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 September 30, 1996           
                      
                            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

                            SEPTEMBER 30, 1996 AND 1995



























<PAGE>


                             SUPER 8 MOTELS III, LTD.

                      (A California Limited Partnership)

                                    INDEX

Financial Statements:                                               PAGE

   Balance Sheet - September 30, 1996 and December 31, 1995           2

   Statement of Operations - Nine Months Ended
   September 30, 1996 and 1995                                        3

   Statement of Changes in Partners' Equity -
   Nine Months Ended September 30, 1996 and 1995                      4

   Statement of Cash Flows - Nine Months Ended
   September 30, 1996 and 1995                                        5

   Notes to Financial Statements                                      6

   Management Discussion and Analysis                               7 - 8

   Other Information and Signatures                                 9 - 10

































<PAGE>
                         Super 8 Motels III, Ltd.
                   (A California Limited Partnership)
                              Balance Sheet
                September 30, 1996 and December 31, 1995

                                                         9/30/96      12/31/95
                                   ASSETS              -----------  -----------
Current Assets:
   Cash and temporary investments                     $   292,612  $   285,554
   Accounts receivable                                     88,166       72,824
   Prepaid expenses                                        18,413       11,588
                                                       -----------  -----------
    Total current assets                                  399,191      369,966
                                                       -----------  -----------
Property and Equipment:
   Land                                                 1,670,129    1,670,129
   Capital improvements                                    26,174       26,175
   Buildings                                            3,276,870    3,276,870
   Furniture and equipment                                754,010      742,531
                                                       -----------  -----------
                                                        5,727,183    5,715,705
   Accumulated depreciation                            (2,794,106)  (2,674,215)
                                                       -----------  -----------
    Property and equipment, net                         2,933,077    3,041,490

    Total Assets                                      $ 3,332,268  $ 3,411,456
                                                       ===========  ==========
                        LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
   Current portion of note payable                    $    59,069  $    77,963
   Accounts payable and accrued liabilities                85,907       85,032
                                                       -----------  -----------
    Total current liabilities                             144,976      162,995
                                                       -----------  -----------
Long - Term Liabilities:
   Note payable                                               -         75,493
                                                       -----------  -----------
    Total liabilities                                     144,976      238,488
                                                       -----------  -----------
Contingent Liabilities (See Note 1)

Partners' Equity:
   General Partners                                        19,335       19,194
   Limited Partners                                     3,167,957    3,153,774
                                                       -----------  -----------
    Total partners' equity                              3,187,292    3,172,968
                                                       -----------  -----------

Total Liabilities and Partners' Equity                $ 3,332,268  $ 3,411,456
                                                       ===========  ===========






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 Nine Months Ending September 30, 1996 and 1995

                             Three Months Nine Months  Three Months Nine Month
                                Ended        Ended        Ended        Ended
                               9/30/96      9/30/96      9/30/95      9/30/95
                             -----------  -----------  -----------  -----------
Income:
 Guest room                 $   388,117  $ 1,103,883  $   398,505  $ 1,201,597
 Telephone and vending            9,797       25,226       10,098       24,061
 Interest                         2,020        6,677        2,900        7,030
 Other                              520        2,499       10,637       11,739
                             -----------  -----------  -----------  -----------
   Total Income                 400,454    1,138,285      422,140    1,244,427
                             -----------  -----------  -----------  -----------
Expenses:
 Motel operating expenses
  (Note 2)                      298,848      894,384      312,707      886,964
 General and administrative      11,649       45,576       11,420       47,173
 Depreciation and amortization   39,380      119,891       39,948      123,372
 Interest                         1,526        7,289        6,273       22,681
 Property management fees        20,188       56,821       21,108       61,325
                             -----------  -----------  -----------  -----------
  Total Expenses                371,591    1,123,961      391,456    1,141,515
                             -----------  -----------  -----------  -----------

 Net Income (Loss)         $    28,863  $    14,324  $    30,684  $   102,912
                             ===========  ===========  ===========  ===========
Net Income (Loss) Allocable
 to General Partners              $289         $143         $307       $1,029
                               =========    =========    =========    =========
Net Income (Loss) Allocable
 to Limited Partners            $28,574      $14,181      $30,377     $101,883
                               =========    =========    =========    =========
Net Income (Loss)
 per Partnership Unit            $4.86        $2.41        $5.16       $17.32
                               =========    =========    =========    =========
Distribution to Limited Partners
 per Partnership Unit            $0.00        $0.00        $0.00        $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 Nine Months Ending September 30, 1996 and 1995

                                                          1996         1995
                                                       -----------  -----------
General Partners:
 Balance at beginning of year                         $    19,194  $    18,506
 Net income (loss)                                            143        1,029
                                                       -----------  -----------
  Balance at end of period                                 19,337       19,535
                                                       -----------  -----------

Limited Partners:
 Balance at beginning of year                           3,153,774    3,085,712
 Net income (loss)                                         14,181      101,883
 Less: Cash distributions                                    -            -
                                                       -----------  -----------
  Balance at end of period                              3,167,955    3,187,595
                                                       -----------  -----------

  Total balance at end of period                      $ 3,187,292  $ 3,207,130
                                                       ===========  ===========
































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 Nine Months Ending September 30, 1996 and 1995

                                                           1996         1995
                                                       -----------  -----------
Cash Flows From Operating Activities:
  Received from motel revenues                        $ 1,117,215  $ 1,250,043
  Expended for motel operations
   and general and administrative expenses             (1,001,945)    (996,827)
  Interest received                                         5,729        5,063
  Interest paid                                            (8,076)     (24,290)
                                                       -----------  -----------
    Net cash provided (used) by operating activities      112,923      233,989
                                                       -----------  -----------
Cash Flows From Investing Activities:
  Purchases of property and equipment                     (11,478)      (9,020)
  Proceeds from sale of equipment                             -            300
                                                       -----------  -----------
    Net cash provided (used) by investing activities      (11,478)      (8,720)
                                                       -----------  -----------
Cash Flows From Financing Activities:
  Payments on notes payable                               (94,387)    (193,060)
  Distributions paid to Limited Partners                      -            -
                                                       -----------  -----------
    Net cash provided (used) by financing activities      (94,387)    (193,060)
                                                       -----------  -----------
    Net increase (decrease) in cash
      and temporary investments                             7,058       32,209

Cash and temporary investments:
  Beginning of year                                       285,554      370,107
                                                       -----------  -----------

  End of period                                       $   292,612  $   402,316
                                                       ===========  ===========
Reconciliation of Net Income to Net Cash Provided by Operating Activities:

   Net income (loss)                                  $    14,324  $   102,912
   Adjustments to reconcile net income to
    net cash provided by operating activities:
     Depreciation and amortization                        119,891      123,372
     Gain on disposition of property                          -           (300)
     (Increase) decrease in accounts receivable           (15,342)      10,679
     (Increase) decrease in prepaid expenses               (6,825)      (5,414)
     Increase (decrease) in accounts payable
      and accrued liabilities                                 875        2,740
                                                       -----------  -----------
        Total adjustments                                  98,599      131,077
                                                       -----------  -----------

        Net cash provided by operating activities     $   112,923  $   233,989
                                                       ===========  ===========


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
                           September 30, 1996

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, 1995 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     $    56,821

          Franchise Fees               $    22,192

Note 2:
The following table summarizes the major components of motel operating expenses
for the periods reported:
                             Three Months Nine Months  Three Months Nine Month
                                Ended        Ended        Ended        Ended
                               9/30/96      9/30/96      9/30/95      9/30/95
                             -----------  -----------  -----------  -----------

Salaries and related costs  $   111,926  $   333,560  $   113,228  $   339,359
Franchise and advertising        21,928       59,323       54,460       66,533
Utilities                        40,243       88,720       43,385       97,711
Allocated costs,
 mainly indirect salaries        41,520      134,970       45,053      131,867
Replacements and renovations      3,253       36,425       10,599       22,651
Other operating expenses         79,978      241,386       45,982      228,843
                             -----------  -----------  -----------  -----------
Total motel operating
 expenses                   $   298,848  $   894,384  $   312,707  $   886,964
                             ===========  ===========  ===========  ===========

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
                           September 30, 1996

LIQUIDITY AND CAPITAL RESOURCES

The Partnership's current assets of $399,191 exceed its current liabilities of
$144,976 by $254,215.  This excess of current assets over current liabilities
is less  than the $297,050 operating reserve requirement in the Partnership
Agreement.  The decline in operating reserve is attributable to the Partner-
ship's payments in 1995 and 1996 of $275,000 in extra payments against
principal on the Bakersfield motel note.

As discussed in the Partnership's previous reports on Forms 10-Q and Forms 10-K,
the General Partners had intended to accumulate a sinking fund to pay the
existing Bakersfield loan balloon payment due in September 1997.  The General
Partners have since decided instead to make the planned sinking fund deposits
directly to the mortgage in the form of additional periodic principal payments,
thus saving on interest expense.  The General Partners have also decided to
suspend quarterly distributions to the Limited Partners in order to apply the
available funds to extra principal payments.

The Partnership has no major commitments for capital expenditures. The Partner-
ship has a replacement and renovation target equal to 3% of guest room revenue.
During the nine months ended September 30, 1996, the Partnership expended
$35,091 in such expenditures  which is equal to 3.2% of guest room revenue.
Included in the total expenditures for renovations and replacements was $21,900
for a major parking lot refurbishment at the Bakersfield motel, $1,800 in
replacement bed sets and $5,365 in tub repairs.   The annual partial guest room
carpet replacement will start in the fourth calendar quarter.  The General
Partners anticipate that renovation and repair expenditures will exceed 3% of
guest room revenue during the current fiscal year due to the major parking lot
refurbishment.

RESULTS OF OPERATIONS

The following is a comparison of the first nine months of the fiscal year ending
December 31, 1996 with the corresponding period of the preceding fiscal year.

Total revenues decreased $106,142 (or 8.5%) for the nine month period as
compared to the previous fiscal year.  This decrease in total revenue was due to
a $97,714 (or 8.1%) decrease in room revenue.  Motel occupancy decreased from
74.6% to 70.1%, while the average room rate declined from $34.51 to $33.63. The
reduction in guest room revenue occurred primarily at the Partnership's San
Bernardino motel and was due to reduced patronage in the corporate and leisure
market segments.   According to various lodging industry publications, the San
Bernardino market is the second worst performing market in the country.

The Partnership's expenses decreased by $17,554 or 1.5%.  The Partnership
experienced an $13,774 increase in renovation and replacement expense due to
the parking lot repairs.  This increase was partially offset by decreased motel
operating expenses due to the lower occupancy and by decreased interest expense
as the mortgage note balanced is reduced.



                                - 7 -
<PAGE>
                        Super 8 Motels III, Ltd.
                   (A California Limited Partnership)
                   Management Discussion and Analysis
            of Financial Condition and Results of Operation
                             (Continued)
                          September 30, 1996


FUTURE TRENDS

The General Partners expect that overall occupancy for the fiscal year ending
December 31, 1996 will be equal to or less than that achieved in 1995. The
General Partners expect income for the current fiscal year to be less 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 less than the previous fiscal year.
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.







































                                - 8 -
<PAGE>





                        PART II.   OTHER INFORMATION
                        ----------------------------


     Item 1.                  Legal Proceedings
                              -----------------
                                 None

     Item 2.                  Changes in Securities
                              ---------------------
                                 None

     Item 3.                  Defaults upon Senior Securities
                              -------------------------------
                                 None

     Item 4.                  Submission of Matters 
                              ---------------------
                                 None

     Item 5.                  Other Information
                              -----------------
                                 None

     Item 6.                  Exhibits and Reports on Form 8-K
                              --------------------------------
                                 None


























                                       -9-
<PAGE>                                                    





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


             11-11-96         By /S/ David P. Grotewohl
             --------         -------------------------
               Date           David P. Grotewohl,
                              President of Grotewohl
                              Management Services, Inc.,
                              Managing General Partner







             11-11-96         By /S/ David P. Grotewohl 
             --------         -------------------------
                Date          David P. Grotewohl,
                              Chief Financial Officer





















                                       -10-
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