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 June 30, 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

                             JUNE 30, 1998 AND 1997










































<PAGE>







                            SUPER 8 MOTELS III, LTD.

                       (A California Limited Partnership)

                                      INDEX

Financial Statements:                                            PAGE

   Balance Sheet - June 30, 1998 and December 31, 1997           2

   Statement of Operations - Six Months Ended
   June 30, 1998 and 1997                                        3

   Statement of Changes in Partners' Equity -
   Six Months Ended June 30, 1998 and 1997                       4

   Statement of Cash Flows - Six Months Ended
   June 30, 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
                       June 30, 1998 and December 31, 1997

                                                         6/30/98      12/31/97
                                                       ----------    ----------
                                     ASSETS
Current Assets:
   Cash and temporary investments                     $   413,765   $   362,215
   Accounts receivable                                     68,587       100,184
   Prepaid expenses                                        10,979         9,229
                                                       ----------    ----------
    Total current assets                                  493,331       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                                789,580       782,439
                                                       ----------    ----------
                                                        5,762,754     5,755,613
   Accumulated depreciation                            (3,039,589)   (2,968,172)
                                                       ----------    ----------

    Property and equipment, net                         2,723,165     2,787,441
                                                       ----------    ----------

    Total Assets                                      $ 3,216,496   $ 3,259,069
                                                       ==========    ==========

                        LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
   Accounts payable and accrued liabilities           $    80,747   $   116,417
                                                       ----------    ----------
    Total current liabilities                              80,747       116,417
                                                       ----------    ----------

    Total liabilities                                      80,747       116,417
                                                       ----------    ----------

Contingent Liabilities (See Note 1)

Partners' Equity:
   General Partners                                        21,792        20,376
   Limited Partners                                     3,113,957     3,122,276
                                                       ----------    ----------
    Total partners' equity                              3,135,749     3,142,652
                                                       ----------    ----------

Total Liabilities and Partners' Equity                $ 3,216,496   $ 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 Six Months Ending June 30, 1998 and 1997

                                 Three Months Six Months Three Months Six Months
                                    Ended       Ended       Ended       Ended
                                   6/30/98     6/30/98     6/30/97     6/30/97
                                  ---------   ---------   ---------   ---------

Income:
 Guest room                      $  405,095  $  814,289  $  426,318  $  829,613
 Telephone and vending                6,085      13,326       7,936      16,344
 Interest                             2,726       5,684       2,427       3,789
 Other                                1,646       2,466       4,043       4,962
                                  ---------   ---------   ---------   ---------
  Total Income                      415,552     835,765     440,724     854,708
                                  ---------   ---------   ---------   ---------

Expenses:
 Motel operating expenses
 (Note 2)                           281,886     560,457     288,952     568,366
 General and administrative         (28,582)     20,801      10,166      32,627
 Depreciation and amortization       35,704      71,414      38,666      77,242
 Property management fees            20,608      41,471      21,746      42,392
                                  ---------   ---------   ---------   ---------
  Total Expenses                    309,616     694,143     359,530     720,627
                                  ---------   ---------   ---------   ---------

 Net Income (Loss)               $  105,936  $  141,622  $   81,194  $  134,081
                                  =========   =========   =========   =========

Net Income (Loss) Allocable
 to General Partners                 $1,059      $1,416        $812      $1,341
                                  =========   =========   =========   =========

Net Income (Loss) Allocable
 to Limited Partners               $104,877    $140,206     $80,382    $132,740
                                  =========   =========   =========   =========

Net Income (Loss)
 per Partnership Unit                $17.65      $23.60      $13.53      $22.34
                                  =========   =========   =========   =========

Distribution to Limited Partners
 per Partnership Unit                $12.50      $25.00       $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 Six Months Ending June 30, 1998 and 1997


                                                          1998          1997
                                                       ----------    ----------
General Partners:
 Balance at beginning of year                         $    20,376   $    19,205
 Net income (loss)                                          1,416         1,341
                                                       ----------    ----------
  Balance at end of period                                 21,792        20,546
                                                       ----------    ----------


Limited Partners:
 Balance at beginning of year                           3,122,276     3,154,879
 Net income (loss)                                        140,206       132,740
 Less: Cash distributions                                (148,525          -
                                                       ----------    ----------
  Balance at end of period                              3,113,957     3,287,619
                                                       ----------    ----------

  Total balance at end of period                      $ 3,135,749   $ 3,308,165
                                                       ==========    ==========






























    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 Six Months Ending June 30, 1998 and 1997

                                                          1998         1997
                                                       ----------    ----------
Cash Flows From Operating Activities:
  Received from motel revenues                        $   861,678   $   847,975
  Expended for motel operations
   and general and administrative expenses               (660,146)     (620,423)
  Interest received                                         5,684         3,789
                                                       ----------    ----------
    Net cash provided (used) by operating activities      207,216       231,341
                                                       ----------    ----------

Cash Flows From Investing Activities:
  Purchases of property and equipment                      (7,141)      (24,553)
  Proceeds from sale of equipment                            -              120
                                                       ----------    ----------
    Net cash provided (used) by investing activities       (7,141)      (24,433)
                                                       ----------    ----------

Cash Flows From Financing Activities:
  Distributions paid to Limited Partners                 (148,525)         -
                                                       ----------    ----------
    Net cash provided (used) by financing activities     (148,525)         -
                                                       ----------    ----------

    Net increase (decrease) in cash
      and temporary investments                            51,550       206,908

Cash and temporary investments:
  Beginning of year                                       362,215       254,782
                                                       ----------    ----------
  End of period                                       $   413,765   $   461,690
                                                       ==========    ==========

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

   Net income (loss)                                  $   141,622   $   134,081
                                                       ----------    ----------
   Adjustments  to  reconcile  net  income  to net cash  provided  by  operating
    activities:
     Depreciation and amortization                         71,414        77,242
     Gain on disposition of property                         -             (120)
     (Increase) decrease in accounts receivable            31,597        (2,944)
     (Increase) decrease in prepaid expenses               (1,750)       (1,263)
     Increase (decrease) in accounts payable
      and accrued liabilities                             (35,667)       24,345
                                                       ----------    ----------
        Total adjustments                                  65,594        97,260
                                                       ----------    ----------

        Net cash provided by operating activities     $   207,216   $   231,341
                                                       ==========    ==========
    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
                             June 30, 1998 and 1997

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                    $41,471

          Franchise Fees                              $16,286

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

                                 Three Months Six Months Three Months Six Months
                                    Ended       Ended       Ended       Ended
                                   6/30/98     6/30/98     6/30/97     6/30/97
                                  ---------   ---------   ---------   ---------

Salaries and related costs       $  117,185  $  232,469  $  115,862  $  225,591
Franchise and advertising            20,255      40,715      21,310      41,481
Utilities                            22,764      43,999      27,194      49,859
Allocated costs,
 mainly indirect salaries            47,755      97,516      44,313      88,423
Replacements and renovations          5,433      11,383       3,436      16,101
Other operating expenses             68,494     134,375      76,837     146,911
                                  ---------   ---------   ---------   ---------

Total motel operating
  expenses                       $  281,886  $  560,457  $  288,952  $  568,366
                                  =========   =========   =========   =========


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
                                  JUNE 30, 1998

LIQUIDITY AND CAPITAL RESOURCES

The Partnership's  current assets of $493,331 exceed its current  liabilities of
$80,747 by  $412,584.  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
six  months  ended  June 30,  1998,  the  Partnership  expended  $18,523 in such
expenditures  which is equal to 2.3% of guest  room  revenue.  Included  in that
amount was $7,527 for replacement  guest room carpets and $4,341 for replacement
lamps.

RESULTS OF OPERATIONS

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

Total revenues  decreased $18,943 (or 2.2%) for the six month period as compared
to the previous  fiscal year. The decrease in total revenue was due to a $15,324
(or 1.8%)  decrease in room revenue.  Motel  occupancy  decreased  slightly from
73.9% in 1997 to 73.0% in 1998 and the average room rate  decreased  from $36.29
in 1997 to $36.03 in 1998.  The decrease was due to a reduction in the corporate
business market segment at the San Bernardino motel.

The  Partnership's  expenses  decreased  by $26,484 or 3.7%.  The  reduction  is
associated  with  reduced  accrued  expenses  associated  with  the  anticipated
partnership liquidation.

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.

8-13-98                              By /S/ Philip B. Grotewohl
-------                                     ---------------------
  Date                                        Philip B. Grotewohl,
                                              Chairman of Grotewohl Management
                                              Services, Inc.,
                                              Managing General Partner

8-13-98                              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 -