SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

                  Quarterly Report Under Section 13 or 15(d) of
                       The Securities Exchange Act of 1934


      For the Period ended March 31, 1998       Commission File 0-10134

                            SUPER 8 MOTELS III, LTD
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                   CALIFORNIA                      94 - 2664921
          -------------------------------       -------------------
          (State or other jurisdiction of       (I.R.S. Employer
          incorporation or organization)        Identification No.)


          2030 J Street
          Sacramento, California                           95814
          --------------------------------------         --------
          Address of principal executive offices         Zip Code



          Registrant's telephone number,
          including area code                           (916) 442 - 9183

          Indicate by check mark  whether the  registrant  (1) has filed
          all  reports  required  to be filed by Section 13 or 15 (d) of
          the  Securities  Exchange Act of 1934 during the  preceding 12
          months (or for such  shorter  period that the  registrant  was
          required to file such  reports),  and (2) has been  subject to
          such filing requirements for the past 90 days.


          Yes XX   No  __











<PAGE>










                            SUPER 8 MOTELS III, LTD.

                       (A California Limited Partnership)

                              FINANCIAL STATEMENTS

                             MARCH 31, 1998 AND 1997










































<PAGE>







                            SUPER 8 MOTELS III, LTD.

                       (A California Limited Partnership)

                                      INDEX

Financial Statements:                                            PAGE

   Balance Sheet - March 31, 1998 and December 31, 1997          2

   Statement of Operations - Three Months Ended
   March 31, 1998 and 1997                                       3

   Statement of Changes in Partners' Equity -
   Three Months Ended March 31, 1998 and 1997                    4

   Statement of Cash Flows - Three Months Ended
   March 31, 1998 and 1997                                       5

   Notes to Financial Statements                                 6

   Management Discussion and Analysis                            7

   Other Information and Signatures                              8 - 10




























<PAGE>


                            SUPER 8 MOTELS III, LTD.
                       (A California Limited Partnership)
                                  Balance Sheet
                      March 31, 1998 and December 31, 1997

                                                       3/31/98        12/31/97
                                                     -----------    -----------
                                     ASSETS
Current Assets:
   Cash and temporary investments                   $    374,860   $    362,215
   Accounts receivable                                   123,430        100,184
   Prepaid expenses                                          523          9,229
                                                     -----------    -----------
    Total current assets                                 498,813        471,628
                                                     -----------    -----------

Property and Equipment:
   Land                                                1,670,129      1,670,129
   Capital improvements                                   26,175         26,175
   Buildings                                           3,276,870      3,276,870
   Furniture and equipment                               789,579        782,439
                                                     -----------    -----------
                                                       5,762,753      5,755,613
   Accumulated depreciation                           (3,003,882)    (2,968,172)
                                                     -----------    -----------

    Property and equipment, net                        2,758,871      2,787,441
                                                     -----------    -----------

    Total Assets                                    $  3,257,684   $  3,259,069
                                                     ===========    ===========

                        LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
   Accounts payable and accrued liabilities         $    153,934   $    116,417
                                                     -----------    -----------
    Total current liabilities                            153,934        116,417
                                                     -----------    -----------

    Total liabilities                                    153,934        116,417
                                                     -----------    -----------

Contingent Liabilities (See Note 1)

Partners' Equity:
   General Partners                                       20,730         20,376
   Limited Partners                                    3,083,020      3,122,276
                                                     -----------    -----------
    Total partners' equity                             3,103,750      3,142,652
                                                     -----------    -----------

Total Liabilities and Partners' Equity              $  3,257,684   $  3,259,069
                                                     ===========    ===========

    The accompanying notes are an integral part of the financial statements.

                                       2
<PAGE>

                            SUPER 8 MOTELS III, LTD.
                       (A California Limited Partnership)
                             Statement of Operations
               For the three Months Ended March 31, 1998 and 1997

                                                    Three Months   Three Months
                                                        Ended          Ended
                                                       3/31/98        3/31/97
                                                     -----------    -----------

Income:
    Guest room                                      $    409,194   $    403,295
    Telephone and vending                                  7,241          8,408
    Interest                                               2,615          1,362
    Other                                                    820            919
                                                     -----------    -----------
     Total Income                                        419,870        413,984
                                                     -----------    -----------

Expenses:
    Motel operating expenses (Note 2)                    278,553        279,414
    General and administrative                            49,383         22,461
    Depreciation and amortization                         35,710         38,576
    Property management fees                              20,863         20,646
                                                     -----------    -----------
     Total Expenses                                      384,509        361,097
                                                     -----------    -----------

    Net Income (Loss)                               $     35,361   $     52,887
                                                     ===========    ===========

Net Income (Loss) Allocable
 to General Partners                                        $354           $529
                                                     ===========    ===========

Net Income (Loss) Allocable
 to Limited Partners                                     $35,007        $52,358
                                                     ===========    ===========

Net Income (Loss)
 per Partnership Unit                                      $5.89          $8.81
                                                     ===========    ===========

Distribution to Limited Partners
 per Partnership Unit                                     $12.50          $0.00
                                                     ===========    ===========









    The accompanying notes are an integral part of the financial statements.

                                       3
<PAGE>

                            SUPER 8 MOTELS III, LTD.
                       (A California Limited Partnership)
                          Statement of Partners' Equity
               For the three Months Ended March 31, 1998 and 1997


                                                         1998           1997
                                                     -----------    -----------
General Partners:
 Balance at beginning of year                       $     20,376   $     19,205
 Net income (loss)                                           354            529
                                                     -----------    -----------
  Balance at end of period                                20,730         19,734
                                                     -----------    -----------


Limited Partners:
 Balance at beginning of year                          3,122,276      3,154,879
 Net income (loss)                                        35,007         52,358
 Less: Cash distributions                                (74,263)         -
                                                     -----------    -----------
  Balance at end of period                             3,083,020      3,207,237
                                                     -----------    -----------

  Total balance at end of period                    $  3,103,750   $  3,226,971
                                                     ===========    ===========





























    The accompanying notes are an integral part of the financial statements.

                                       4
<PAGE>
                            SUPER 8 MOTELS III, LTD.
                       (A California Limited Partnership)
                             Statement of Cash Flows
               For the three Months Ended March 31, 1998 and 1997

                                                         1998           1997
                                                     -----------    -----------
Cash Flows From Operating Activities:
  Received from motel revenues                      $    394,009   $    410,194
  Expended for motel operations
   and general and administrative expenses              (302,576)      (282,831)
  Interest received                                        2,615          1,362
                                                     -----------    -----------
    Net cash provided (used) by operating activities      94,048        128,725
                                                     -----------    -----------

Cash Flows From Investing Activities:
  Purchases of property and equipment                     (7,140)         -
  Proceeds from sale of equipment                          -                120
                                                     -----------    -----------
    Net cash provided (used) by investing activities     (7,140)            120
                                                     -----------    -----------

Cash Flows From Financing Activities:
  Distributions paid to Limited Partners                 (74,263)         -
                                                     -----------    -----------
    Net cash provided (used) by financing activities     (74,263)         -
                                                     -----------    -----------

    Net increase  in cash and temporary investments       12,645        128,845

Cash and temporary investments:
  Beginning of year                                      362,215        254,782
                                                     -----------    -----------
  End of period                                     $    374,860   $    383,627
                                                     ===========    ===========

    Reconciliation of Net Income to Net Cash Provided by Operating Activities:

   Net income (loss)                                $     35,361   $     52,887
                                                     -----------    -----------
   Adjustments to reconcile net income to net
    cash provided by operating activities:
     Depreciation and amortization                        35,710         38,576
     Gain on disposition of property                       -               (120)
     (Increase) decrease in accounts receivable          (23,246)        (2,428)
     (Increase) decrease in prepaid expenses               8,706          9,239
     Increase (decrease) in accounts payable
      and accrued liabilities                             37,517         30,571
                                                     -----------    -----------
        Total adjustments                                 58,687         75,838
                                                     -----------    -----------

        Net cash provided by operating activities   $     94,048   $    128,725
                                                     ===========    ===========

    The accompanying notes are an integral part of the financial statements.

                                       5
<PAGE>

                            SUPER 8 MOTELS III, LTD.
                       (A California Limited Partnership)
                          Notes to Financial Statements
                                 March 31, 1998
Note 1:
The attached interim financial  statements include all adjustments which are, in
the opinion of management,  necessary to a fair statement of the results for the
period presented.

Users  of  these  interim  financial  statements  should  refer  to the  audited
financial  statements  for the year  ended  December  31,  1997  for a  complete
disclosure  of  significant  accounting  policies and practices and other detail
necessary for a fair presentation of the financial statements.

In accordance  with the  partnership  agreement,  the following  information  is
presented  related to fees paid or accrued to the General  Partner or affiliates
for the period.


          Property Management Fees                   $20,863

          Franchise Fees                              $8,184

Note 2:
The following table summarizes the major components of motel operating  expenses
for the periods reported:


                                                    Three Months   Three Months
                                                        Ended          Ended
                                                       3/31/98        3/31/97
                                                     -----------    -----------

Salaries and related costs                          $    115,284   $    109,729
Franchise and advertising                                 20,460         20,171
Utilities                                                 21,235         22,665
Allocated costs,
 mainly indirect salaries                                 49,761         44,110
Replacements and renovations                               5,950         12,040
Other operating expenses                                  65,863         70,699
                                                     -----------    -----------

Total motel operating expenses                      $    278,553   $    279,414
                                                     ===========    ===========


The following  additional material  contingencies are required to be restated in
interim reports under federal securities law: None.









                                       6
<PAGE>

                            SUPER 8 MOTELS III, LTD.
                       (A California Limited Partnership)
                       MANAGEMENT DISCUSSION AND ANALYSIS
                 OF FINANCIAL CONDITION AND RESULTS OF OPERATION
                                 MARCH 31, 1998

LIQUIDITY AND CAPITAL RESOURCES

The Partnership's  current assets of $498,813 exceed its current  liabilities of
$153,934 by $344,879.  This excess of current  assets over  current  liabilities
constitutes  an operating  reserve  that is greater than the $297,050  operating
reserve requirement in the Partnership Agreement.

The Partnership has no major  commitments for capital  expenditures.  During the
three months  ended March 31, 1998,  the  Partnership  expended  $13,091 in such
expenditures  which is equal to 3.2% of guest  room  revenue.  Included  in that
amount was $7,140 for replacement guest room carpets.

RESULTS OF OPERATIONS

The  following  is a  comparison  of the first  three  months of the fiscal year
ending December 31, 1998 with the  corresponding  period of the preceding fiscal
year.

Total revenues increased $5,886 (or 1.4%) for the three month period as compared
to the previous  fiscal year.  The increase in total revenue was due to a $5,899
(or 1.5%) increase in room revenue. Motel occupancy decreased from 74.3% in 1997
to 72.4% in 1998,  which was offset by an increase in the average room rate from
$35.25 in 1997 to $36.73 in 1998.  The  decrease  was due to a reduction  in the
corporate business market segment at the San Bernardino motel.

The Partnership's  expenses  increased by $23,412 or 6.5%. This expense increase
was due to increased minimum wage requirements and to legal, appraisal and other
costs associated with the potential liquidation of the partnership.

FUTURE TRENDS

The General  Partners  expect that overall  occupancy for the fiscal year ending
December 31, 1998 will be no greater or the same as that  achieved in 1997.  The
General Partners expect income for the current fiscal year to be no greater than
the previous fiscal year. Expenses are subject to both cost inflation and to the
deferred  maintenance  associated with the effects of high occupancy in previous
years.  The net effect  should be net income equal to or slightly  less than the
previous fiscal year result.

As  discussed  in  more  detail  in  the  following   section   labeled   "Legal
Proceedings,"  the General Partners have agreed to offer the motels for sale and
to present  any offer that equal or exceeds 75% of the  appraised  value for the
approval of the Limited Partners.

In the opinion of management, these financial statements reflect all adjustments
which were  necessary  to a fair  statement  of results for the interim  periods
presented. All adjustments are of a normal recurring nature.




                                       7
<PAGE>



                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

On October 27, 1997 a complaint was filed in the United States  District  Court,
Eastern District of California by the registrant,  the Managing General Partner,
and  four  other  limited  partnerships  (together  with  the  registrant,   the
"Partnerships")  as to which the  Managing  General  Partner  serves as  general
partner (i.e.,  Super 8 Motels,  Ltd.,  Super 8 Motels II, Ltd., Super 8 Economy
Lodging IV, Ltd. and Famous Host Lodging V, L.P.), as plaintiffs.  The complaint
named as defendants  Everest/Madison  Investors, LLC, Everest Lodging Investors,
LLC, Everest Properties, LLC, Everest Partners, LLC, Everest Properties II, LLC,
Everest  Properties,  Inc., W. Robert  Kohorst,  David I. Lesser,  The Blackacre
Capital Group,  L.P.,  Blackacre Capital  Management  Corp.,  Jeffrey B. Citron,
Ronald J.  Kravit,  and  Stephen P.  Enquist ( the  "Everest  Defendants").  The
factual basis underlying the plaintiffs'  causes of actions  pertained to tender
offers  directed  by  certain  of the  defendants  to  limited  partners  of the
Partnerships,  and to  indications of interest made by certain of the defendants
in purchasing  the property of the  Partnerships.  The  complaint  requested the
following  relief:  (i) a declaration  that each of the  defendants had violated
Sections  13(d),  14(d) and 14(e) of the  Securities  Exchange  Act of 1934 (the
"Exchange Act"), and the rules and regulations promulgated by the Securities and
Exchange  Commission  thereunder;   (ii)  a  declaration  that  certain  of  the
defendants  had  violated  Section  15(a) of the  Exchange Act and the rules and
regulations thereunder; (iii) an order permanently enjoining the defendants from
(a)  soliciting  tenders  of  or  accepting  for  purchase   securities  of  the
Partnerships,  (b)  exercising  any voting  rights  attendant to the  securities
already acquired, (c) soliciting proxies, and (d) violating Sections 13 or 14 of
the Exchange Act or the rules and regulations  promulgated  thereunder;  (iv) an
order enjoining  certain of the defendants  from violating  Section 15(a) of the
Exchange Act and the rules and regulations promulgated thereunder;  (v) an order
directing  certain of the defendants to offer to each person who sold securities
to such  defendants the right to rescind such sale; and (vi) a declaration  that
the  Partnerships  need not provide to the defendants a list of limited partners
in the Partnerships or any other information  respecting the Partnerships  which
is not publicly available.

On October 28, 1997 a complaint was filed in the Superior  Court of the State of
California,   Sacramento   County  by  Everest   Lodging   Investors,   LLC  and
Everest/Madison  Investors,  LLC, as plaintiffs,  against  Philip B.  Grotewohl,
Grotewohl Management Services,  Inc., Kenneth M. Sanders,  Robert J. Dana, Borel
Associates,  and BWC  Incorporated,  as  defendants,  and the  Partnerships,  as
nominal defendants.  The factual basis underlying the causes of action pertained
to the  receipt  by the  defendants  of  franchise  fees  and  reimbursement  of
expenses,  the  indications of interest made by the plaintiffs in purchasing the
properties of the nominal defendants,  and the alleged refusal of the defendants
to provide  information  required by the terms of the Partnerships'  partnership
agreements and California law. The complaint requested the following relief: (i)
a  declaration  that the action has a proper  derivative  action;  (ii) an order
requiring the defendants to discharge their fiduciary duties to the Partnerships
and to enjoin them from breaching their fiduciary duties;  (iii) disgorgement of
certain profits; (iv) appointment of a receiver; and (v) an award for damages in
an amount to be determined.


                                       8
<PAGE>



                     PART II. OTHER INFORMATION (Continued)


On February 20, 1998, the parties  entered into a settlement  agreement and both
of the above complaints were dismissed.  Pursuant to the terms of the settlement
agreement,  among other things,  the General  Partner has agreed to proceed with
the marketing for sale of the  properties  of the  Partnerships,  if by June 30,
1998, it receives an offer to purchase one or more  properties  for a cash price
equal to 75% or more of the appraised  value.  In addition,  the General Partner
has agreed to submit the offer for approval to the limited  partners as required
by the  partnership  agreements and applicable law. The General Partner has also
agreed that upon the sale of one or more properties,  to distribute promptly the
proceeds of the sale after  payment of payables and retention of reserves to pay
anticipated expenses. The Everest Defendants agreed not to generally solicit the
acquisition of any  additional  units of the  Partnerships  without first filing
necessary  documents with the SEC. Under the terms of the settlement  agreement,
the  Partnerships  have agreed to reimburse the Everest  Defendants  for certain
costs not to exceed  $60,000,  to be allocated among the  Partnerships.  Of this
amount,  the Partnership will pay approximately  $12,000 during the year covered
by this report.

Item 2.  Changes in Securities

           None

Item 3.  Defaults upon Senior Securities

           None

Item 4.  Submission of Matter to the Vote of Security Holders

           None

Item 5.  Other Information

           See Notes to Financial Statements

Item 6.  Exhibits and Reports on Form 8-K

           None















                                       9
<PAGE>





                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.





                                                  SUPER 8 MOTELS, III Ltd.

    4-30-98                                      By /S/ Philip B. Grotewohl
    -------                                         -------------------------
     Date                                           Philip B. Grotewohl,
                                                    Chairman of Grotewohl
                                                    Management Services, Inc.,
                                                    Managing General Partner

    4-30-98                                      By /S/ Philip B. Grotewohl
    -------                                         -------------------------
     Date                                           Philip B. Grotewohl,
                                                    Chief executive officer,
                                                    chief financial officer,
                                                    chief accounting officer
                                                    and sole director of
                                                    Grotewohl Management
                                                    Services, Inc., Managing
                                                    General Partner
























                                       10