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, 1997

                            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, 1997 AND 1996



























<PAGE>


                             SUPER 8 MOTELS III, LTD.

                      (A California Limited Partnership)

                                    INDEX

Financial Statements:                                               PAGE

   Balance Sheet - March 31, 1997 and December 31, 1996               2

   Statement of Operations - Three Months Ended
   March 31, 1997 and 1996                                            3

   Statement of Changes in Partners' Equity -
   Three Months Ended March 31, 1997 and 1996                         4

   Statement of Cash Flows - Three Months Ended
   March 31, 1997 and 1996                                            5

   Notes to Financial Statements                                      6

   Management Discussion and Analysis                                 7

   Other Information and Signatures                                 8 - 9

































<PAGE>
                          Super 8 Motels III, Ltd.
                     (A California Limited Partnership)
                               Balance Sheet
                    March 31, 1997 and December 31, 1996

                                                        3/31/97      12/31/96
                                                      -----------   -----------
                                   ASSETS
Current Assets:
   Cash and temporary investments                    $    383,627  $    254,782
   Accounts receivable                                     70,542        68,114
   Prepaid expenses                                         2,102        11,341
                                                      -----------   -----------
    Total current assets                                  456,271       334,237
                                                      -----------   -----------
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                                756,837       756,837
                                                      -----------   -----------
                                                        5,730,011     5,730,011
   Accumulated depreciation                            (2,864,955)   (2,826,379)
                                                      -----------   -----------

    Property and equipment, net                         2,865,056     2,903,632
                                                      -----------   -----------

    Total Assets                                     $  3,321,327  $  3,237,869
                                                      ===========   ===========

                        LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
   Accounts payable and accrued liabilities                94,356        63,785
                                                       -----------   -----------
    Total current liabilities                              94,356        63,785
                                                      -----------   -----------

    Total liabilities                                      94,356        63,785
                                                      -----------   -----------
Contingent Liabilities (See Note 1)

Partners' Equity:
   General Partners                                        19,734        19,205
   Limited Partners                                     3,207,237     3,154,879
                                                      -----------   -----------
    Total partners' equity                              3,226,971     3,174,084
                                                      -----------   -----------

Total Liabilities and Partners' Equity               $  3,321,327  $  3,237,869
                                                      ===========   ===========





   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 Ending March 31, 1997 and 1996

                            Three Months Three Months
                                                         Ended         Ended
                                                        3/31/97       3/31/96
                                                      -----------   -----------
Income:
    Guest room                                       $    403,295  $    355,413
    Telephone and vending                                   8,408         7,719
    Interest                                                1,362         2,534
    Other                                                     919           534
                                                      -----------   -----------
     Total Income                                         413,984       366,200
                                                      -----------   -----------
Expenses:
    Motel operating expenses (Note 2)                     279,414       286,845
    General and administrative                             22,461        19,464
    Depreciation and amortization                          38,576        40,250
    Interest                                                  -           3,524
    Property management fees                               20,646        18,192
                                                      -----------   -----------
     Total Expenses                                       361,097       368,275
                                                      -----------   -----------

    Net Income (Loss)                                $     52,887  $     (2,075)
                                                      ===========   ===========

Net Income (Loss) Allocable
 to General Partners                                         $529          ($21)
                                                         ========      ========
Net Income (Loss) Allocable
 to Limited Partners                                      $52,358       ($2,054)
                                                         ========      ========
Net Income (Loss)
 per Partnership Unit                                       $8.81        ($0.35)
                                                         ========      ========
Distribution to Limited Partners
 per Partnership Unit                                       $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 Three Months Ending March 31, 1997 and 1996


                                                          1997          1996
                                                      -----------   -----------
General Partners:
 Balance at beginning of year                        $     19,205  $     19,194
 Net income (loss)                                            529           (21)
                                                      -----------   -----------
  Balance at end of period                                 19,734        19,173
                                                      -----------   -----------

Limited Partners:
 Balance at beginning of year                           3,154,879     3,153,774
 Net income (loss)                                         52,358        (2,054)
 Less: Cash distributions                                     -             -
                                                      -----------   -----------
  Balance at end of period                              3,207,237     3,151,720
                                                      -----------   -----------

  Total balance at end of period                     $  3,226,971  $  3,170,893
                                                      ===========   ===========






























   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 Ending March 31, 1997 and 1996

                                                         1997          1996
                                                      -----------   -----------
Cash Flows From Operating Activities:
  Received from motel revenues                       $    410,194  $    361,780
  Expended for motel operations
   and general and administrative expenses               (282,831)     (334,591)
  Interest received                                         1,362         1,460
  Interest paid                                               -          (3,680)
                                                      -----------   -----------
    Net cash provided (used) by operating activities      128,725        24,969
                                                      -----------   -----------
Cash Flows From Investing Activities:
  Purchases of property and equipment                         -          (5,456)
  Proceeds from sale of equipment                             120           -
                                                      -----------   -----------
    Net cash provided (used) by investing activities          120        (5,456)
                                                      -----------   -----------
Cash Flows From Financing Activities:
  Payments on notes payable                                   -         (18,769)
  Distributions paid to Limited Partners                      -             -
                                                      -----------   -----------
    Net cash provided (used) by financing activities          -         (18,769)
                                                      -----------   -----------
    Net increase (decrease) in cash
      and temporary investments                            28,845           744

Cash and temporary investments:
  Beginning of year                                       254,782       285,554
                                                      -----------   -----------

  End of period                                      $    383,627  $    286,298
                                                      ===========   ===========

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

   Net income (loss)                                 $     52,887  $     (2,075)
                                                      -----------   -----------
   Adjustments  to  reconcile  net  income  to net cash  provided  by  operating
    activities:
     Depreciation and amortization                         38,576        40,250
     Gain on disposition of property                         (120)          -
     (Increase) decrease in accounts receivable            (2,428)       (2,960)
     (Increase) decrease in prepaid expenses                9,239         9,595
     Increase (decrease) in accounts payable
      and accrued liabilities                              30,571       (19,841)
                                                      -----------   -----------
        Total adjustments                                  75,838        27,044
                                                      -----------   -----------

        Net cash provided by operating activities    $    128,725  $     24,969
                                                      ===========   ===========
   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, 1997 and 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,  1996  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               $20,646

          Franchise Fees                          $8,068

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

                            Three Months Three Months
                                                         Ended         Ended
                                                        3/31/97       3/31/96
                                                      -----------   -----------
Salaries and related costs                           $    109,729  $    107,689
Franchise and advertising                                  20,171        17,776
Utilities                                                  22,665        23,852
Allocated costs,
 mainly indirect salaries                                  44,110        45,819
Replacements and renovations                               12,040         7,305
Other operating expenses                                   70,699        84,404
                                                      -----------   -----------
Total motel operating expenses                       $    279,414  $    286,845
                                                      ===========   ===========

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, 1997

LIQUIDITY AND CAPITAL RESOURCES

The Partnership's  current assets of $456,271 exceed its current  liabilities of
$94,356 by  $361,915.  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  General  Partner
anticipates  that  the  Partnership   will  begin  quarterly   distributions  of
approximately  $6.25  per unit with the  distribution  for the  second  calendar
quarter on or around August 15, 1997.

The  Partnership  has  no  major  commitments  for  capital  expenditures.   The
Partnership  has a replacement  and renovation  target equal to 3% of guest room
revenue.  During the three months ended March 31, 1997, the Partnership expended
$11,720 in such expenditures  which is equal to 2.9% of guest room revenue.  The
General  Partners  anticipate that renovation and repair  expenditures  will not
exceed 3% of guest room revenue during the current fiscal year.

RESULTS OF OPERATIONS

The  following  is a  comparison  of the first  three  months of the fiscal year
ending December 31, 1997 with the  corresponding  period of the preceding fiscal
year.

Total  revenues  increased  $47,784  (or  13.0%) for the three  month  period as
compared to the previous fiscal year. The increase in total revenue was due to a
$47,882 (or 13.5%)  increase in room revenue.  Motel  occupancy  increased  from
67.2% to 74.3%, while the average room rate increased from $33.99 to $35.25. The
increase in guest room  revenue  occurred  primarily  at the  Partnership's  San
Bernardino motel and was due to increased patronage in the corporate and leisure
market segments.

The Partnership's expenses decreased by $7,178 or 1.9%. This reduction is due to
reduced interest expense and to reduced operating expenses.

FUTURE TRENDS

The General  Partners  expect that overall  occupancy for the fiscal year ending
December  31,  1997 will be greater  than that  achieved  in 1996.  The  General
Partners  expect  income for the  current  fiscal  year to be  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  greater 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.




                                  - 7 -
<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



























                                  - 8 -
<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


              5/5/97          By /S/ David P. Grotewohl
             --------         -------------------------
               Date           David P. Grotewohl,
                              President of Grotewohl
                              Management Services, Inc.,
                              Managing General Partner







              5/5/97          By /S/ David P. Grotewohl
             --------         -------------------------
                Date          David P. Grotewohl,
                              Chief Financial Officer




















                                  - 9 -