorated for the portion of the year elapsed at the time of termination). The target award amounts available to the executive officers for 2007 are as follows: Mr. Coffey, $234,000; Mr. Narayan, $104,000; Mr. Taffin, $63,000; and Mr. McKeirnan, $57,000.
(5)	The value of the accelerated stock options is calculated by multiplying the number of shares subject to unvested options by the difference between the respective exercise prices of those options and $12.74, the closing market price of our common stock on December 29, 2006.
(6)	The value of the accelerated restricted stock units is calculated by multiplying the number of unvested units by $12.74, the closing market price of our common stock on December 29, 2006.
(7)	Represents the estimated value of the continuation of benefits under our self-insured medical, dental and vision plan based on the average per employee cost of that plan for various categories of employees in 2006.
(8)	TheGross-Up Payment will be payable only if the termination of employment entitling an executive officer to a severance payment and other severance benefits occurs in connection with certainchange-in-control events specified in the Code. If we demonstrate that a portion of the severance payments represent compensation to the executive officers for refraining from the performance of services in compliance with their covenants not to

20

compete, that portion will not be deemed “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code and the amount of theGross-Up Payments will be reduced. TheGross-Up Payments in this column have been estimated based on the amount of the severance payments and other severance benefits shown in this table and the assumption that no amounts described in footnote 4 to this table are paid in connection with such termination of employment and that no portion of the severance payments represent compensation for the covenants not to compete.

(9)

Assumes that no amounts described in footnote 4 to this table are paid in connection with the termination of employment entitling the executive officers to severance payments and other severance benefits.

Change of Control Arrangements

If our company undergoes a change of control as defined in the respective employment agreements, then any stock options held by the executives will immediately vest and be exercisable, any stock granted to the executives will immediately vest, all restrictions on restricted stock issued to the executives will terminate, and any restricted stock awarded but not yet issued to the executives will be issued. The value of the acceleration of these equity awards is shown in the above Table of Severance Payments and Benefits.

In addition, Mr. Coffey may terminate his agreement for any reason within six months following a change of control, in which case he will receive a lump-sum severance payment equal to two times his total cash compensation for the prior year, plus aGross-Up Payment, if applicable, plus a continuation of all life, health and insurance benefits for a two-year period. If Mr. Coffey’s employment had terminated immediately following the end of our fiscal year ended December 31, 2006 under circumstances entitling him to these change of control benefits, he would have received a lump-sum severance payment of $1,191,676, plus an estimatedGross-Up Payment of $1,044,126, plus life, health and insurance benefits having a value as set forth in the above Table of Severance Payments and Benefits, plus the award amount described in footnote 4 to that table.

DIRECTOR COMPENSATION

We pay our Chairman of the Board an annual retainer of $70,000 and provide him office space. We pay each of our other non-employee directors an annual retainer of $30,000. The chair of the Audit Committee receives an additional annual fee of $20,000. The chairs of each of the Compensation Committee and the Nominating and Corporate Governance Committee receive an additional annual fee of $15,000. Non-chair members of these committees receive an additional $5,000 annual fee for each committee on which they serve. All director fees are payable in advance in equal quarterly installments.

In addition to annual fees, each non-employee director is entitled to receive, as soon as reasonably practical after each annual meeting of our shareholders while he continues to serve as a director, a grant of shares of our common stock that, based on the closing market price on the last trading day prior to the annual meeting, have a value of $20,000.

In addition to the annual fees and stock grants, it is our policy to reimburse directors for theirout-of-pocket expenses incurred in connection with their service on the Board and its committees.

Our President and Chief Executive Officer is not separately compensated outside of his employment agreement for service as a director.

21

2006 Director Compensation Table

The following table shows compensation of the non-employee members of our Board for 2006.

	Fees Earned		Stock
	or Paid in		Awards		All Other
Name	Cash ($)		($ )( 1)(2)		Compensation ($)			Total ($) (3)
Donald K. Barbieri		60,000		12,000		12,487	(3)		84,487
Richard L. Barbieri		30,000		12,000		0			42,000
Ryland P. Davis		35,000		12,000		0			47,000
Jon E. Eliassen		40,000		12,000		0			52,000
Peter F. Stanton		45,000		12,000		0			57,000
Ronald R. Taylor		40,000		12,000		0			52,000

(1)	On July 25, 2006, each director named above received a grant of 1,048 unrestricted shares of our common stock. The amounts shown in this column represent the grant date fair value of these stock awards computed in accordance with Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment.” We recognized the full value of these awards as compensation expense in 2006 for financial reporting purposes.
(2)	At December 31, 2006, Messrs. Stanton and Taylor each held options to acquire 11,000 shares of our common stock. At that date, none of our other non-employee directors held options to acquire our common stock.
(3)	Represents the estimated value of office space that we provided to Mr. Barbieri during 2006.

REPORT OF THE AUDIT COMMITTEE³

The Audit Committee oversees our company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the committee reviewed and discussed the audited financial statements with management.

The committee reviewed with BDO Seidman, LLP the matters required to be discussed by Statement on Auditing Standards No. 61, as amended by Statement on Auditing Standards No. 90 (Communication with Audit Committees). In addition, the committee has received written disclosures and the letter from BDO Seidman, LLP required by Independence Standards Board Standard No. 1, and has discussed with BDO Seidman, LLP their independence.

In reliance on the reviews and discussions referred to above, the committee recommended to the Board that the audited financial statements be included in the Annual Report onForm 10-K for the year ended December 31, 2006 for filing with the Securities and Exchange Commission. The committee and the Board have also recommended, subject to shareholder ratification, the selection of BDO Seidman, LLP as our independent registered public accounting firm for 2007.

Respectfully submitted,

Audit Committee of the Board of Directors

Peter F. Stanton, Chairman
Ryland P. “Skip” Davis
Jon E. Eliassen
Ronald R. Taylor

March 27, 2007

³ The material in this report is not soliciting material, is not deemed filed with the Securities and Exchange Commission and is not incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made on, before, or after the date of this Proxy Statement and irrespective of any general incorporation language in such filing.

22

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The audit fees incurred for professional services by BDO Seidman, LLP for 2006 were $649,500, including fees for the annual audit of the 2006 financial statements, Sarbanes Oxley compliance work and quarterly reviews; $58,500 of fees for the audit of certain hotel properties; $80,000 of fees for consent and other services performed in connection with our prospectus filed onForm S-3/A during the second quarter of 2006; and $6,000 in fees for work on ourForm S-8. The audit fees incurred for professional services by BDO Seidman, LLP for 2005 were $235,500, including fees for the annual audit of the 2005 financial statements and quarterly reviews, and $58,500 of fees for the audit of certain hotel properties.

Audit-Related Fees

The fees billed for professional services by BDO Seidman, LLP for audit-related fees for 2006 were $25,500. Services covered included audit and attest services required by agreement on entities we consolidate, but not required by statute or a regulatory body. They also included fees related to the audit of our employee benefit plan, certain advice and accounting research.

The fees billed for professional services by BDO Seidman, LLP for audit-related fees for 2005 were $19,000. Services covered included audit and attest services required by agreement on entities we consolidate, but not required by statute or a regulatory body. They also included fees related to the audit of our employee benefit plan, certain advice and accounting research.

Tax Fees

The fees billed by BDO Seidman, LLP for tax-related services for 2006 were $138,975. Services covered an IRS exam, tax returns, year-end tax planning and tax advice.

The fees billed by BDO Seidman, LLP for tax-related services for 2005 were $129,355. Services covered an IRS exam, tax returns and year end tax planning.

Other Fees

There were no other fees billed by BDO Seidman, LLP for any other professional services rendered to us during 2006 or 2005.

During 2006 and 2005, BDO Seidman, LLP did not provide our company any professional services described in paragraph (c)(4) ofRule 2-01 ofRegulation S-X.

Pre-Approval Policies and Procedures

The Audit Committee is responsible for selecting, setting compensation and overseeing the work of our independent registered public accounting firm. The committee has adopted a policy that requires advance approval of audit, audit-related, tax, and other services (“audit and non-audit services”) performed by the independent registered public accounting firm.

The committee has delegated to its chairman authority to approve permitted services provided that the chairman reports any decisions to the committee at its next regularly scheduled meeting. On an ongoing basis, management communicates specific projects and categories of services for which the advance approval of the committee or chairman is requested. The committee or chairman reviews these requests and advises management if the engagement services of the independent registered public accounting firm are approved. On a periodic basis, management reports to the committee actual spending for audit and non-audit services compared to approved amounts.

23

Auditor Independence

The Audit Committee has considered whether and determined that the other professional services provided by BDO Seidman, LLP are compatible with maintaining its independence.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Under our written Statement of Policy with respect to Related Party Transactions, a related party transaction (as defined below) may be consummated or may continue only if the Audit Committee of our Board, or in certain cases the full Board, approves or ratifies the transaction in accordance with the guidelines set forth in the policy. The policy applies to the following related parties: (1) our directors; (2) any of our executive or other officers who are required by Section 16(a) of the Securities Exchange Act of 1934, as amended, to file reports of ownership and changes in ownership of our common stock with the Securities and Exchange Commission; (3) any person who is the beneficial owner of more than 5% of our common stock; (4) any immediate family member, as defined in the policy, of any of the foregoing persons; and (5) any entity that is owned or controlled in substantial part by any of the foregoing persons. “Related party transaction” is defined in the policy as a transaction between us and any of the foregoing persons.

Under the policy, the following transactions are deemed to be automatically pre-approved:

•  any compensation paid to a related party that has been approved by the Compensation Committee;

•  any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which a related party’s only relationship is as an employee (other than an executive officer) or a director, if the aggregate amount involved does not exceed the lesser of $50,000 or 2 percent of the charitable organization’s total annual receipts;

•  any transaction where the related party’s interest arises solely from the ownership of our common stock and all holders of our common stock receive the same benefit on a pro rata basis (e.g. dividends);

•  any transaction where the related party’s interest arises solely from participation in an employee benefit plan maintained by us for the general benefit of all of our employees; and

•  any transaction with a related party involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services.

Transactions with Related Parties

Information is set forth below regarding certain related party transactions that occurred during 2006 or that are anticipated to occur during or following 2007. All of such transactions were reviewed and approved or ratified in accordance with our Statement of Policy with respect to Related Party Transactions.

Inland Northwest Corporation

We have periodically entered into agreements with Inland Northwest Corporation (“INC”) to provide development, accounting and other administrative services in exchange for fees and costs incurred by us in providing such services. During 2006 we received approximately $28,000 from INC for such services. In addition, we purchased approximately $126,000 of dairy products from Inland Northwest Dairies LLC, a company in which INC has a 51% membership interest. We expect that these relationships will continue for the foreseeable future. Each of Donald K. Barbieri, Arthur M. Coffey and Richard L. Barbieri serves as a director and executive officer of INC. At the present time, INC is owned by an employee stock ownership trust (“ESOT). Donald K. Barbieri and Richard L. Barbieri were former shareholders of INC who sold their shares to the ESOT, and they remain guarantors on bank debt of INC incurred in connection with that transaction. In addition, Mr. Coffey is a participant in the ESOT.

24

Goodale & Barbieri Company

Goodale & Barbieri Company (“G&B”) was previously a wholly owned subsidiary of ours through which we conducted the management, leasing, brokerage and development portion of our former real estate division. On April 30, 2006, we consummated a tax-free exchange in which we transferred the shares we held in G&B to Thomas M. Barbieri and another individual in exchange for 84,880 and 9,431 shares, respectively, of our common stock then owned by them. The approximate aggregate value of these 94,311 shares, based on the average of the closing prices for our common stock on the NYSE for the ten trading days prior to signing of the exchange agreement, was $1,250,000, or approximately $1,125,000 for the shares received from Thomas M. Barbieri and $125,000 for the shares received from the other individual. Thomas M. Barbieri is the brother of Donald K. Barbieri and Richard L. Barbieri. The transaction was unanimously approved by our four independent directors, which do not include Donald K. Barbieri or Richard L. Barbieri.

We sublease office space to G&B for which they paid us $74,496 in rents in 2006 and are continuing to pay us rent in 2007. In addition, G&B manages two of our properties, the Kalispell Center and Lincoln Plaza. During the portion of 2006 following our divestment of G&B, we paid G&B $118,149 for management of the Kalispell Center and $67,055 for management of the Lincoln Plaza. We expect to pay G&B additional management fees for these properties for the foreseeable future. If we terminate the management agreement for either of these properties, we may be required to pay G&B a termination fee of up to $48,000 for the Kalispell Center or $150,000 for the Lincoln Plaza. We believe that Thomas M. Barbieri owns 90% of G&B, so that the approximated dollar value of his interest in all of these transactions between G&B and us would be 90% of the respective total amounts disclosed.

David Barbieri

David Barbieri serves as our Vice President, Information Technology. He has been with our company since 1996 and has served as our Vice President, Information Technology, since 2000. He was previously a Manufacturing Engineer at Exabyte Corporation in Boulder, Colorado from 1993 to 1996 after graduating from Colorado University with a degree in Mechanical Engineering. He is the son of Donald K. Barbieri. The aggregate amount of salary and bonus that we paid David Barbieri for 2006 was $148,694. His 2007 base salary is $124,538 and his target bonus opportunity for 2007 is 30% of this salary.

PROPOSALS OF SHAREHOLDERS

Proposals of shareholders to be considered for inclusion in the Proxy Statement and proxy for our 2008 Annual Meeting of Shareholders must be received by us on or prior to December 20, 2007.

A shareholder of record, who intends to submit a proposal at the 2008 Annual Meeting of Shareholders that is not eligible for inclusion in the Proxy Statement or proxy, or who intends to submit one or more nominations for directors at the meeting, must provide us prior written notice. Written notice of any such proposal or nominations should be addressed to our Secretary and received at our principal executive office at 201 West North River Drive, Suite 100, Spokane, Washington 99201 not later than December 20, 2007. The written notice must satisfy certain requirements specified in our By-laws, which are included in the excerpt from the By-Laws attached as Appendix C to this Proxy Statement. A complete copy of our By-laws will be sent to any shareholder upon written request to our Secretary.

25

ANNUAL REPORT ONFORM 10-K

A copy of our Annual Report onForm 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission is being mailed with this Proxy Statement to each shareholder of record. Shareholders not receiving a copy of such Annual Report may obtain one without charge by writing or calling our Secretary, 201 West North River Drive, Suite 100, Spokane, Washington 99201 ((509)459-6100).

By Order of the Board of Directors

Thomas L. McKeirnan
Secretary
Spokane, Washington

April 18, 2007

26

APPENDIX A

AUDIT COMMITTEE CHARTER

Approved February 13, 2007

Purpose

The purpose of the Audit Committee (the “Committee”) is to assist the Board of Directors of Red Lion Hotels Corporation (the “Company”) in fulfilling its oversight responsibilities for (1) the integrity of the Company’s financial statements, (2) the Company’s compliance with legal and regulatory requirements, (3) the independent auditor’s qualifications and independence and (4) the performance of the Company’s internal audit function and independent auditors. Additionally, the Audit Committee will prepare the audit committee report that SEC rules require be included in the Company’s annual proxy statement.

Authority

The Audit Committee has authority to conduct or authorize investigations into any matters within its scope of responsibility. It is empowered to:

1. Appoint, compensate, retain and oversee the work of the public accounting firm engaged to prepare or issue an audit report or perform other audit, review or attest services for the Company. This firm will report directly to the Committee.

2. Resolve any disagreements between management and the external auditor regarding financial reporting.

3. Pre-approve all auditing and permitted non-audit services performed by the Company’s external audit firm.

4. Delegate authority to the Committee Chair or subcommittees, including the authority to pre-approve all auditing and permitted non-audit services, provided that such decisions are presented to the full Committee at its next scheduled meeting.

5. Meet with Company officers, external auditors or outside counsel, as necessary.

6. Retain independent counsel or other advisers that the Committee determines are necessary to assist in the conduct of an investigation or to otherwise carry out its duties.

7. Seek any information it requires from employees or external parties, all of whom are directed to cooperate with the Committee’s requests.

The Company will provide for appropriate funding, as determined by the Committee, for payment of: (1) compensation to the public accounting firm engaged by the Committee, (2) compensation to any advisers retained by the Committee and (3) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

Composition and Qualifications

The Audit Committee will consist of at least three members of the Board of Directors. The Board will appoint Committee members and the Committee chair on an annual basis, as soon as is practical following the annual meeting of shareholders of the Company. The Board shall also have the right to removeand/or replace any member of the Committee from time to time in its discretion.

Each Committee member (i) must be “independent,” as that term is defined by the rules and listing standards of the SEC and the NYSE, respectively, and (ii) must be “financially literate,” as such qualification is interpreted by the Board in its business judgment. At least one Committee member shall be an “audit committee financial expert,” as defined by applicable rules of the SEC. The Board shall assess the qualification of the members at the time of their appointment and review their qualification on an annual basis or more frequently as the circumstances dictate. The

A-1

Company does not impose more stringent definitions of “independence” on the members than those adopted by the SEC and NYSE.

No Committee member shall simultaneously serve on the audit committees of more than two other public companies unless the Board has made an affirmative determination that such member is able to effectively undertake the responsibilities of serving on the Committee in addition to his or her positions on such other audit committees.

Meetings

The Committee will meet at least four times a year, with authority to convene additional meetings, as circumstances require. All Committee members are expected to attend each meeting, in person or via tele-conference or video-conference; however, a quorum shall consist of a majority of the members and the Committee is empowered to authorize an individual Committee member to perform such reviews and take such actions as are not prohibited by applicable law and regulations. The Committee will invite members of management, auditors or others to attend meetings and provide pertinent information, as necessary. It will meet separately, periodically, with management, with internal auditors and with external auditors. Meeting agendas will be prepared and provided in advance to members, along with appropriate briefing materials. Minutes will be prepared.

Responsibilities

The Committee will carry out the following responsibilities:

1. Financial Statements

a. Review significant accounting and reporting issues and understand their impact on the financial statements. These include (1) complex or unusual transactions and highly judgmental areas, (2) major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles and (3) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.

b. Review analyses prepared by managementand/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of all material alternative accounting treatments within GAAP on the financial statements.

c. Review with management and the external auditors the results of the audit, including any difficulties encountered. This review will include any restrictions on the scope of the independent auditor’s activities or on access to requested information and any significant disagreements with management.

d. Discuss the annual audited financial statements and quarterly financial statements with management and the external auditors, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

e. Review disclosures made by the CEO and CFO during the Forms10-K and10-Q certification process about significant deficiencies in the design or operation of internal controls over financial reporting or any fraud that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

f. Discuss the Company’s earnings press releases (particularly the use of “pro forma,” or “adjusted” non-GAAP, information), as well as financial information and earnings guidance, if any, provided to analysts and rating agencies. This review may be general (i.e. the types of information to be disclosed and the type of presentations to be made). The Committee does not need to discuss each release in advance.

2. Internal Control

a. Consider the effectiveness of the Company’s internal control system.

A-2

b. Understand the scope of internal and external auditors’ review of internal control over financial reporting and obtain reports on significant findings and recommendations, together with management’s responses.

c. Monitor compliance with the Code of Business Conduct and Ethics of the Company to the extent required by applicable law or regulation or delegated to the Committee in policies adopted by the Company.

3. Internal Audit

a. Review internal audit plans, activities, staffing, independence, authority and organizational structure.

b. Ensure there are no unjustified restrictions or limitations, and review and concur in the appointment, replacement or dismissal of the Company’s head of Internal Audit.

c. Discuss regularly risk management processes and system of internal control with management and internal audit.

d. On a regular basis, meet separately with internal audit.

4. External Audit

a. Review the external auditor’s proposed audit scope and approach.

b. Review the performance of the external auditors and exercise final approval on the appointment or discharge of the auditors. In performing this review, the Committee will:

•  At least annually, obtain and review a report by the independent auditor describing: the firm’s internal quality-control procedures; any material issues raised by the most recent quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm and any steps taken to deal with any such issues; and all relationships between the independent auditor and the Company.

•  Take into account the opinions of management and internal audit.

•  Review and evaluate the lead partner of the independent auditor.

•  Present its conclusions with respect to the external auditor to the Board.

c. Ensure the rotation of the lead audit partner and concurring partner every five years and other audit partners other than the lead partner and concurring partner every seven years, and consider whether there should be regular rotation of the audit firm itself.

d. Set clear hiring policies for any candidate for employment by the Company who is an employee or former employee of the independent auditors. In accordance with Section 10A of the Securities Exchange Act of 1934, as amended, it shall be the Company’s policy to not hire or employ any chief executive officer, controller, chief financial officer, chief accounting officer, or any person serving in an equivalent position for the Company, who was previously employed by the Company’s external auditor and participated in any capacity in an audit of the Company during the one year period preceding the date of the initiation of such audit.

e. Review regularly with the external auditors any audit problems or difficulties and management’s response.

f. On a regular basis, meet separately with external auditors.

5. Compliance

a. Review the Company’s system for monitoring compliance with laws and regulations and the results of management’s investigation andfollow-up of any instances of noncompliance.

A-3

b. Carry out the procedures delegated to the Committee by the Board for: (1) the receipt, retention and treatment of complaints received by the Company regarding the accounting, internal accounting controls or auditing matters; and (2) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or audit matters.

c. Review the findings of any material examinations by regulatory agencies and any material auditor observations.

d. Review, approve or ratify related party transactions in accordance with the Company’s Statement of Policy with respect to Related Party Transactions.

6. Reporting Responsibilities

a. Regularly report to the Board of Directors about the Committee’s activities and any material issues the Committee observes with respect to the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the performance and independence of the Company’s independent auditors and the performance of the internal audit function.

b. Report annually to the shareholders, describing the Committee’s composition, responsibilities and how they were discharged and any other information required by rule, including approval of non-audit services.

c. Review any other reports the Company issues that relate to Committee responsibilities.

7. Other Responsibilities

a. Discuss the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures. Although the Committee is not required to be the sole body responsible for risk assessment and management, the Committee must discuss guidelines and policies to govern the process by which risk assessment and management is undertaken.

b. Perform other activities related to this charter as requested by the Board of Directors.

c. Institute and oversee special investigations as needed.

d. Review and assess the adequacy of the Committee charter annually, request Board approval for proposed changes and ensure appropriate disclosure as may be required by law or regulation.

e. Confirm annually that all responsibilities outlined in this charter have been carried out.

f. Evaluate the Committee’s and individual members’ performance at least annually.

Limitations on Scope and Responsibility

The Committee members serve on the Committee with the understanding on their part and the part of the Company’s Board, management, external auditors and internal auditors that:

1. Committee members are not employees or officers of the Company and are not directly involved in the Company’s daily operations and do not serve on a full-time basis.

A-4

2. Committee members expect the Company’s management, external auditors and internal auditors to provide the Committee with prompt and accurate information, so that the Committee can discharge its duties properly.

3. To the extent permitted by law, the Committee is entitled to rely on the information and opinions of the persons and entities noted above in carrying out its responsibilities.

The Committee members, in adopting this charter and in agreeing to serve on the Committee, do so in reliance on, among other things, the provisions of the Company’s Amended and Restated Articles of Corporation which:

1. Together with the Company’s By-laws, provide indemnification for their benefit; and,

2. Provide that, to the fullest extent provided by law, no director shall be liable to the Company or its shareholders for monetary damages for breach of fiduciary duty as a director.

A-5

APPENDIX B

Corporate Governance Guidelines Regarding Director Qualifications

Director Qualification Standards

1. The Nominating and Corporate Governance Committee is responsible for recommending to the Board (1) nominees for Board membership to fill vacancies or newly created positions and (2) the persons to be nominated by the Board for election at the Company’s annual meeting of shareholders.

2. In connection with the selection and nomination process, the Nominating and Corporate Governance Committee shall review the desired experience, mix of skills and other qualities to assure appropriate Board composition, taking into account the current Board members and the specific needs of the Company and the Board. The Board will generally look for individuals who have displayed high ethical standards, integrity and sound business judgment. This process is designed to ensure that the Board includes members with diverse backgrounds, skills and experience, including appropriate financial and other expertise relevant to the business of the Company.

3. Independent Directors must comprise a majority of the Board.

4. A director will not be an “Independent Director” if any of the following situations set forth in the following categories apply:

(a) the director has been an employee of the Company, or any of its consolidated subsidiaries, during the last three years, or the director has an Immediate Family Member who is, or who has been during the last 3 years, an executive officer of the Company;

(b) the director or the director’s Immediate Family Member has received more than $100,000 per year in direct compensation from the Company, or any of its consolidated subsidiaries, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service) during any twelve-month period within the last three years;

(c) (i) the director or the director’s Immediate Family Member is a current partner of a firm that is the Company’s independent auditor, (ii) the director is a current employee of such a firm, (iii) the director has an Immediate Family Member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice, or (iv) the director or an Immediate Family Member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Company’s audit within that time;

(d) the director or the director’s Immediate Family Member is, or during the last three years, has been, part of an interlocking directorate in which a current executive officer of the Company, or any of its consolidated subsidiaries, served on the compensation committee of another company that concurrently employed the director (or any of his or her Immediate Family Members) as an executive officer;

(e) the director is a current employee, or the director’s Immediate Family member is a current executive officer of a company that makes payments (exclusive of charitable contributions) to, or receives payments (exclusive of charitable contributions) from, the Company, or any of its consolidated subsidiaries, for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of the consolidated gross revenues of such other company;

(f) the director has a material relationship with the Company, or any of its consolidated subsidiaries, either directly or as a partner, shareholder or officer of an organization that has a material relationship with the Company, or any of its consolidated subsidiaries. For this purpose, “material relationship” is defined as one in which the person, or an entity of which the director (or the director’s Immediate Family Member) is an employee, makes payments to, or receives payments from, the Company for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million, or 2% of such other entity’s consolidated gross revenues.

B-1

5. In addition to satisfying all of the independence criteria set forth in paragraph 4 of this Section, all members of the Audit Committee must also meet the following requirements:

(a) A member of the Audit Committee may not receive consulting, advisory or other compensatory fees from the Company, or any of its consolidated subsidiaries, other than in his or her capacity as a member of the Audit Committee, the Board of Directors, or any other committee of the Board (compensatory fees do not include the receipt of fixed amounts under a retirement plan (including deferred compensation) for prior service with the Company or any of its consolidated subsidiaries, provided that such compensation is not contingent in any way on continued service).

(b) No member of the Audit Committee may be an “affiliated person” of the Company, or any of its consolidated subsidiaries, as such term is defined by the Securities and Exchange Commission.

6. The number of boards on which a director may sit may be reviewed on acase-by-case basis by the Board.

7. The Board has not established term limits for directors. Although term limits can promote the inclusion on the Board of people with diverse perspectives, the process described in paragraph 2 of this Section can achieve the same result. Moreover, term limits have the disadvantage of causing the Company to lose the contributions of directors who have been able to develop, over a period of time, increasing insight into the Company and its operations, thereby increasing their contributions to the Company. However, in order to promote both continuity and turnover, and to further the expectation that Board members will be very actively involved in both the affairs of the Company and the communities which the Company serves, the Board will normally not nominate a person who would be serving on the Board after the age of 75.

8. Each director shall be obligated to notify the Chairman of the Board of the Company promptly upon learning of any fact which causes such director not to be considered an Independent Director, as set forth in paragraph 4 above, or if any entity of which such director is an officer or director becomes a competitor of the Company. The Nominating and Corporate Governance Committee shall review the situation and make a prompt recommendation to the Board.

B-2

APPENDIX C

Provisions of By-Laws Regarding Director Nominations

Section 3.3 Nominations and Qualifications of Directors.

(1) Nominations of candidates for election as directors at an annual meeting of shareholders may only be made (i) by, or at the direction of, the Board of Directors or (ii) by any shareholder of the Corporation who is entitled to vote at the meeting and who complies with the procedures set forth in the remainder of this Section 3.3.

(2) If a shareholder proposes to nominate one or more candidates for election as directors at an annual meeting, the shareholder must have given timely notice thereof to the Secretary of the Corporation. To be timely, a shareholder’s notice must be delivered to, or mailed and received at, the Principal Office (i) not less than one hundred twenty (120) days prior to the first anniversary of the date that the Corporation’s proxy statement was released to shareholders in connection with the previous year’s annual meeting; (ii) a reasonable time before the Corporation begins to print and mail its proxy materials if the date of this year’s annual meeting has been changed by more than thirty (30) days from the date of the previous year’s meeting; or (iii) not more than seven (7) days following the delivery to shareholders of the notice of annual meeting with respect to the current year’s annual meeting, if the Corporation did not release a proxy statement to shareholders in connection with the previous year’s annual meeting, or if no annual meeting was held during such year.

(3) A shareholder’s notice to the Secretary under Section 3.3(2) shall set forth, as to each person whom the shareholder proposes to nominate for election as a director (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the number and class of shares of stock of the Corporation that are beneficially owned on the date of such notice by such person and (iv) if the Corporation at such time has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), any other information relating to such person required to be disclosed in solicitations of proxies with respect to nominees for election as directors pursuant to Regulation 14A under the Exchange Act, including but not limited to information required to be disclosed by Schedule 14A of Regulation 14A, and any other information that the shareholder would be required to file with the Securities and Exchange Commission in connection with the shareholder’s nomination of such person as a candidate for director or the shareholder’s opposition to any candidate for director nominated by, or at the direction of, the Board of Directors. In addition to the above information, a shareholder’s notice to the Secretary under Section 3.3(2) shall (A) set forth (i) the name and address, as they appear on the Corporation’s books, of the shareholder and of any other shareholders that the shareholder knows or anticipates will support any candidate or candidates nominated by the shareholder and (ii) the number and class of shares of stock of the Corporation that are beneficially owned on the date of such notice by the shareholder and by any such other shareholders and (B) be accompanied by a statement in the form of a record, executed and acknowledged by each candidate nominated by the shareholder, that the candidate agrees to be so nominated and to serve as a director of the Corporation if elected at the annual meeting.

(4) The Board of Directors, or a designated committee thereof, may reject any shareholder’s nomination of one or more candidates for election as directors if the nomination is not made pursuant to a shareholder’s notice timely given in accordance with the terms of Section 3.3(2). If the Board of Directors, or a designated committee thereof, determines that the information provided in a shareholder’s notice does not satisfy the requirements of Section 3.3(3) in any material respect, the Secretary of the Corporation shall notify the shareholder of the deficiency in the notice. The shareholder shall have an opportunity to cure the deficiency by providing additional information to the Secretary within such period of time, not to exceed five (5) days from the date such deficiency notice is given to the shareholder, as the Board of Directors or such committee shall reasonably determine. If the deficiency is not cured within such period, or if the Board of Directors or such committee determines that the additional information provided by the shareholder, together with information previously provided, does not satisfy the requirements of Section 3.3(3) in any material respect, then the Board of Directors or such committee may reject the shareholder’s notice.

C-1

(5) Notwithstanding the procedures set forth in Section 3.3(4), if a shareholder proposes to nominate one or more candidates for election as directors at an annual meeting, and neither the Board of Directors nor any committee thereof has made a prior determination of whether the shareholder has complied with the procedures set forth in this Section 3.3 in connection with such nomination, then the chairman of the annual meeting shall determine and declare at the annual meeting whether the shareholder has so complied. If the chairman determines that the shareholder has so complied, then the chairman shall so state and ballots shall be provided for use at the meeting with respect to such nomination. If the chairman determines that the shareholder has not so complied, then, unless the chairman, in his or her sole and absolute discretion, determines to waive such compliance, the chairman shall state that the shareholder has not so complied and the defective nomination shall be disregarded.

(6) All directors of the Corporation shall be at least twenty-one years of age. Directors need not be shareholders or residents of the State of Washington. At each meeting of shareholders for the election of directors at which a quorum is present, the persons receiving a plurality of the votes cast shall be elected directors.

C-2

14475 ANNUAL MEETING OF SHAREHOLDERS OF Red Lion Hotels Corporation May 17, 2007 Please date, sign and mail your proxy card in the envelope provided as soon as possible. D Please detach along perforated line and mail in the envelope provided. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE FOR AGAINST ABSTAIN 1. To elect three directors to the Board of Directors for a three-year term 2. RATIFICATION OF SELECTION OF of office expiring at the 2010 Annual Meeting of Shareholders BDO SEIDMAN, LLP TO SERVE AS NOMINEES: OUR INDEPENDENT REGISTERED { Donald K. Barbieri PUBLIC ACCOUNTING FIRM FOR^{FOR ALL NOMINEES}{ Arthur M. Coffey 2007 { Ronald R. Taylor THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED WITHHOLD AUTHORITY IN THE MANNER DIRECTED HEREIN. EXCEPT AS OTHERWISE FOR ALL NOMINEES DIRECTED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL DIRECTORS LISTED IN PROPOSAL 1 AND FOR FOR ALL EXCEPT PROPOSAL 2, AND IT WILL BE VOTED IN THE DISCRETION OF (See instructions below) THE PROXIES ON ALL OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark “FOR THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR ALL EXCEPT” and fill in the circle next to each nominee for which you ALL NOMINEES” LISTED IN PROPOSAL 1 AND “FOR” wish to withhold authority to vote, as shown here: z PROPOSAL 2. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. Signature of Shareholder: Date: Signature of Shareholder: Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS OF RED LION HOTELS CORPORATION THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby constitutes and appoints Thomas L. McKeirnan and Anupam Narayan, and each of them, the undersigned’s true and lawful agents and proxies with full power of substitution in each, to represent and to vote, in such manner as in their discretion shall be deemed appropriate to carry out the authority as designated on the reverse side, all shares of Common Stock of Red Lion Hotels Corporation that the undersigned would be entitled to vote if present in person at the Annual Meeting of Shareholders of Red Lion Hotels Corporation to be held on Thursday, May 17, 2007, at 9:00 a.m. local time at the Red Lion Hotel at the Park, West 303 North River Drive, Spokane, Washington and at any adjournments thereof, on all matters that may come before the meeting, including matters incident to the conduct of the meeting and any shareholder proposal omitted from the proxy statement and this proxy pursuant to the rules of the Securities and Exchange Commission. You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. (Continued and to be signed on reverse side) COMMENTS:

ANNUAL MEETING OF SHAREHOLDERS OF Red Lion Hotels Corporation May 17, 2007ê Please detach along perforated line and mail in the envelope provided.ên PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx FOR AGAINST ABSTAIN 1. To elect three directors to the Board of Directors for a three-year term of office expiring at the 2010 Annual Meeting of Shareholders 2. RATIFICATION OF SELECTION OF BDO SEIDMAN, LLP TO SERVE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2007ooo NOMINEES:o FOR ALL NOMINEES¡¡¡Donald K. Barbieri Arthur M. Coffey Ronald R. Tayloro WITHHOLD AUTHORITY FOR ALL NOMINEES THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. EXCEPT AS OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL DIRECTORS LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AND IT WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR ALL NOMINEES” LISTED IN PROPOSAL 1 AND “FOR” PROPOSAL 2.o FOR ALL EXCEPT (See instructions below) INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee for which you wish to withhold authority to vote, as shown here:˜ To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.o Signature of Shareholder: Date: Signature of Shareholder: Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS OF RED LION HOTELS CORPORATION THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby constitutes and appoints Thomas L. McKeirnan and Anupam Narayan, and each of them, the undersigned’s true and lawful agents and proxies with full power of substitution in each, to represent and to vote, in such manner as in their discretion shall be deemed appropriate to carry out the authority as designated on the reverse side, all shares of Common Stock of Red Lion Hotels Corporation that the undersigned would be entitled to vote if present in person at the Annual Meeting of Shareholders of Red Lion Hotels Corporation to be held on Thursday, May 17, 2007, at 9:00 a.m. local time at the Red Lion Hotel at the Park, West 303 North River Drive, Spokane, Washington and at any adjournments thereof, on all matters that may come before the meeting, including matters incident to the conduct of the meeting and any shareholder proposal omitted from the proxy statement and this proxy pursuant to the rules of the Securities and Exchange Commission. You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. (Continued and to be signed on reverse side) COMMENTS: 14475