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, 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

                           SEPTEMBER 30, 1997 AND 1996



























<PAGE>


                             SUPER 8 MOTELS III, LTD.

                      (A California Limited Partnership)

                                    INDEX

Financial Statements:                                               PAGE

   Balance Sheet - September 30, 1997 and December 31, 1996           2

   Statement of Operations - Nine Months Ended
   September 30, 1997 and 1996                                        3

   Statement of Changes in Partners' Equity -
   Nine Months Ended September 30, 1997 and 1996                      4

   Statement of Cash Flows - Nine Months Ended
   Septeber 30, 1997 and 1996                                         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
                    September 30, 1997 and December 31, 1996

                                                         9/30/97     12/31/96
                                                       -----------  -----------
                                     ASSETS
Current Assets:
   Cash and temporary investments                     $   434,469  $   254,782
   Accounts receivable                                     94,735       68,114
   Prepaid expenses                                        17,936       11,341
                                                       -----------  -----------
    Total current assets                                  547,140      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                                784,802      756,837
                                                       -----------  -----------
                                                        5,757,976    5,730,011
   Accumulated depreciation                            (2,940,268)  (2,826,379)
                                                       -----------  -----------

    Property and equipment, net                         2,817,708    2,903,632
                                                       -----------  -----------

    Total Assets                                      $ 3,364,848  $ 3,237,869
                                                       ===========  ===========

                        LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
   Accounts payable and accrued liabilities           $    89,234  $    63,785
                                                       -----------  -----------
    Total current liabilities                              89,234       63,785
                                                       -----------  -----------

    Total liabilities                                      89,234       63,785
                                                       -----------  -----------

Contingent Liabilities (See Note 1)

Partners' Equity:
   General Partners                                        20,963       19,205
   Limited Partners                                     3,254,651    3,154,879
                                                       -----------  -----------
    Total partners' equity                              3,275,614    3,174,084
                                                       -----------  -----------

Total Liabilities and Partners' Equity                $ 3,364,848  $ 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 Nine Months Ending September 30, 1997 and 1996

                             Three Months Nine Months  Three Months Nine Months
                                Ended        Ended        Ended       Ended
                               9/30/97      9/30/97      9/30/96     9/30/96
                             -----------  -----------  -----------  -----------

Income:
    Guest room              $   407,133  $ 1,236,746  $   388,117  $ 1,103,883
    Telephone and vending         9,360       25,704        9,797       25,226
    Interest                      2,964        6,753        2,020        6,677
    Other                           821        5,783          520        2,499
                             -----------  -----------  -----------  -----------
     Total Income               420,278    1,274,986      400,454    1,138,285
                             -----------  -----------  -----------  -----------

Expenses:
    Motel operating expenses
    (Note 2)                    307,710      877,176      298,848      894,384
    General and admin-
     istrative                   11,646       44,273       11,649       45,576
    Depreciation and
     amortization                37,245      114,487       39,380      119,891
    Interest                        -            -          1,526        7,289
    Property management fees     20,866       63,257       20,188       56,821
                             -----------  -----------  -----------  -----------
     Total Expenses         $   377,467  $ 1,099,193  $   371,591  $ 1,123,961
                             -----------  -----------  -----------  -----------

    Net Income (Loss)            42,811      175,793       28,863       14,324
                             ===========  ===========  ===========  ===========

Net Income (Loss) Allocable
 to General Partners               $428       $1,758         $289         $143
                             ===========  ===========  ===========  ===========

Net Income (Loss) Allocable
 to Limited Partners            $42,383     $174,035      $28,574      $14,181
                             ===========  ===========  ===========  ===========

Net Income (Loss)
 per Partnership Unit             $7.13       $29.29        $4.81        $2.39
                             ===========  ===========  ===========  ===========

Distribution to Limited
 Partners per
 Partnership Unit                $12.50       $12.50        $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, 1997 and 1996


                                                          1997         1996
                                                       -----------  -----------
General Partners:
 Balance at beginning of year                         $    19,205  $    19,194
 Net income (loss)                                          1,758          143
                                                       -----------  -----------
  Balance at end of period                                 20,963       19,337
                                                       -----------  -----------


Limited Partners:
 Balance at beginning of year                           3,154,879    3,153,774
 Net income (loss)                                        174,035       14,181
 Less: Cash distributions                                 (74,263)         -
                                                       -----------  -----------
  Balance at end of period                              3,254,651    3,167,955
                                                       -----------  -----------

  Total balance at end of period                      $ 3,275,614  $ 3,187,292
                                                       ===========  ===========






























    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, 1997 and 1996

                                                          1997         1996
                                                       -----------  -----------
Cash Flows From Operating Activities:
  Received from motel revenues                        $ 1,241,612  $ 1,117,215
  Expended for motel operations
   and general and administrative expenses               (965,972)  (1,001,945)
  Interest received                                         6,753        5,729
  Interest paid                                               -         (8,076)
                                                       -----------  -----------
    Net cash provided (used) by operating activities      282,393      112,923
                                                       -----------  -----------
Cash Flows From Investing Activities:
  Purchases of property and equipment                     (28,563)     (11,478)
  Proceeds from sale of equipment                             120          -
                                                       -----------  -----------
    Net cash provided (used) by investing activities      (28,443)     (11,478)
                                                       -----------  -----------
Cash Flows From Financing Activities:
  Payments on notes payable                                   -        (94,387)
  Distributions paid to Limited Partners                  (74,263)         -
                                                       -----------  -----------
    Net cash provided (used) by financing activities      (74,263)     (94,387)
                                                       -----------  -----------
    Net increase (decrease) in cash
      and temporary investments                           179,687        7,058

Cash and temporary investments:
  Beginning of year                                       254,782      285,554
                                                       ===========  ===========
  End of period                                       $   434,469  $   292,612
                                                       ===========  ===========

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

   Net income (loss)                                  $   175,793  $    14,324
                                                       -----------  -----------
   Adjustments  to  reconcile  net  income  to net cash  provided  by  operating
    activities:
     Depreciation and amortization                        114,487      119,891
     Gain on disposition of property                         (120)         -
     (Increase) decrease in accounts receivable           (26,621)     (15,342)
     (Increase) decrease in prepaid expenses               (6,595)      (6,825)
     Increase (decrease) in accounts payable
      and accrued liabilities                              25,449          875
                                                       -----------  -----------
        Total adjustments                                 106,600       98,599
                                                       -----------  -----------

        Net cash provided by operating activities     $   282,393  $   112,923
                                                       ===========  ===========
 
    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, 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                $63,257

          Franchise Fees                          $24,735

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

                             Three Months Nine Months  Three Months Nine Months
                                Ended        Ended        Ended        Ended
                               9/30/97      9/30/97      9/30/96      9/30/96
                             -----------  -----------  -----------  -----------

Salaries and related costs  $   116,033  $   342,723  $   111,926  $   333,560
Franchise and advertising        20,357       61,837       21,928       59,323
Utilities                        38,135       87,993       40,243       88,720
Allocated costs,
 mainly indirect salaries        43,878      132,302       41,520      134,970
Replacements and renovations     10,490       26,591        3,253       36,425
Other operating expenses         78,817      225,730       79,978      241,386
                             -----------  -----------  -----------  -----------

Total motel operating
 expenses                   $   307,710  $   877,176  $   298,848  $   894,384
                             ===========  ===========  ===========  ===========


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, 1997

LIQUIDITY AND CAPITAL RESOURCES

         The  Partnership's  current  assets  of  $547,140  exceed  its  current
liabilities  of $89,234 by $457,906.  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.  The
Partnership  has a replacement  and renovation  target equal to 3% of guest room
revenue.  During the nine months  ended  September  30,  1997,  the  Partnership
expended $55,154 (of which $28,563 was capitalized) in such  expenditures  which
is equal to 4.5% of guest room revenue.  Included in the renovations was $15,023
for guest room carpet at both  properties,  $5,099 for  replacement  bedspreads,
$4,262 for replacement televisions,  $4,255 for tub refurbishment and $8,021 for
two replacement ice machines.

RESULTS OF OPERATIONS

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

         Total revenues  increased $136,701 (or 12.0%) for the nine month period
as compared to the previous  fiscal year.  The increase in total revenue was due
to a $132,863 (or 12.0%)  increase in room revenue.  Motel  occupancy  increased
from 70.1%  during the previous  fiscal year to 72.1% during the current  fiscal
year,  while the average room rate  increased  from $33.63 during the first nine
months of 1996 to $36.73 during the  corresponding  period of 1997. 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 $24,768 or 2.2%. This reduction
is due to reduced interest expense and to reduced renovation expenses during the
current fiscal year.

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
                              -----------------
     On October  27, 1997 a complaint  was filed in the United  States  District
Court,  Eastern District of California by the registrant,  Grotewohl  Management
Services,  Inc. (a general  partner of the  registrant)  and four other  limited
partnerships  (together with the  registrant,  the  "Partnerships")  as to which
Grotewohl  Management  Services,  Inc. 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 names 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 B. Enquist.  The factual basis  underlying the  plaintiffs'
causes  of  actions  pertains  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  requests the following  relief:  (i) a declaration
that each of the defendants has 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 have 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.  The
plaintiffs  have not yet  received an answer of the  defendants  respecting  the
complaint.

     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 pertains
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 Partnership's  partnership
agreement and California law. The complaint requests the following relief: (i) a
declaration  that  the  action  is 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.  The defendants and nominal defendants have recently
been served and are formulating their response to the complaint.

                                      - 8 -
<PAGE>
                        PART II.   OTHER INFORMATION (CONTINUED)
                        ----------------------------------------

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

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

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

     Item 5.                  Other Information
                              -----------------
                                 See Notes to Financial Statements

     Item 6.                  Exhibits and Reports on Form 8-K
                              --------------------------------
                                 See Item 1 above



































                                     - 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


             11/13/97         By /S/ David P. Grotewohl
             ---------        -------------------------
               Date           David P. Grotewohl,
                              President of Grotewohl
                              Management Services, Inc.,
                              Managing General Partner







             11/13/97        By /S/ David P. Grotewohl
             ---------       --------------------------
               Date           David P. Grotewohl,
                              Chief Financial Officer




















                                  - 10 -