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, 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

                             JUNE 30, 1997 AND 1996



























<PAGE>


                            SUPER 8 MOTELS III, LTD.

                       (A California Limited Partnership)

                                      INDEX

Financial Statements:                                               PAGE

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

   Statement of Operations - Six Months Ended
   June 30, 1997 and 1996                                             3

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

   Statement of Cash Flows - Six Months Ended
   June 30, 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
                       June 30, 1997 and December 31, 1996

                                                      6/30/97       12/31/96
                                                    ------------   ------------
                                     ASSETS
Current Assets:
   Cash and temporary investments                   $    461,690   $    254,782
   Accounts receivable                                    71,058         68,114
   Prepaid expenses                                       12,604         11,341
                                                     -----------    -----------
    Total current assets                                 545,352        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                               780,792        756,837
                                                     -----------    -----------
                                                       5,753,966      5,730,011
   Accumulated depreciation                           (2,903,023)    (2,826,379)
                                                     -----------    -----------

    Property and equipment, net                        2,850,943      2,903,632
                                                     -----------    -----------

    Total Assets                                    $  3,396,295   $  3,237,869
                                                     ===========    ===========

                        LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
   Accounts payable and accrued liabilities         $     88,130   $     63,785
                                                     -----------    -----------
    Total current liabilities                             88,130         63,785
                                                     -----------    -----------

    Total liabilities                                     88,130         63,785
                                                     -----------    -----------

Contingent Liabilities (See Note 1)

Partners' Equity:
   General Partners                                       20,546         19,205
   Limited Partners                                    3,287,619      3,154,879
                                                     -----------    -----------
    Total partners' equity                             3,308,165      3,174,084
                                                     -----------    -----------

Total Liabilities and Partners' Equity              $  3,396,295   $  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 Six Months Ending June 30, 1997 and 1996

                             Three Months  Six Months  Three Months  Six Months
                                 Ended        Ended        Ended        Ended
                                6/30/97      6/30/97      6/30/96      6/30/96
                              ----------   ----------   ----------   ----------

Income:
    Guest room                $  426,318   $  829,613   $  360,354   $  715,766
    Telephone and vending          7,936       16,344        7,711       15,429
    Interest                       2,427        3,789        2,123        4,657
    Other                          4,043        4,962        1,445        1,979
                              ----------    ---------    ---------    ---------
     Total Income                440,724      854,708      371,633      737,831
                              ----------    ---------    ---------    ---------

Expenses:
    Motel operating expenses
     (Note 2)                    288,952      568,366      308,693      595,538
    General and
     administrative               10,166       32,627       14,463       33,926
    Depreciation and
     amortization                 38,666       77,242       40,261       80,511
    Interest                        -            -           2,239        5,763
    Property management fees      21,746       42,392       18,441       36,633
                               ---------    ---------    ---------    ---------
     Total Expenses           $  359,530   $  720,627   $  384,097   $  752,371
                               ---------    ---------    ---------    ---------

    Net Income (Loss)             81,194      134,081      (12,464)     (14,540)
                               =========    =========    =========    =========

Net Income (Loss) Allocable
 to General Partners                $812       $1,341        ($125)       ($145)
                               =========    =========    =========    =========

Net Income (Loss) Allocable
 to Limited Partners             $80,382     $132,740     ($12,339)    ($14,395)
                               =========    =========    =========    =========

Net Income (Loss)
 per Partnership Unit             $13.53       $22.34       ($2.08)      ($2.42)
                               =========    =========    =========    =========

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 Six Months Ending June 30, 1997 and 1996


                                                        1997           1996
                                                    ------------   ------------
General Partners:
 Balance at beginning of year                       $     19,205   $     19,194
 Net income (loss)                                         1,341           (145)
                                                     -----------    -----------
  Balance at end of period                                20,546         19,049
                                                     -----------    -----------


Limited Partners:
 Balance at beginning of year                          3,154,879      3,153,774
 Net income (loss)                                       132,740        (14,395)
 Less: Cash distributions                                                  -
                                                     -----------    -----------
  Balance at end of period                             3,287,619      3,139,379
                                                     -----------    -----------

  Total balance at end of period                    $  3,308,165   $  3,158,428
                                                     ===========    ===========





























    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, 1997 and 1996

                                                        1997           1996
                                                    ------------   ------------
Cash Flows From Operating Activities:
  Received from motel revenues                      $    847,975   $    715,540
  Expended for motel operations
   and general and administrative expenses              (620,423)      (684,825)
  Interest received                                        3,789          4,961
  Interest paid                                             -            (6,500)
                                                     -----------    -----------
    Net cash provided (used) by operating activities     231,341         29,176
                                                     -----------    -----------
Cash Flows From Investing Activities:
  Purchases of property and equipment                    (24,553)       (11,098)
  Proceeds from sale of equipment                            120           -
                                                     -----------    -----------
    Net cash provided (used) by investing activities     (24,433)       (11,098)
                                                     -----------    -----------
Cash Flows From Financing Activities:
  Payments on notes payable                                 -           (88,400)
  Distributions paid to Limited Partners                    -              -
                                                     -----------    -----------
    Net cash provided (used) by financing activities        -           (88,400)
                                                     -----------    -----------
    Net increase (decrease) in cash
      and temporary investments                          206,908        (70,322)

Cash and temporary investments:
  Beginning of year                                      254,782        285,554
                                                     -----------    -----------
  End of period                                     $    461,690   $    215,232
                                                     ===========    ===========

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

   Net income (loss)                                $    134,081   $    (14,540)
                                                     -----------    -----------
   Adjustments  to  reconcile  net  income  to net cash  provided  by  operating
    activities:
     Depreciation and amortization                        77,242         80,511
     Gain on disposition of property                        (120)          -
     (Increase) decrease in accounts receivable           (2,944)       (17,329)
     (Increase) decrease in prepaid expenses              (1,263)        (9,155)
     Increase (decrease) in accounts payable
      and accrued liabilities                             24,345        (10,311)
                                                      -----------   -----------
        Total adjustments                                 97,260         43,716
                                                      -----------   -----------

        Net cash provided by operating activities   $    231,341   $     29,176
                                                     ===========    ===========

    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, 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                       $42,392

          Franchise Fees                                 $16,592

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
                                6/30/97      6/30/97      6/30/96      6/30/96
                              ----------   ----------   ----------   ----------

Salaries and related costs    $  115,862   $  225,591   $  113,945   $  221,634
Franchise and advertising         21,310       41,481       18,037       35,813
Utilities                         27,194       49,859       24,626       48,478
Allocated costs,
 mainly indirect salaries         44,313       88,423       47,631       93,450
Replacements and renovations       3,436       16,101       25,868       33,172
Other operating expenses          76,837      146,911       78,586      162,991
                               ----------    ---------   ---------    ---------

Total motel operating
  expenses                     $  288,952   $  568,366  $  308,693   $  595,538
                               ==========    =========   =========    =========


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, 1997 _

LIQUIDITY AND CAPITAL RESOURCES

The Partnership's  current assets of $545,352 exceed its current  liabilities of
$88,130 by  $457,222.  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  $12.50  per unit  with a  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 six months ended June 30, 1997,  the  Partnership  expended
$40,654  in such  expenditures  which is equal  to 4.9% of guest  room  revenue.
Included  in  the  renovations  was  $13,710  for  guest  room  carpet  at  both
properties,   $3,682  for   replacement   bedspreads,   $3,206  for  replacement
televisions  and $4,010 for a  replacement  ice  machine.  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 six months of the fiscal year ending
December 31, 1997 with the corresponding period of the preceding fiscal year.

Total  revenues  increased  $116,877  (or  15.8%)  for the six  month  period as
compared to the previous fiscal year. The increase in total revenue was due to a
$113,847 (or 15.9%)  increase in room revenue.  Motel  occupancy  increased from
69.5% during the previous  fiscal year to 73.9% during the current  fiscal year,
while the average room rate increased from $33.19 during the first six months of
1996 to $36.29 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 $31,744 or 4.2%. 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
                              -----------------
                                 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


              8/12/97         By /S/ David P. Grotewohl
             ---------        -------------------------
               Date           David P. Grotewohl,
                              President of Grotewohl
                              Management Services, Inc.,
                              Managing General Partner







              8/12/97         By /S/ David P. Grotewohl
             ---------       --------------------------
                Date          David P. Grotewohl,
                              Chief Financial Officer




















                                  - 9 -