RevPAR (revenue per available room) is the hotel industry's key measurement -- the equivalent of same-store sales for retailers. Motley Fool Income Investor recommendation Equity Inns (NYSE:ENN) announced that its RevPAR for the second quarter increased 11.5% over the year-ago quarter -- handily beating the industry's 8.3% gain.

Driving RevPAR: a 7.5% increase in the average daily room rate and a 2.8% increase in occupancy to 75.7%. Limited-service hotels (55% of the portfolio) recorded a strong 5.4% increase in occupancy, while all-suite, extended-stay, and full-service hotels all posted declines. Average daily room rates increased across the board.

Pricing and occupancy strength led to a 26% increase (on a per-share basis) to $0.34 in adjusted funds from operations (AFFO). That's based upon the company's definition, which does not include capital expenditures. AFFO is another name for cash flow, and it was three cents higher than analyst estimates.

RevPAR at real estate investment trusts (REITs) has been especially strong. While Host Marriott's (NYSE:HMT) 9.8% increase fell short of Equity Inns', Boykin Lodging (NYSE:BOY) checked in with outstanding 13.5% growth.

The hotel business is admittedly cyclical, but Equity Inns' 32% revenue increase this quarter was an unqualified triumph. During the quarter, the company continued to improve its asset quality by purchasing six hotels with an average age of seven years and, more recently, selling two with an average age of 20 years.

Since Equity Inns was recommended in the January 2005 issue of Income Investor -- when the company's dividend yield tallied 4.8% -- investors have collected a 15.4% capital gain. The stock is currently trading for $12.56 a share. That's a great total return, in such a short time, for an income investment.

AFFO is estimated to be $1.08 a share this year (up from $0.86 last year) and $1.23 next year. That means lots of dividend growth is coming. If Equity Inns delivers, the cash flow growth will provide capital appreciation potential for this cyclical industry stock, even in a rising interest rate environment.

Shareholders, for now, can rest easy. They should keep one eye open, though; large-scale factors have a horrible way of smudging results for companies like these.

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Fool contributor W.D. Crotty does not own shares in any of the companies mentioned but has been known to sleep in their beds. Click here to see the Motley Fool's disclosure policy.