- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-11463

PROMUS HOTEL CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE I.R.S. NO. 62-1596939
(State of Incorporation) (I.R.S. Employer Identification No.)

755 CROSSOVER LANE
MEMPHIS, TENNESSEE 38117
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 374-5000

------------------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- -------------------------------------------------------------- --------------------------------------------------------------

Common Capital Stock, Par Value $.10 per share* NEW YORK STOCK EXCHANGE
CHICAGO STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
PHILADELPHIA STOCK EXCHANGE

* Common Capital Stock also has special stock purchase rights listed on each of
the same exchanges

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

None

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 [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant based upon the closing price of $35.375 for the Common Stock as
reported on the New York Stock Exchange Composite Tape on February 28, 1997, is
$1,767,634,201.

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of February 28, 1997.

Common Capital Stock...................................51,425,460 Shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1996, are incorporated by reference into Parts I and II
hereof and portions of the definitive Proxy Statement for the 1997 Annual
Meeting of Stockholders are incorporated by reference into Part III hereof.

Material from the Annual Report to Stockholders for the fiscal year ended
December 31, 1996 (the "Annual Report") of Promus Hotel Corporation (referred to
herein, together with its subsidiaries where the context requires, as the
"Company" or "Promus") is incorporated by reference in Parts I and II hereof
where referred to herein. Material from the Company's Proxy Statement, prepared
and mailed to stockholders in accordance with Section 14 of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder, for the Annual
Meeting of Stockholders of the Company to be held on April 23, 1997 (the "Proxy
Statement") is incorporated by reference in Part III hereof where referred to
therein.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES.

Promus Hotel Corporation is one of the leading hotel companies in the United
States. The Company operates the Embassy Suites, Hampton Inn, Hampton Inn &
Suites and Homewood Suites hotel brands and Embassy Vacation Resort interval
ownership brand.

Promus was incorporated on March 2, 1995 under Delaware law and conducts its
hotel business through its wholly-owned subsidiary, Promus Hotels, Inc. ("PHI"),
and PHI's subsidiaries. The principal asset of Promus is the stock of PHI, which
holds, directly or indirectly through subsidiaries, substantially all of the
assets of the Company's businesses. The principal executive offices of Promus
are located at 755 Crossover Lane, Memphis, Tennessee 38117, telephone (901)
374-5000.

Operating data for the three most recent years, together with interest
expense, dividend income, and interest and other income, is set forth on pages
19, 21 and 27 of the Annual Report. Information as to assets is set forth on the
inside front cover of the Annual Report and pages 26, 30, 31, and 36 through 39
of the Annual Report. All of the foregoing pages of the Annual Report are
incorporated herein by reference.

For information on operating results and a discussion of those results, see
the inside front cover and page one and see also "Performance Statistics" on
page 17 of the Annual Report, and "Management's Discussion and Analysis" on
pages 18 through 24 of the Annual Report, which pages are incorporated herein by
reference.

GENERAL

On June 30, 1995, The Promus Companies Incorporated ("PCI") split into two
independent public corporations, one for conducting its casino entertainment
business and one for conducting its hotel business. The stockholders of PCI
retained their shares of PCI (now known as Harrah's Entertainment, Inc.) and
received one share of Promus Hotel Corporation for each two shares of PCI they
owned prior to the split.

The Company operates, owns and licenses hotels bearing the Embassy Suites,
Hampton Inn, Hampton Inn & Suites and Homewood Suites names. Each brand is
targeted to a specific market segment. The Company also operates and licenses an
interval ownership system bearing the name of Embassy Vacation Resort.

Embassy Suites hotels, of which there were 136 hotels in operation on
December 31, 1996, appeal to the business and leisure traveler who has a need or
desire for greater space and more focused services than are available in
traditional upscale hotels. Embassy Suites hotels comprise the largest upscale,
all-suite hotel system in the United States determined by number of suites and
system revenues.

Hampton Inn hotels are moderately priced hotels designed to attract the
business and leisure traveler desiring quality accommodations at affordable
prices. Since 1984, when the brand was introduced, the system has grown to 620
hotels in operation as of December 31, 1996.

Homewood Suites hotels, of which there were 37 in operation on December 31,
1996, appeal to the extended stay market and targets the traveler who stays five
or more consecutive nights, as well as the traditional business and leisure
traveler.

Hampton Inn & Suites hotels incorporate the best features of the Hampton Inn
and Homewood Suites brands, offering both traditional hotel room accommodations
and apartment-style suites within one property. There were 16 Hampton Inn &
Suites hotels in operation as of December 31, 1996.

Embassy Vacation Resort properties, of which there were three as of December
31, 1996, feature a high quality interval ownership system available to the
public.

As of December 31, 1996, the Company's hotel brands included 683 properties
that are licensed by the Company, 98 properties that are licensed and managed by
the Company, and 28 properties that are owned and operated by the Company. These
809 hotels include 105,930 rooms and suites.

All of the Company's hotel brands are managed by a single senior management
team. Although the Company's growth strategy emphasizes obtaining new franchise
or management contracts, the Company also constructs, owns and operates its own
hotels. Owned hotels are sold from time to time to realize the value of the
underlying assets and to increase its return on investment. Following such
sales, the hotels typically are operated either by the Company under management
contracts and franchise licenses or by the purchasers under franchise licenses
from the Company.

Each of the Company's hotel brands uses a fully integrated computerized
system that includes centralized reservations and marketing systems, along with
local property management and revenue management systems. This sophisticated
business system is fully integrated and is linked to the Promus network, a
communications network which connects all Promus hotels to the Company's
reservation offices and more than 300,000 travel agents worldwide. The Embassy
Suites, Embassy Vacation Resort, Hampton Inn, Hampton Inn & Suites and Homewood
Suites business systems' reservation modules receive reservation requests
entered on terminals located at all of their respective hotels, interval
ownership properties and reservation centers, major domestic and international
airlines via their global distribution systems, and direct from consumers via
computer access to each brand's Internet site. The systems immediately confirm
reservations or indicate accommodations available at alternate Promus
properties. Reservations are transmitted automatically to the property for which
the reservation is made. The Company's data centers that house all of the
satellite and reservation, marketing and revenue management computers are
located in Memphis, Tennessee. The Company's primary reservation office is
located in Memphis, Tennessee with a second office in Tampa, Florida. See pages
26 and 31 of the Annual Report, which pages are incorporated by reference, for
"Investment in Franchise System."

A major element of the Company's business strategy and culture is an
unconditional 100% guarantee of service satisfaction. If guests are not
satisfied with their stay, they are not expected to pay. All of the Company's
hotel brands offer suites/rooms exclusively for non-smoking guests.

LICENSING AND MANAGEMENT CONTRACT OPERATIONS

LICENSING

The Company's revenues from licensing operations for all Embassy Suites,
Hampton Inn, Hampton Inn & Suites and Homewood Suites hotels consist of initial
license application fees and continuing royalties. The initial license
application fee for an Embassy Suites hotel is $500 per room, with a minimum of
$100,000, and $450 per room, with a minimum of $45,000, for each Hampton Inn,
Hampton Inn & Suites and Homewood Suites hotel. The license agreements generally
provide for a four percent royalty based upon gross rooms/suites revenues and
also provide for a separate marketing and reservation contribution.

There is no initial license application fee for the Embassy Vacation Resort
interval ownership brand. There are license fees of 2% of net interval sales; 2%
of gross rental pool revenues; and 5.5% of gross rental pool revenues booked
through Promus central reservations.

In screening applicants for license agreements, the Company evaluates the
character, operations ability, experience and financial responsibility of each
applicant or its principals; the Company's prior business dealings, if any, with
the applicant; suitability of the proposed hotel location and other factors. The
license agreement establishes requirements for service and quality of
accommodations. The Company provides certain training for licensee management
and makes regular inspections of licensed hotels.

License agreements for new hotels generally have a 20-year term. The Company
may terminate a license agreement if the licensee fails to cure a breach of the
license agreement in a timely manner. In

certain instances, a license agreement may be terminated by the licensee, but
such termination generally requires a payment to the Company.

MANAGEMENT CONTRACTS

The Company's revenues from management contracts consist primarily of
management fees which are up to five percent of adjusted gross revenues of the
hotel. The contract terms governing management fees vary depending on the size
and location of the hotel and other factors relative to the property.

Under the Company's management contracts, the Company, as the manager,
operates or supervises all aspects of the hotel's operations. The hotel owner is
generally responsible for all costs, expenses and liabilities incurred in
connection with operating the hotel, including the expenses and salaries of all
hotel employees. The hotel owner also enters into a separate license agreement
with the Company and pays the royalty and marketing and reservation
contributions as provided in the license agreement. In addition, the hotel owner
is often required to set aside a certain percentage of hotel revenues for
capital replacement. The Company's management contracts typically have a term of
ten years and most give the Company specified renewal rights. The management
contract may be terminated by either party due to an uncured default by the
other party.

The Company also acts as the manager for two of its Embassy Vacation Resort
properties pursuant to management contracts with generally similar terms and
responsibilities as its hotel management contracts. Fees for the management of
Embassy Vacation Resort properties consist of a percentage of rental pool
revenue and homeowner assessments.

See "Franchise and Management Fees" on page 27 of the Annual Report, which
page is incorporated herein by reference, for revenues from licensing and
management contract operations.

REAL ESTATE INVESTMENT TRUSTS

The Company has acquired equity positions in three publicly-traded real
estate investment trusts ("REITs"), the purpose of which in each case is to
increase development and management of hotels identified by the Company's hotel
brands. In 1995 and 1996, investments totaling $75 million were made in shares
and units of FelCor Suite Hotels, Inc. and FelCor Suites Limited Partnership
("FELCOR"). These funds were used by FELCOR to acquire existing hotels for
conversion to the Embassy Suites brand including 16 Crown Sterling hotels now
managed by the Company. All the Crown Sterling conversions were completed by the
end of 1996. Additionally, the Company has guaranteed up to $25 million of a
third party loan to FELCOR, all of which was drawn as of December 31, 1996. In
1996 the Company committed to invest $15 million in shares of Equity Inns, Inc.
and $15 million in shares of Winston Hotels, Inc. In both cases the investments
will be funded as the REITs acquire hotels developed and managed by the Company.
Although the Company made the equity investments described above for investment
purposes, it is not the strategy of the Company to invest in real estate or the
equity of REITs for protracted periods.

EMBASSY SUITES HOTELS

The following table sets forth information regarding all Embassy Suites
hotels, including company owned hotels, hotels operated by the Company under
management contracts or joint venture arrangements and hotels operated by
licensees:

MANAGEMENT
COMPANY CONTRACTS/
LICENSED OWNED JOINT VENTURES TOTAL
---------------- --------------- ---------------- ----------------

1994 Activity:
Additions............................... 1 177 - - 2 410 3 587
Status Changes, net(a).................. - (15) - (2) - 15 - (2)
Sales/Terminations...................... (2) (760) - - (1) (239) (3) (999)
------ ------- ------ ------ ------ ------- ------ -------
December 31, 1994......................... 51 11,756 9 2,025 47 11,934 107 25,715

1995 Activity:
Additions............................... 6 1,052 - - 2 191 8 1,243
Status Changes, net(a).................. (1) (56) - - 1 56 - -
Sales/Terminations...................... (1) (223) - - - - (1) (223)
------ ------- ------ ------ ------ ------- ------ -------
December 31, 1995......................... 55 12,529 9 2,025 50 12,181 114 26,735

1996 Activity:
Additions............................... 3 1,088 - - 19 4,824 22 5,912
Status Changes, net(a).................. - (34) - - - 34 - -
Sales/Terminations...................... - - - - - - - -
------ ------- ------ ------ ------ ------- ------ -------
December 31, 1996......................... 58 13,583 9(b) 2,025 69(c) 17,039 136 32,647
------ ------- ------ ------ ------ ------- ------ -------
------ ------- ------ ------ ------ ------- ------ -------

- ------------------------

(a) Consists of transfers of properties among the licensed, managed and owned
categories.

(b) Includes one property in which the Company owns more than a 50% interest.
(This property is under a license agreement to a third party and is managed
by Promus.)

As of December 31, 1996, 12 Embassy Suites hotels were under construction,
11 of which will be licensee operated, one of which will be company-managed.

Embassy Suites hotels are located in 34 states, the District of Columbia,
Thailand, Canada and Latin America. Embassy Suites hotels have an average of 240
suites per hotel. Each guest suite has a separate living room and dining/work
area, with a console television, sofa-sleeper, refrigerator and wet bar, as well
as a traditional bedroom (with a king size bed or two double beds). Most Embassy
Suites hotels are built around a landscaped atrium. All hotels offer a free,
cooked-to-order breakfast and, where local law allows, complimentary evening
cocktails.

The following table sets forth information concerning system occupancy,
average daily rate per occupied suite and revenue per available suite for all
Embassy Suites hotels:

AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
YEAR RATE OCCUPIED SUITE AVAILABLE SUITE
- -------------------------------------------------- ------------- -------------- ---------------

1996.............................................. 73.6% $ 107.36 $ 79.00
1995.............................................. 74.2% $ 101.90 $ 75.61
1994.............................................. 74.9% $ 97.28 $ 72.86

EMBASSY VACATION RESORT PROPERTIES

The following table sets forth information regarding all Embassy Vacation
Resort ("EVR") properties, including resorts licensed and managed by the Company
and those licensed by the Company and managed by the licensee or agent:

LICENSED WITH LICENSED WITH
MANAGEMENT BY LICENSEE MANAGEMENT BY COMPANY
---------------------------------------- ----------------------------------------

NUMBER NUMBER NUMBER OF NUMBER OF NUMBER NUMBER NUMBER OF NUMBER OF
OF OF INTERVALS INTERVALS OF OF INTERVALS INTERVALS
RESORTS UNITS AVAILABLE SOLD RESORTS UNITS AVAILABLE SOLD
------- ------ --------- --------- ------- ------ --------- ---------
December 31, 1994........ - - - - - - - -

1995 Activity............ 1 207 10,557 281 1 48 2,448 1,523
------- ------ --------- --------- ------- ------ --------- ---------
December 31, 1995........ 1 207 10,557 281 1 48 2,448 1,523

1996 Activity............ - - - 1,145 1 116(a) 5,916(a) 1,575(b)
------- ------ --------- --------- ------- ------ --------- ---------
December 31, 1996........ 1 207 10,557 1,426 2 164 8,364 3,098
------- ------ --------- --------- ------- ------ --------- ---------
------- ------ --------- --------- ------- ------ --------- ---------

- ------------------------

(a) Included in these numbers are 62 units currently under construction,
resulting in 3,162 intervals available for sale.

(b) Includes 263 intervals sold under pre-sale contracts.

Embassy Vacation Resort is a premium interval ownership concept that
provides consumers the opportunity to purchase use of a one, two or three
bedroom condominium-style unit for one or more weeks annually in a prime leisure
location, for an initial investment plus a reasonable annual maintenance fee.

Each Embassy Vacation Resort property offers a quality, fully furnished
accommodations product (consisting of an inside living area, full kitchen,
bathroom(s), bedroom(s), and outside patio/entertainment area) coupled with
added value facilities like swimming pool, exercise room, hot tub, tennis
courts, volleyball, and kids club. Beach, boating, snow/water skiing facilities
may be available depending on location.

For a separate annual fee (the initial year paid as part of the purchase
price), plus a per exchange service fee, each owner has the opportunity to
exchange his interest for the use of similar facilities at another Embassy
Vacation Resort property or a third party participating resort property.

The Company has two managed and one franchised EVR properties. The resort at
Poipu Point on the Hawaiian island of Kauai was converted to the EVR brand and
has 207 suites. The resort in Orlando, Florida, which is under construction, has
102 suites open and will add an additional 268 suites over the next four years.
Construction is underway on the resort in South Lake Tahoe, California, which
will add 210 suites over the next five years. Sales of timeshare intervals are
underway at all three resorts.

Additionally, in December 1996, the Company created a joint venture
relationship with Vistana Development, Inc. for the purpose of developing
multiple, as yet unidentified, future interval resorts. As part of this
agreement, the Company agreed to franchise two resort projects under the
Company's brands, one of which will also be managed by the Company.

HAMPTON INN HOTELS

The following table sets forth information regarding all Hampton Inn hotels,
including Company owned hotels, hotels operated under management contracts or
joint venture arrangements and hotels operated by licensees:

MANAGEMENT
COMPANY CONTRACTS/
LICENSED OWNED JOINT VENTURES TOTAL
---------------- --------------- --------------- ----------------

NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
OF OF OF OF OF OF OF OF
HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS
------ ------- ------ ------ ------ ------ ------ -------
December 31, 1993.................. 333 39,153 15 2,048 24 2,961 372 44,162

1994 Activity:
Additions........................ 67 6,149 - - - - 67 6,149
Sales/Terminations............... (1) (118) - (1) (1) (121) (2) (240)
------ ------- ------ ------ ------ ------ ------ -------
December 31, 1994.................. 399 45,184 15 2,047 23 2,840 437 50,071

1995 Activity:
Additions........................ 87 8,187 - - - - 87 8,187
Status Changes, net(a)........... 1 131 (1) (131) - - - -
Sales/Terminations............... (4) (544) - - - - (4) (544)
------ ------- ------ ------ ------ ------ ------ -------
December 31, 1995.................. 483 52,958 14 1,916 23 2,840 520 57,714

1996 Activity:
Additions........................ 102 9,996 - (1) - 89 102 10,084
Status Changes, net(a)........... - - (1) (125) 1 125 - -
Sales/Terminations............... (1) (124) (1) (136) - - (2) (260)
------ ------- ------ ------ ------ ------ ------ -------
December 31, 1996.................. 584(b) 62,830 12 1,654 24(c) 3,054 620 67,538
------ ------- ------ ------ ------ ------ ------ -------
------ ------- ------ ------ ------ ------ ------ -------

- ------------------------

(a) Consists of transfers of properties among the licensed, managed and owned
categories.

(b) Includes one property open only on a seasonal basis.

On December 31, 1996, 95 Hampton Inn hotels were under construction. All of
these hotels will be licensee operated.

Hampton Inn hotels are currently located in 46 states, as well as Canada,
Thailand and Latin America. An average Hampton Inn hotel has 109 rooms. The
Hampton Inn hotel's standardized concept provides for a guest room featuring a
color television, free in-room movies, free local telephone calls and
complimentary continental breakfast. Unlike full-service hotels, Hampton Inn
hotels do not feature restaurants, lounges or large public spaces.

The following table sets forth information concerning system occupancy,
average daily rate per occupied room and revenue per available room for all
Hampton Inn hotels:

AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
YEAR RATE OCCUPIED ROOM AVAILABLE ROOM
- ------------------------------------------------- ------------- --------------- ---------------

1996............................................. 72.1% $ 60.84 $ 43.85
1995............................................. 73.7% $ 56.97 $ 42.01
1994............................................. 74.3% $ 53.46 $ 39.74

HOMEWOOD SUITES HOTELS

The following table sets forth information regarding all Homewood Suites
hotels, including Company owned hotels, hotels operated under management
contracts or joint venture arrangements and hotels operated by licensees:

MANAGEMENT
COMPANY CONTRACT/
LICENSED OWNED JOINT VENTURE TOTAL
--------------- --------------- --------------- ---------------

NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
OF OF OF OF OF OF OF OF
HOTELS SUITES HOTELS SUITES HOTELS SUITES HOTELS SUITES
------ ------ ------ ------ ------ ------ ------ ------
December 31, 1993...................... 16 1,794 8 932 - - 24 2,726
1994 Activity - Additions.............. 2 155 - - - - 2 155
------ ------ ------ ------ ------ ------ ------ ------
December 31, 1994...................... 18 1,949 8 932 - - 26 2,881
1995 Activity:
Additions............................ 4 266 1 92 - - 5 358
Sales/Terminations................... (1) (144) - - - - (1) (144)
------ ------ ------ ------ ------ ------ ------ ------
December 31, 1995...................... 21 2,071 9 1,024 - - 30 3,095
1996 Activity:
Additions............................ 6 637 2 247 - - 8 884
Status Changes, net(a)............... - - (4) (471) 4 471 - -
Sales/Terminations................... (1) (80) - - - - (1) (80)
------ ------ ------ ------ ------ ------ ------ ------
December 31, 1996...................... 26 2,628 7 800 4(b) 471 37 3,899
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------

- ------------------------

(a) Consists of transfers of properties among the licensed, managed and owned
categories.

(b) These hotels are also licensed to third parties.

On December 31, 1996, 21 Homewood Suites hotels were under construction, 17
of which will be licensee operated, and four of which will be Company owned.

Homewood Suites hotels, which have an average of 105 suites, are currently
located in 19 states. Homewood Suites hotels feature residential-style
accommodations, which include a living room area (some with fireplaces),
separate bedroom (with a king size bed or two double beds) and a separate
bathroom, and a fully-equipped kitchen. The hotel is centered around a central
community building called the Lodge which affords guests a high level of social
interaction. Amenities include a complimentary breakfast and an evening social
hour, a convenience store, grocery shopping, business center, outdoor pool,
exercise center and limited meeting facilities.

The following table sets forth information concerning system occupancy,
average daily rate per occupied suite and revenue per available suite for all
Homewood Suites hotels:

AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
YEAR RATE OCCUPIED SUITE AVAILABLE SUITE
- -------------------------------------------------- ------------- --------------- ---------------

1996.............................................. 73.2% $ 90.40 $ 66.14
1995.............................................. 76.9% $ 82.42 $ 63.37
1994.............................................. 78.1% $ 76.38 $ 59.67

HAMPTON INN & SUITES HOTELS

The following table sets forth information regarding all Hampton Inn &
Suites hotels, including hotels operated under management contracts or joint
venture arrangements, and hotels operated by licensees:

MANAGEMENT
CONTRACTS/
LICENSED JOINT VENTURES TOTAL
--------------- --------------- ---------------

NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
OF OF OF OF OF OF
HOTELS SUITES HOTELS SUITES HOTELS SUITES
------ ------ ------ ------ ------ ------
December 31, 1994.............................................. - - - - - -
1995 Activity - Additions...................................... 5 573 - - 5 573
------ ------ ------ ------ ------ ------
December 31, 1995.............................................. 5 573 - - 5 573
1996 Activity - Additions...................................... 10 1,146 1 127 11 1,273
------ ------ ------ ------ ------ ------
December 31, 1996.............................................. 15 1,719 1(a) 127 16 1,846
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------

- ------------------------

(a) This hotel is also licensed to a third party.

Hampton Inn & Suites hotels combine standard guest rooms with a significant
block of two-room suites in a single property. Development of this product is
targeted for commercial and suburban markets, as well as destination and resort
markets. Each property contains a centrally located, expanded lobby and
complimentary services area and includes an exercise room, convenience shop,
meeting/hospitality room and coin-laundry. An expanded complimentary continental
breakfast buffet is offered. The first Hampton Inn & Suites hotel opened June 6,
1995.

As of December 31, 1996, 17 Hampton Inn & Suites hotels were under
construction, all of which will be licensee operated. Hampton Inn & Suites have
an average of 115 suites and are currently located in 12 states and Canada.

The following table sets forth information concerning system occupancy,
average daily rate per occupied suite and revenue per available suite for all
Hampton Inn & Suites hotels:

AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
YEAR RATE OCCUPIED SUITE AVAILABLE SUITE
- ---------------------------------------------------------------------- ------------- --------------- ---------------

1996.................................................................. 63.9% $ 73.41 $ 46.89
1995.................................................................. 59.4% $ 70.13 $ 41.65

OTHER

AUDUBON WOODS BUSINESS CAMPUS

The Company's corporate headquarters, located in Memphis, Tennessee,
consists of four office buildings acquired in 1995 containing approximately
360,000 square feet of office space on 31 acres of land. The Company occupies
50% of the office space while leasing the remaining space. The Company spent
approximately $13 million during 1996 for renovations. Renovations are expected
to be completed in the second quarter of 1997.

TRADEMARKS

The following trademarks used herein are owned by the Company:
Promus-Registered Trademark-; Embassy Suites-Registered Trademark-; Embassy
Vacation Resort-Registered Trademark-; Hampton Inn-Registered Trademark-;
Hampton Inn & Suites-Registered Trademark-, Homewood
Suites-Registered Trademark-. The names

"Embassy Suites," "Embassy Vacation Resort," "Hampton Inn," "Hampton Inn &
Suites," and "Homewood Suites" are registered as service marks in the United
States and in certain foreign countries. The Company considers all of these
marks, and the associated name recognition, to be valuable to its business.

COMPETITION

The Company encounters strong competition as a hotel owner, manager and
franchisor with other lodging related companies in the lodging industry. As of
December 31, 1996, there were more than 150 hotel brands (chains with more than
one hotel). Although most of these companies are privately owned firms, several
large national chains own and operate their own hotels and also franchise their
brands. There is no single competitor which is dominant in the industry.

Affiliation with a national or regional brand is a major trend in the U.S.
lodging industry. In 1996, 67% of U.S. hotel rooms were brand-affiliated,
compared to 62% in 1989. Most of the branded properties are franchises, under
which the operator pays the franchisor a fee for use of its systems, brand
identification and reservation system.

The Company believes that its brands are attractive to hotel owners seeking
a management company or franchise affiliation because its hotels typically
generate higher occupancies and revenue per available room (RevPAR) than direct
competitors in most market areas. The Company attributes this performance
premium to its success in achieving and maintaining strong customer preference.
The Company's brands are also designed to be attractive to leisure guests and
weekend demand. Repeat guest business is enhanced by the Company's unconditional
service guarantee, which is a significant component of the Company's operating
strategy. Customer preference for the Company's brands means the Company neither
needs nor desires to incur the significant cost of frequent stay programs.

The lodging industry in general, including the Company's brands, may be
adversely affected by national and regional economic conditions and government
regulations. The demand for accommodations at a particular hotel may be
adversely affected by many factors including changes in travel patterns, local
and regional economic conditions and the degree of competition with other hotels
in the area.

GOVERNMENTAL REGULATION

LICENSING

A number of states regulate the licensing of hotels and restaurants and the
granting of liquor licenses by requiring registration, disclosure statements and
compliance with specific standards of conduct. Various federal and state
regulations mandate certain disclosures and other practices with respect to the
sales of license agreements and the licensor/licensee relationship. In addition,
there is considerable state regulation of the vacation interval industry. The
Company's operations have not been materially affected by such legislation and
regulations, but the Company cannot predict the effect of future legislation.

EMPLOYEE RELATIONS

Promus, through its subsidiaries, has approximately 11,000 employees, of
whom approximately 1,000 are based in the Company's headquarters, reservations
and data centers in Memphis, Tennessee. Promus' subsidiaries have collective
bargaining agreements covering fewer than ten employees. The Company considers
its relations with employees to be very good.

ITEM 3. LEGAL PROCEEDINGS.

Actions for negligence or other tort claims occur routinely in the ordinary
course of the Company's business, but none of these proceedings involves a claim
for damages (in excess of applicable excess umbrella insurance coverages)
involving more than 10% of current assets of the Company. The Company does not
anticipate any amounts which it may be required to pay as a result of an adverse
determination of

such legal proceedings, individually or in the aggregate, or any other relief
granted by reason thereof, will have a material adverse effect on the Company's
financial position or results of operation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not Applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

POSITIONS AND OFFICES HELD AND PRINCIPAL
NAME AND AGE OCCUPATIONS OR EMPLOYMENT DURING PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------

Michael D. Rose (55)................... Chairman of the Board of Promus since April, 1995. Chairman of the Board
of Harrah's Entertainment, Inc. (1995-1996). Chairman of the Board
(1989-1995) of PCI. Chief Executive Officer (1989-1994) and President
(1989-1991) of PCI. Mr. Rose is also a director of Ashland, Inc., Darden
Restaurants, Inc., First Tennessee National Corporation, Stein Mart,
Inc. and General Mills, Inc.

Raymond E. Schultz (63)................ Director, President and Chief Executive Officer of Promus since April,
1995. President and Chief Executive Officer of the Hotel Division of PCI
(1993-1995). President and Chief Executive Officer of Hampton
Inn/Homewood Suites Hotel Division of PCI (1991-1993). President and
Chief Executive Officer of Hampton Inn Hotel Division of PCI
(1983-1991).

David C. Sullivan (57)................. Director, Executive Vice President and Chief Operating Officer of Promus
since April, 1995. Executive Vice President and Chief Operating Officer
of the Hotel Division of PCI (1993-1995). Senior Vice President of
Development and Operations of Hampton Inn/ Homewood Suites Hotel
Division of PCI (1991-1993). Vice President of Development, Hampton Inn
Hotel Division of PCI (1990-1991).

Donald H. Dempsey (52)................. Senior Vice President and Chief Financial Officer of Promus since April,
1995. Senior Vice President of Finance & Administration of the Hotel
Division of PCI (1993-1995). Vice President, Finance of Hampton
Inn/Homewood Suites Hotel Division of PCI (1991-1993). Vice President,
Finance of Hampton Inn Hotel Division of PCI (1990-1991).

Ralph B. Lake (52)..................... Senior Vice President, General Counsel and Secretary of Promus since
April, 1995. Vice President and General Counsel of Gaming Development of
PCI (1992-1995). Associate General Counsel-International of PCI
(1991-1992). Vice President and General Counsel of Homewood Suites Hotel
Division of PCI (1988-1991).

Thomas L. Keltner (50)................. Senior Vice President, Development of Promus since April, 1995. Senior
Vice President, Development of the Hotel Division of PCI (1993-1995).
President, Golf Training Systems, Inc., (1991-1993). Senior Vice
President and Chief Operating Officer, Franchise Division of Holiday Inn
Worldwide (1990). President and Managing Director, Holiday Inns
International (1988-1990).

Mark C. Wells (47)..................... Senior Vice President, Franchise Services of Promus since March, 1996.
Senior Vice President, Marketing of Promus (April 1995-March 1996).
Senior Vice President, Marketing of the Hotel Division of PCI
(1993-1995). Senior Vice President, Marketing of Hampton Inn/Homewood
Suites Hotel Division of PCI (July 1993-October 1993). Senior Vice
President, Marketing of Embassy Suites Hotel Division of PCI
(1991-1993). Vice President, Marketing of Hampton Inn Hotel Division of
PCI (1986-1991).

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

The Company's Common Stock is listed on the New York Stock Exchange and
traded under the ticker symbol "PRH". The stock is also listed on the Chicago
Stock Exchange, the Pacific Stock Exchange and the Philadelphia Stock Exchange.

The following table sets forth the high and low price per share of the
Company's Common Stock for 1996:

1996 HIGH LOW
- --------------------------------------------------------------------------- --------- ---------

First Quarter.............................................................. $ 28.00 $ 20.88
Second Quarter............................................................. $ 29.63 $ 25.25
Third Quarter.............................................................. $ 32.25 $ 24.75
Fourth Quarter............................................................. $ 34.00 $ 28.25

The approximate number of holders of record of the Company's Common Stock as
of February 28, 1997 is as follows:

APPROXIMATE NUMBER
OF HOLDERS OF
TITLE OF CLASS RECORD
- ------------------------------------------------------------------------- -------------------

Common Stock, Par Value $.10 per share................................... 11,960

The Company does not presently intend to declare cash dividends. The terms
of the Company's existing bank credit facility limit the Company's ability to
pay cash dividends on Common Stock. See "Management's Discussion and
Analysis--Liquidity and Capital Resources" on pages 23 and 24 of the Annual
Report and Note 4 to the financial statements on pages 31 and 32 of the Annual
Report. When permitted under the terms of the existing credit facility, the
declaration and payment of dividends is at the discretion of the Board of
Directors of the Company. The Board of Directors of the Company intends to
reevaluate its dividend policy in the future in light of the Company's results
of operations, financial condition, cash requirements, future prospects and
other factors deemed relevant by the Board of Directors. All of the foregoing
pages of the Annual Report are incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA.

See the information for the years 1992 through 1996 set forth under
"Selected Financial Data" in the Annual Report on page 39, which page is
incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

See "Management's Discussion and Analysis" on pages 18 through 24 of the
Annual Report which pages are incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See the information set forth in the Annual Report on pages 25 through 39,
which pages are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

DIRECTORS

See the information regarding the names, ages, positions and prior business
experience of the directors of the Company set forth on pages 5 through 7 of the
Proxy Statement, which pages are incorporated herein by reference.

EXECUTIVE OFFICERS OF THE REGISTRANT

See "Executive Officers of the Registrant" on page 11 in Part I hereof.

ITEM 11. EXECUTIVE COMPENSATION.

See the information set forth in the Proxy Statement on page 8 thereof
entitled "Compensation of Directors" and the information on pages 16 through 20
thereof. The information on page 8 of the Proxy Statement entitled "Compensation
of Directors" and the information on pages 16 through 20 of the Proxy Statement
entitled "Summary Compensation Table," "Options Granted in 1996," "Aggregated
Option Exercises in 1996 and December 31, 1996, Option Values," and "Certain
Employment Arrangements" is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

See the information set forth in the Proxy Statement on pages 2 through 4
thereof entitled "Ownership of the Capital Stock of the Company" which
information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

See the information set forth in the Proxy Statement entitled "Certain
Transactions" on pages 21 and 22 thereof, which information is incorporated
herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) 1. Financial Statements (including related notes to consolidated financial
statements) filed as part of this report are listed below:

Report of Independent Public Accountants.

Consolidated Balance Sheets as of December 31, 1996 and December 31, 1995.

Consolidated Statements of Income for the Years Ended December 31, 1996,
December 31, 1995, and December 31, 1994.

Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1996, December 31, 1995, and December 31, 1994.

Consolidated Statements of Cash Flows for the Years Ended December 31,
1996, December 31, 1995, and December 31, 1994.

(a) 2. Financial Statement Schedules for the years ended December 31, 1996,
December 31, 1995, and December 31, 1994, are as follows:

NO.
- ---------

I Condensed financial information of registrant.
II Valuation and qualifying accounts.

Schedules III, IV, and V are not applicable and have therefore been
omitted.

(a) 3. Exhibits (footnotes appear on pages 17 and 18):

NO.
- ----------

3(1) Amended and Restated Certificate of Incorporation of Promus Hotel Corporation dated June 30, 1995. (13)

3(2) Bylaws of Promus Hotel Corporation, as amended and restated dated May 26, 1995. (14)

4(1) Form of Rights Agreement, dated as of June 30, 1995, between Promus Hotel Corporation and Continental
Stock Transfer & Trust Company. (11)

4(2) Form of Debt Securities Indenture. (17)

10(1) Form of Indemnification Agreement entered into by Promus Hotel Corporation and each of its directors
and executive officers. (14)

+10(2) Promus Hotel Corporation 1995 Stock Option Plan. (4)

+10(3) Promus Hotel Corporation 1995 Restricted Stock Plan. (5)

+10(4) The Restatement of the Promus Hotel Corporation Savings and Retirement Plan-A, dated as of June 30,
1995. (17)

+10(5) Amendment to the Promus Hotel Corporation Savings and Retirement Plan-A, dated as of June 30, 1995.
(17)

+10(6) The Restatement of the Promus Hotel Corporation Savings and Retirement Plan-B, dated as of June 30,
1995. (17)

+10(7) Amendment to the Promus Hotel Corporation Savings and Retirement Plan-B, dated as of June 30, 1995.
(17)

+10(8) Promus Hotel Corporation Non-Management Directors Stock Incentive Plan. (7)

+10(9) Promus Hotel Corporation Key Executive Officer Annual Incentive Plan. (6)

+10(10) Promus Hotel Corporation Executive Deferred Compensation Plan. (8)

+10(11) Promus Hotel Corporation Deferred Compensation Plan. (8)

+10(12) Promus Hotel Corporation Savings and Retirement Plan Trust Agreement, dated as of May 26, 1995, among
Promus Hotel Corporation and Robert S. Davis, Donald H. Dempsey, Patricia R. Ferguson, Jeffery M.
Jarvis, Kelly R. Jenkins, Frederick G. Schultz and Mark C. Wells, as trustees. (8)

+10(13) Form of Severance Agreement, dated as of June 30, 1995, entered into with Donald H. Dempsey, Thomas L.
Keltner, Ralph B. Lake, David C. Sullivan and Mark C. Wells. (9)

+10(14) Form of Severance Agreement, dated June 30, 1995, entered into with Michael D. Rose and Raymond E.
Schultz. (9)

NO.
- ----------
+10(15) Employment Agreement, dated as of June 30, 1995, between Michael D. Rose and Promus Hotel Corporation.
(9)

+10(16) Employment Agreement, dated as of July 1, 1995, between Raymond E. Schultz and Promus Hotel
Corporation. (10)

+10(17) Form of Letter of Amendment, dated February 22, 1996 to the Employment Agreement between Raymond E.
Schultz and Promus Hotel Corporation. (14)

+10(18) Financial Counseling Plan of The Promus Companies Incorporated as amended February 25, 1993, as adopted
by Promus Hotel Corporation on April 5, 1995. (1)

+10(19) Summary Plan Description of Executive Term Life Insurance Plan adopted by Promus Hotel Corporation on
April 5, 1995. (3)

+10(20) Administrative Regulations, Long Term Compensation Plan (Restricted Stock Plan and Stock Option Plan),
dated as of January 1, 1992, adopted by Promus Hotel Corporation on April 5, 1995. (2)

10(21) Plan of Reorganization and Distribution Agreement, dated as of June 30, 1995, between The Promus
Companies Incorporated and Promus Hotel Corporation. (9)

10(22) Tranche A Credit Agreement, dated as of June 7, 1995, among Embassy Suites, Inc., as Initial Borrower,
Promus Hotels, Inc., as the Subsequent Borrower, certain subsidiaries and related parties from time
to time party thereto, as Guarantors, the several lenders from time to time party thereto, and
NationsBank, N.A. (Carolinas), as Agent. (8)

10(23) First Amendment to Tranche A Credit Agreement, dated as of June 30, 1995, by and among Embassy Suites,
Inc., Promus Hotels, Inc., The Promus Companies Incorporated, Promus Hotel Corporation and
NationsBank, N.A. (Carolinas). (9)

10(24) Tranche A Assignment and Assumption Agreement, dated as of June 30, 1995, among Embassy Suites, Inc.,
Promus Hotels, Inc., The Promus Companies Incorporated and NationsBank, N.A. (Carolinas). (9)

10(25) Tranche B Credit Agreement, dated as of June 7, 1995, among Embassy Suites, Inc., as Initial Borrower,
Promus Hotels, Inc., as the Subsequent Borrower, certain subsidiaries and related parties from time
to time party thereto, as Guarantors, the several lenders from time to time party thereto, and
NationsBank, N.A. (Carolinas), as Agent. (8)

10(26) First Amendment to Tranche B Credit Agreement, dated as of June 30, 1995, by and among Embassy Suites,
Inc., Promus Hotels, Inc., The Promus Companies Incorporated, Promus Hotel Corporation and
NationsBank, N.A. (Carolinas). (9)

10(27) Tranche B Assignment and Assumption Agreement dated as of June 30, 1995, by and among Embassy Suites,
Inc., Promus Hotels, Inc., The Promus Companies Incorporated and NationsBank, N.A. (Carolinas). (9)

10(28) Pledge Agreement dated as of June 30, 1995, by and among Promus Hotel Corporation, Promus Hotels, Inc.,
certain subsidiaries which may now be owners of Credit Parties and NationsBank, N.A. (Carolinas). (9)

10(29) Escrow Agreement, dated as of June 30, 1995, among Promus Hotel Corporation, Promus Hotels, Inc. and
NationsBank. (8)

NO.
- ----------
10(30) Employee Benefits and Other Employment Matters Allocation Agreement, dated as of June 30, 1995, between
The Promus Companies Incorporated and Promus Hotel Corporation. (9)

10(31) Risk Management Allocation Agreement, dated as of June 30, 1995, between The Promus Companies
Incorporated and Promus Hotel Corporation. (9)

10(32) Tax Sharing Agreement, dated as of June 30, 1995, between The Promus Companies Incorporated and Promus
Hotel Corporation. (9)

10(33) International Swap Dealers Association, Inc. Master Agreement, dated as of June 30, 1995, among Promus
Hotels, Inc. and NationsBank, N.A. (Carolinas). (9)

10(34) Transfer Agreement, dated as of June 30, 1995, among Embassy Suites, Inc., Promus Hotels, Inc., and
NationsBank, N.A. (Carolinas). (9)

10(35) Subscription Agreement, dated as of October 17, 1995, by and among Promus Hotels, Inc. and FelCor
Suites Hotels, Inc. and FelCor Suites Limited Partnership. (10)

10(36) Form of Aircraft Agreement, dated August 4, 1995, between Promus Hotels, Inc., and Harrah's Operating
Company, Inc. (14)

10(37) Form of Interest Swap Confirmations, between NationsBank, N.A. and Promus Hotels, Inc. dated December
11, 1995. (14)

10(38) Form of Interest Swap Agreement between NationsBank, N.A. and Promus Hotels, Inc. dated January 24,
1995, as amended on December 6, 1995. (14)

10(39) Form of Interest Swap Confirmations, dated January 22, 1996, between NationsBank, N.A. and Promus
Hotels, Inc. (15)

10(40) Form of Unwind Interest Swap Confirmations, dated January 22, 1996, between NationsBank, N.A. and
Promus Hotels, Inc. (15)

10(41) Form of Guarantee Agreement, dated February 5, 1996, among Promus Hotel Corporation, and Promus Hotels,
Inc., Canadian Imperial Bank of Commerce, as agent for the Lenders, FelCor Suites Limited
Partnership, FelCor/CSS Holdings, L.P., and FelCor Suite Hotels, Inc. (15)

10(42) Second Amendment to Tranche A Credit Agreement, dated as of May 15, 1996, by and among Embassy Suites,
Inc., Promus Hotels, Inc., The Promus Companies Incorporated, Promus Hotel Corporation, and
NationsBank, N.A. (Carolinas). (16)

10(43) Second Amendment to Tranche B Credit Agreement, dated as of May 15, 1996, by and among Embassy Suites,
Inc., Promus Hotels, Inc., The Promus Companies Incorporated, Promus Hotel Corporation, and
NationsBank, N.A. (Carolinas). (16)

* 10(44) Third Amendment to Tranche A Credit Agreement, dated as of November 5, 1996, by and among Embassy
Suites, Inc., Promus Hotels, Inc., The Promus Companies Incorporated, Promus Hotel Corporation, and
NationsBank, N.A. (Carolinas).

* 10(45) Third Amendment to Tranche B Credit Agreement, dated as of November 5, 1996, by and among Embassy
Suites, Inc., Promus Hotels, Inc., The Promus Companies Incorporated, Promus Hotel Corporation, and
NationsBank, N.A. (Carolinas).

* +10(46) Form of Amendment to the 1995 Promus Hotel Corporation Stock Option Plan, dated as of November 13,
1996.

NO.
- ----------
* +10(47) Form of Amendment to the 1995 Restricted Stock Plan dated as of November 13, 1996.

* +10(48) Form of Amendment to the Promus Hotel Corporation 1996 Non-Management Directors Stock Incentive Plan
dated as of December 23, 1996.

* 10(49) Form of Stock Purchase Agreement between Promus Hotels, Inc. and Winston Hotels, Inc. dated as of April
24, 1996.

* 10(50) Form of Amendment No. 1 to Stock Purchase Agreement between Promus Hotels, Inc. and Winston Hotels,
Inc. dated as of August 7, 1996.

* 10(51) Form of Stock Purchase Agreement between Promus Hotels, Inc. and Equity Inns, Inc. and Equity Inns
Partnership, L.P. dated as of May 31, 1996.

* 11(1) Computation of per share earnings.

* 12(1) Computations of ratios.

* 13(1) Portions of Annual Report to Stockholders for the fiscal year ended December 31, 1996.

* 21(1) List of subsidiaries of Promus Hotel Corporation.

* 23(1) Consent of Arthur Andersen LLP.

* 27(1) Financial Data Schedule.

- ------------------------

* Included herewith.

+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.

FOOTNOTES

(1) Incorporated by reference from PCI's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993, filed May 13, 1993, File No. 1-10410.

(2) Incorporated by reference from PCI's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1992, filed May 13, 1992, File No. 1-10410.

(3) Incorporated by reference from PCI's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, filed March 17, 1993, File No. 1-10410.

(4) Incorporated by reference from PCI's Proxy Statement, Annex III-A, dated
April 25, 1995, File No. 1-10410.

(5) Incorporated by reference from PCI's Proxy Statement, Annex III-B, dated
April 25, 1995, File No. 1-10410.

(6) Incorporated by reference from PCI's Proxy Statement, Annex VII, dated
April 25, 1995, File No. 1-10410.

(7) Incorporated by reference from PCI's Proxy Statement, Annex VIII, dated
April 25, 1995, File No. 1-10410.

(8) Incorporated by reference from the Company's Current Report on Form 8-K,
filed June 14, 1995, File No. 1-11463.

(9) Incorporated by reference from the Company's Quarterly Report on Form 10-Q,
for the quarter ended June 30, 1995, filed August 11, 1995, File No.
1-11463.

(10) Incorporated by reference from the Company's Quarterly Report on Form 10-Q,
for the quarter ended September 30, 1995, filed November 13, 1995, File No.
1-11463.

(11) Incorporated by reference from the Company's Form 8-A, filed June 6, 1995,
File No. 1-11463.

(12) Incorporated by reference from the Company's Registration Statement No.
33-59997 on Form S-8 for the Promus Hotel Corporation Savings & Retirement
Plan, filed June 6, 1995.

(13) Incorporated by reference from PCI's Proxy Statement, Annex II-A, dated
April 25, 1995, File No. 1-10410.

(14) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, filed March 12, 1996, File No.
1-11463.

(15) Incorporated by reference from the Company's Quarterly Report on Form 10-Q,
for the quarter ended March 31, 1996, filed May 7, 1996, File No. 1-11463.

(16) Incorporated by reference from the Company's Quarterly Report on Form 10-Q,
for the quarter ended June 30, 1996, filed August 12, 1996, File No.
1-11463.

(17) Incorporated by reference from the Company's Registration Statement on Form
S-3, filed October 11, 1996, File No. 1-11463.

(b) No Reports on Form 8-K were filed during the fourth quarter of 1996 and
thereafter through February 28, 1997.

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

PROMUS HOTEL CORPORATION

By: /s/ MICHAEL D. ROSE
-----------------------------------------
Dated: March 18, 1997 (Michael D. Rose, CHAIRMAN)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------

/s/ U. BERTRAM ELLIS, JR. Director
- ------------------------------ March 18, 1997
(U. Bertram Ellis, Jr.)

/s/ DEBRA J. FIELDS Director
- ------------------------------ March 18, 1997
(Debra J. Fields)

/s/ CHRISTOPHER W. HART Director
- ------------------------------ March 18, 1997
(Christopher W. Hart)

/s/ C. WARREN NEEL Director
- ------------------------------ March 18, 1997
(C. Warren Neel)

/s/ BEN C. PETERNELL Director
- ------------------------------ March 18, 1997
(Ben C. Peternell)

/s/ MICHAEL D. ROSE Chairman of the Board
- ------------------------------ March 18, 1997
(Michael D. Rose)

/s/ MICHAEL I. ROTH Director
- ------------------------------ March 18, 1997
(Michael I. Roth)

Director, President and
/s/ RAYMOND E. SCHULTZ Chief Executive Officer
- ------------------------------ (Principal Executive March 18, 1997
(Raymond E. Schultz) Officer)

/s/ JAY STEIN Director
- ------------------------------ March 18, 1997
(Jay Stein)

/s/ DAVID C. SULLIVAN Director
- ------------------------------ March 18, 1997
(David C. Sullivan)

/s/ RONALD TERRY Director
- ------------------------------ March 18, 1997
(Ronald Terry)

Senior Vice President and
/s/ DONALD H. DEMPSEY Chief Financial Officer
- ------------------------------ (Principal Financial March 18, 1997
(Donald H. Dempsey) Officer)

Vice President, Controller
/s/ JEFFERY M. JARVIS and Chief Accounting
- ------------------------------ Officer (Principal March 18, 1997
(Jeffery M. Jarvis) Accounting Officer)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Promus Hotel Corporation:

We have audited in accordance with generally accepted auditing standards the
financial statements included in the Promus Hotel Corporation 1996 annual
report, incorporated by reference in this Form 10-K, and have issued our report
thereon dated February 5, 1997. Our audits were made for the purpose of forming
an opinion on those statements taken as a whole. The schedules listed under Item
14(a)2 are the responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Memphis, Tennessee
March 18, 1997

SCHEDULE I
PROMUS HOTEL CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
AS OF DECEMBER 31
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

1996 1995
---------- ----------

ASSETS

Cash and cash equivalents................................................................. $ - $ -
Deferred income taxes..................................................................... 468 180
Investments in and advances to subsidiaries
(eliminated in consolidation)........................................................... 247,172 166,412
Organizational costs...................................................................... 603 775
---------- ----------
$ 248,243 $ 167,367
---------- ----------
---------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued expenses.......................................................................... $ 154 $ -

Commitments and contingencies (Note 3)

Stockholders' equity
Common stock, $0.10 par value, 360,000,000 shares authorized, 51,399,117 and 51,371,152
shares outstanding, net of 5,698 and 2,626 shares held in treasury.................... 5,140 5,137
Capital surplus......................................................................... 136,513 136,057
Retained earnings....................................................................... 90,073 25,349
Unrealized gain on marketable equity securities of affiliates, net of related deferred
tax liability of $10,844 and $1,165................................................... 16,961 1,822
Deferred compensation related to restricted stock....................................... (598) (998)
---------- ----------
248,089 167,367
---------- ----------
$ 248,243 $ 167,367
---------- ----------
---------- ----------

The accompanying notes are an integral part of these balance sheets.

S-1

SCHEDULE I (CONTINUED)
PROMUS HOTEL CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
FOR THE PERIOD FROM JUNE 30, 1995 (DATE OF REGISTRATION) THROUGH
DECEMBER 31, 1995 AND FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS)

1996 1995
--------- ---------

Revenues.................................................................................... $ - $ -
Costs and expenses.......................................................................... 655 547
--------- ---------
Loss before income taxes and equity in subsidiaries' earnings............................... (655) (547)
Income tax benefit.......................................................................... 255 231
--------- ---------
Loss before equity in subsidiaries' earnings................................................ (400) (316)
Equity in subsidiaries' earnings before extraordinary items................................. 65,124 22,846
--------- ---------
Income before extraordinary items........................................................... 64,724 22,530
Extraordinary items, net of income tax expense of $1,635.................................... - 2,819
--------- ---------
Net income.................................................................................. $ 64,724 $ 25,349
--------- ---------
--------- ---------

The accompanying notes are an integral part of these financial statements.

S-2

SCHEDULE I (CONTINUED)
PROMUS HOTEL CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JUNE 30, 1995 (DATE OF REGISTRATION) THROUGH
DECEMBER 31, 1995 AND FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS)

1996 1995
--------- ---------

Cash flows from operating activities
Net income................................................................................ $ 64,724 $ 25,349
Adjustments to reconcile net income to cash flows from operating activities
Extraordinary items..................................................................... - (2,819)
Amortization............................................................................ 501 547
Equity in earnings of subsidiary........................................................ (65,124) (22,846)
Other................................................................................... (101) (231)
--------- ---------
Cash flows provided by operating activities........................................... - -
--------- ---------
Net change in cash and cash equivalents..................................................... - -
Cash and cash equivalents, beginning of period.............................................. - -
--------- ---------
Cash and cash equivalents, end of period.................................................... $ - $ -
--------- ---------
--------- ---------

The accompanying notes are an integral part of these financial statements.

S-3

SCHEDULE I (CONTINUED)

PROMUS HOTEL CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996

NOTE 1--BASIS OF ORGANIZATION

Promus Hotel Corporation, a Delaware corporation, is a holding company, the
principal assets of which are capital stock in a subsidiary, Promus Hotels,
Inc., (PHI). These condensed financial statements should be read in conjunction
with the consolidated financial statements of Promus and subsidiaries.

On June 30, 1995, The Promus Companies Incorporated (Parent) completed the
transfer of the operations, assets and liabilities of its hotel business (the
Hotel Business), to a new publicly-traded entity, Promus Hotel Corporation
(Promus or the Company). As approved by Parent's Board of Directors and
stockholders on May 26, 1995, this entity was spun-off (the Spin-Off) from the
Parent and its stock was distributed to Parent's stockholders on a one-for-two
basis effective June 30, 1995 (the Distribution). Concurrent with the
Distribution, Parent changed its name to Harrah's Entertainment, Inc.

NOTE 2--ORGANIZATIONAL COSTS

Organizational costs are being amortized on a straight-line basis over a
five year period.

NOTE 3--COMMITMENTS AND CONTINGENCIES

The Company is a party to various inquiries, administrative proceedings and
litigation relating to contracts, sales of property and other matters arising in
the normal course of business. While any proceeding or litigation has an element
of uncertainty, management believes that the final outcome of these matters will
not have a materially adverse effect upon Promus' consolidated financial
position or its results of operations.

NOTE 4--STOCKHOLDERS' EQUITY

In addition to its common stock, the Company has the following classes of
stock authorized but unissued:

Preferred stock, $100 par value, 150,000 shares authorized
Special stock-Series A, $1.125 par value, 5,000,000 shares authorized

One special right is attached to each outstanding share of common stock.
These rights entitle the holders to purchase, under certain conditions, units
consisting of fractional shares of Special stock-Series A at a purchase price of
$120 per unit, subject to adjustment. The rights also, under certain conditions,
entitle the holders to purchase $240 worth of common stock for $120. These
rights expire on May 1, 2005, unless Promus decides to redeem them earlier at
$0.01 per right or upon the occurrence of certain other events.

NOTE 5--INCOME TAXES

Promus files a consolidated tax return with its subsidiaries.

NOTE 6--EXTRAORDINARY ITEMS

Promus' equity in PHI's net extraordinary items relates to the early payoff
and forgiveness of a portion of existing debt attributable to two of PHI's
equity investments in 1995.

S-4

SCHEDULE I (CONTINUED)

PROMUS HOTEL CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 (CONTINUED)

NOTE 7--SUPPLEMENTAL CASH FLOW INFORMATION

Concurrent with the Spin-Off, the historical assets of the Hotel Business
were transferred to Promus by Parent, and the issuance of Promus common stock
was completed in connection with the Distribution. This noncash transaction has
been excluded from the statement of cash flows.

S-5

SCHEDULE II

PROMUS HOTEL CORPORATION
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

COLUMN
COLUMN A B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------ ------- ----------------- -------- ---------

ADDITIONS
-----------------
BALANCE CHARGED
AT TO
BEGINNING COSTS CHARGED BALANCE
OF AND TO OTHER AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ------------------------------------------------ ------- ------- -------- -------- ---------
Fiscal Year Ended December 31, 1996
Allowance for doubtful accounts
Current..................................... $1,172 $ 269 $ 171 $ 432(a) $ 1,180
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------
Long-term................................... $ - $ 270 $ 87 $ - $ 357
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------
Self-insurance reserves....................... $8,934 $4,171 $ 8,991(c) $6,045 $ 16,051
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------
Fiscal Year Ended December 31, 1995
Allowance for doubtful accounts
Current..................................... $ 855 $ - $ 349(b) $ 32(a) $ 1,172
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------
Self-insurance reserves....................... $ - $4,036 $ 10,844(b)(c) $5,946 $ 8,934
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------
Fiscal Year Ended December 31, 1994
Allowance for doubtful accounts
Current..................................... $1,089 $ 28 $ - $ 262(a) $ 855
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------
Long-term................................... $ 644 $ - $ - $ 644 $ -
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------

- ------------------------

(a) Includes uncollectible accounts written off, net of amounts recovered, and
balances transferred to other accounts.

(b) Includes balances received from Parent in connection with the Spin-Off that
had not been previously allocated.

S-6

EXHIBIT INDEX