UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2001 or _______

[ ] 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 1-14331

MERISTAR HOTELS & RESORTS, INC.
(Exact name of Registrant as specified in its Charter)

DELAWARE 51-0379982
(State of Incorporation) (IRS Employer Identification No.)

1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
(Address of Principal Executive Offices)(Zip Code)

202-965-4455
(Registrant's Telephone Number, Including Area Code)

NONE
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)

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 for which 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

The number of shares of Common Stock, par value $0.01 per share,
outstanding at August 8, 2001 was 37,183,284.

MERISTAR HOTELS & RESORTS, INC.

INDEX

Page
----

PART I. FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)

Condensed Consolidated Balance Sheets -
June 30, 2001 and December 31, 2000 ............................. 3

Condensed Consolidated Statements of Operations and Other
Comprehensive Income (Loss) - Three Months and Six Months Ended
June 30, 2001 and 2000 .......................................... 4

Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2001 and 2000 ......................... 5

Notes to Condensed Consolidated Financial Statements ............ 6

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ................... 14

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK ..................................................... 21

PART II. OTHER INFORMATION ............................................... 22

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS ................................................ 22

ITEM 5: OTHER INFORMATION ............................................... 23

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K ................................ 23

PART I. FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

MERISTAR HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

June 30, December 31,
2001 2000
----------- --------------
(unaudited)

Assets
Current Assets:
Cash and cash equivalents ............................ $ 1,369 $ 7,645
Accounts receivable, net of allowance for doubtful
accounts of $2,805 and $4,097 ...................... 11,453 72,655
Prepaid expenses ..................................... 8,292 9,719
Deposits and other ................................... 3,153 12,107
--------- ---------
Total current assets ...................................... 24,267 102,126
--------- ---------
Fixed assets:
Furniture, fixtures, and equipment ..................... 31,845 33,996
Accumulated depreciation ............................... (11,543) (9,247)
--------- ---------
Total fixed assets, net ................................... 20,302 24,749
--------- ---------
Investments in and advances to affiliates ................. 28,874 40,109
Intangible assets, net of accumulated
amortization of $15,122 and $11,899 ..................... 164,131 166,898
Deferred income tax asset ................................. 6,300 --
--------- ---------
$ 243,874 $ 333,882
========= =========

Liabilities, Minority Interests, and Stockholders' Equity
Current Liabilities:
Accounts payable, accrued expenses and other
liabilities .......................................... $ 49,430 $ 119,597
Due to MeriStar Hospitality Corporation ................ 10,893 22,222
Income taxes payable ................................... 1,991 1,923
Long-term debt, current portion ........................ -- 147
--------- ---------
Total current liabilities ................................. 62,314 143,889
Deferred income tax liability ............................. -- 5,508
Derivative financial instrument ........................... 754 --
Long-term debt ............................................ 110,000 100,040
--------- ---------
Total liabilities ......................................... 173,068 249,437
--------- ---------
Minority interests ........................................ 6,850 11,140
Stockholders' equity:
Common stock, par value $0.01 per share:
Authorized - 100,000 shares
Issued and outstanding 37,183 and 35,976 shares ..... 372 360
Additional paid-in capital ............................. 78,832 74,989
Accumulated deficit..................................... (14,090) (2,144)
Accumulated other comprehensive income (loss):
Translation adjustment .............................. (419) 207
Unrealized loss on derivative financial instrument .. (754) --
Unrealized gain (loss) on investments ............... 15 (107)
--------- ---------
Total stockholders' equity ................................ 63,956 73,305
--------- ---------
$ 243,874 $ 333,882
========= =========

See accompanying notes to condensed consolidated financial statements.

MERISTAR HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE
INCOME (LOSS)
UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2001 2000 2001 2000
--------- --------- --------- ---------

Revenue:
Rooms .............................................. $ 39,121 $ 253,242 $ 76,661 $ 489,548
Food and beverage .................................. 3,107 80,193 6,241 154,579
Other operating departments ........................ 1,841 25,186 3,785 49,594
Corporate housing .................................. 26,488 9,392 50,937 9,392
Management and other fees .......................... 12,960 4,671 25,643 10,195
--------- --------- --------- ---------
Total revenue ........................................ 83,517 372,684 163,267 713,308
--------- --------- --------- ---------
Operating expenses by department:
Rooms .............................................. 8,771 56,868 17,276 110,868
Food and beverage .................................. 2,304 56,619 4,644 110,643
Other operating departments' expenses .............. 1,171 14,113 2,213 27,553
Corporate housing .................................. 19,464 6,037 36,805 6,037

Undistributed operating expenses:
Administrative and general ......................... 20,383 58,155 39,545 115,624
Property operating costs ........................... 9,185 48,535 18,149 96,749
Participating lease expense ........................ 16,627 107,071 32,763 213,312
Depreciation and amortization ...................... 3,411 2,119 6,546 3,762
Merger costs ....................................... 614 -- 4,385 --
Charges to investments in and advances to
affiliates, accounts and notes receivables,
and other ....................................... -- -- 15,298 --
Restructuring expenses ............................. 912 -- 912 --
--------- --------- --------- ---------
Total operating expenses ............................. 82,842 349,517 178,536 684,548
--------- --------- --------- ---------
Net operating income (loss) .......................... 675 23,167 (15,269) 28,760
Interest expense, net ................................ 2,777 1,353 5,662 2,544
Equity in (income) loss of affiliates ................ (327) (4) (440) 124
--------- --------- --------- ---------
Income (loss) before minority interests
and income taxes .................................. (1,775) 21,818 (20,491) 26,092
Minority interests ................................... 91 1,738 (581) 2,139
--------- --------- --------- ---------
Income (loss) before income taxes .................... (1,866) 20,080 (19,910) 23,953
Income tax expense (benefit) ......................... (746) 7,590 (7,964) 9,023
--------- --------- --------- ---------
Net income (loss) .................................... $ (1,120) $ 12,490 $ (11,946) $ 14,930

Other comprehensive income (loss):
Foreign currency translation adjustment ........... $ 222 $ 122 $ (626) $ 90
Transition adjustment ............................. -- -- (205) --
Unrealized loss on derivative financial
instruments ..................................... (191) -- (549) --
Unrealized gain (loss) on investments ............. 99 (72) 122 (72)
--------- --------- --------- ---------
Comprehensive income (loss) .......................... $ (990) $ 12,540 $ (13,204) $ 14,948
========= ========= ========= =========

Earnings (loss) per share:
Basic ........................................... $ (0.03) $ 0.38 $ (0.32) $ 0.46
========= ========= ========= =========
Diluted ......................................... $ (0.03) $ 0.37 $ (0.32) $ 0.45
========= ========= ========= =========

See accompanying notes to condensed consolidated financial statements.

MERISTAR HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED (IN THOUSANDS)

Six Months Ended
June 30,
-----------------------
2001 2000
--------- ---------

Operating activities:
Net income (loss) ............................................. $ (11,946) $ 14,930

Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization .............................. 6,546 3,762
Minority interests ......................................... (581) 2,139
Deferred income taxes ...................................... (11,808) 9,118
Charges to investments in and advances to affiliates,
accounts and notes receivables, and other ................. 15,298 --
Changes in operating assets and liabilities, excluding effects
of assignment of leases to MeriStar Hospitality Corporation
and acquisitions:
Accounts receivable, net ................................ 7,795 (21,544)
Prepaid expenses ........................................ (96) (12,561)
Deposits and other ...................................... 2,492 (5,548)
Accounts payable, accrued expenses and other liabilities (4,636) 10,534
Income taxes payable .................................... 68 (100)
Due to MeriStar Hospitality Corporation ................. (11,329) 11,449
--------- ---------
Net cash (used in) provided by operating activities ........... (8,197) 12,179
--------- ---------
Investing activities:
Purchases of fixed assets .................................. (1,073) (4,334)
Purchases of intangible assets ............................. (3,564) (1,604)
Investments in and advances to affiliates, net ............. 463 (6,671)
Cash paid to BridgeStreet Accommodations shareholders ...... -- (12,216)
Hotel operating cash transferred in connection with
lease conversions ......................................... (3,778) --
Change in restricted cash .................................. -- 210
--------- ---------
Net cash used in investing activities ......................... (7,952) (24,615)
--------- ---------
Financing activities:
Proceeds from issuance of long-term debt ................... 50,022 138,500
Principal payments on long-term debt ....................... (40,177) (110,979)
BridgeStreet Accommodations debt repaid .................... -- (12,021)
Proceeds from issuances of common stock .................... 241 5,488
Contributions by minority investors ........................ 25 --
Distributions to minority investors ........................ (114) --
Purchase of operating partnership units .................... -- (1,149)
Deferred financing costs ................................... -- (1,600)
--------- ---------
Net cash provided by financing activities ..................... 9,997 18,239
--------- ---------
Effect of exchange rate changes on cash ....................... (124) (23)
--------- ---------

Net increase (decrease) in cash and cash equivalents .......... (6,276) 5,780
Cash and cash equivalents, beginning of period ................ 7,645 1,726
--------- ---------
Cash and cash equivalents, end of period ...................... $ 1,369 $ 7,506
========= =========

See accompanying notes to condensed consolidated financial statements.

MERISTAR HOTELS & RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
UNAUDITED (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. ORGANIZATION

We manage, lease, and operate a portfolio of hospitality properties and provide
related services in the hotel, corporate housing, resort, conference center, and
golf markets. Our portfolio is diversified by franchise and brand affiliations.
Our subsidiary, MeriStar H&R Operating Company, L.P., conducts all of our
operations. We are the sole general partner of MeriStar H&R and control its
operations.

We were created in connection with the August 3, 1998 merger of American General
Hospitality Corporation and CapStar Hotel Company. That merger created MeriStar
Hospitality Corporation, a real estate investment trust. We are the manager and
operator of substantially all of the hotels owned by MeriStar Hospitality. At
the time of the merger, CapStar Hotel Company distributed all of the shares of
our common stock to its shareholders and we became a separate, publicly traded
company.

We have an intercompany agreement with MeriStar Hospitality. This provides each
of us the right to participate in certain transactions entered into by each
company. The intercompany agreement provides, among other things, that Meristar
Hospitality has the right of first refusal with respect to some of our hotel
real estate opportunities and that we have a right of first refusal with respect
to some of MeriStar Hospitality's hotel management opportunities (excluding
hotels that MeriStar Hospitality elects to have managed by a hotel brand). We
also provide each other with certain services including administrative,
renovation supervision, corporate, accounting, finance, insurance, legal, tax,
information technology, human resources, acquisition identification and due
diligence, and operational services. We and MeriStar Hospitality are compensated
in amounts that we believe would be charged by an unaffiliated third party for
comparable services.

On May 31, 2000, we completed the acquisition of BridgeStreet Accommodations,
Inc. BridgeStreet provides corporate housing services in the United States,
Canada, and the United Kingdom. Our consolidated financial statements include
the operating results of BridgeStreet since May 31, 2000. We operate our
corporate housing division under the name BridgeStreet Corporate Housing
Worldwide.

Until January 1, 2001, we leased the hotels we operated for MeriStar
Hospitality. On January 1, 2001, amendments to the Internal Revenue Code that
permit real estate investment trusts to create taxable subsidiaries became law.
These taxable subsidiaries are subject to taxation similar to a subchapter C
corporation and can perform some activities previously not permissible for real
estate investment trusts. As a result, we assigned all 106 leases with MeriStar
Hospitality to taxable subsidiaries of MeriStar Hospitality on January 1, 2001.
In connection with the assignment, we executed management agreements with the
taxable subsidiaries for each of the 106 properties. We structured the
management agreements to substantially mirror the economics of the prior leases.
The conversion did not result in the exchange of any cash consideration among
the parties. Under the management agreements, the annual base management fee is
2.5 percent of total hotel revenue with incentive fees of up to an additional
1.5 percent of total hotel revenue based in part on our achievement of specified
operating thresholds.

On January 1, 2001, we invested $100 in Flagstone Hospitality Management LLC, a
joint venture established to manage 54 hotels owned by RFS Hotel Investors, Inc.
We own 51% of, and control, the joint venture. We have included the results of
Flagstone in our consolidated financial statements from January 1, 2001.

As of June 30, 2001, we leased or managed 268 hotels with 55,101 rooms in 39
states, the District of Columbia, Canada, and Puerto Rico. In addition, we had
approximately 3,900 apartments under lease in the United States, Canada, and the
United Kingdom at June 30, 2001.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

We have prepared these unaudited interim financial statements according to the
rules and regulations of the Securities and Exchange Commission. We have omitted
certain information and footnote disclosures that are normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America. These interim financial statements
should be read in conjunction with the financial statements, accompanying notes
and other information included in our Annual Report on Form 10-K for the year
ended December 31, 2000. Certain 2000 amounts have been reclassified to conform
to the 2001 presentation.

In our opinion, the accompanying unaudited condensed consolidated interim
financial statements reflect all adjustments, which are of a normal and
recurring nature, necessary for a fair presentation of the financial condition
and results of operations and cash flows for the periods presented. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires us to make estimates
and assumptions. Such estimates and assumptions affect the reported amounts of
assets and liabilities, as well as the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Our actual results could
differ from those estimates. The results of operations for the interim periods
are not necessarily indicative of the results for the entire year.

Our management agreements with the taxable subsidiaries of MeriStar Hospitality
have initial terms of 10 years, with three five-year extensions at our option.
The annual base management fee is 2.5 percent of total hotel revenue with
incentives of up to an additional 1.5 percent of total hotel revenue based in
part on our achievement of specified operating thresholds.

Our hotel participating leases have noncancelable remaining terms ranging from 7
to 13 years, subject to earlier termination upon the occurrence of certain
contingencies as defined in the leases. The rent payable under each
participating lease is the greater of base rent or percentage rent, as defined.
Percentage rent applicable to room and food and beverage hotel revenue varies by
lease and is calculated by multiplying fixed percentages by the total amounts of
such revenues over specified threshold amounts. Both the minimum rent and the
revenue thresholds used in computing percentage rents are subject to annual
adjustments based on increases in the United States Consumer Price Index.
Percentage rent applicable to other revenues is calculated by multiplying fixed
percentages by the total amounts of such revenues.

Emerging Issues Task Force Issue No. 98-9, "Accounting for Contingent Rent in
Interim Financial Periods", requires a lessee to recognize contingent rental
expense for interim periods prior to the achievement of the specified target
that triggers the contingent rental expense, if the achievement of that target
by the end of the fiscal year is considered probable. This accounting
pronouncement relates only to our recognition of lease expense in interim
periods for financial reporting purposes; it has no effect on the timing of rent
payments under our leases or our annual lease expense calculations. We made cash
lease payments in excess of the lease expense we were required to recognize
during the interim periods ended June 30, 2001 and 2000. As of June 30, 2001 and
2000, this resulted in prepaid expense balances of $270 and $10,126,
respectively, which are included on our condensed consolidated balance sheets.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which requires that an entity recognize all derivatives
as either assets or liabilities in the balance sheet and measure those
instruments at fair value. In June 1999, the Financial Accounting Standard Board
issued Statement of Financial Accounting Standard No. 137, which amended
Statement of Financial Accounting Standard No. 133 to defer the effective date
to all fiscal quarters of all fiscal years beginning after June 15, 2000. In
June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 138, which provides additional guidance and
amendments to Statement of Financial Accounting Standard No. 133. We recognized
a transition adjustment of $205 at January 1, 2001 as the fair value of our
interest rate collar agreement to hedge our variable rate debt. The transition
adjustment resulted in a derivative instrument liability and a corresponding
charge to other comprehensive loss. As of June 30, 2001, the fair values of our
derivative instruments included in accumulated other comprehensive loss is $754.
The estimated amount recorded in accumulated other comprehensive loss expected
to be reclassified to the statement of operations within the next six months is
approximately $539.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets".
This standard eliminates the amortization of goodwill and replaces it with an
annual impairment analysis of the carrying value of the goodwill. We will adopt
this standard on January 1, 2002. We are currently in the process of evaluating
the effect of this new standard our financial statements.

3. LONG-TERM DEBT

Long-term debt consists of the following:

June 30, December 31,
2001 2000
--------- ---------

Senior secured credit facility ................................ $ 74,000 $ 100,000
Revolving credit facility with MeriStar Hospitality
Corporation ................................................. 36,000 --
Other ......................................................... -- 187
--------- ---------
110,000 100,187
Less current portion .......................................... -- (147)
--------- ---------
$ 110,000 $ 100,040
========= =========

On February 29, 2000, we entered into a $100,000 senior secured credit facility
with a syndicate of banks. The interest rate on the credit facility is the
30-day London Interbank Offered Rate plus 350 basis points. The senior secured
credit facility expires in February 2002 with a one-year extension at our
option. The senior secured credit facility contains certain covenants, including
maintenance of financial ratios, reporting requirements and other customary
restrictions. The weighted average effective interest rate as of June 30, 2001
was 8.7%. We have determined that the fair value of the notes payable under the
senior secured credit facility approximates its carrying value.

On August 3, 1998, we entered into a three-year $75,000 unsecured revolving
credit facility with MeriStar Hospitality. This facility was subsequently
amended on February 29, 2000 to reduce the maximum borrowing limit to $50,000
and to change the maturity date to 91 days after the maturity of our senior
secured credit facility. The credit facility contains certain covenants,
including maintenance of financial ratios, reporting requirements and other
customary restrictions. Interest on the facility is variable, based on the
30-day London Interbank Offered Rate plus 650 basis points. The weighted average
effective interest rate as of June 30, 2001 was 10.9%. We have determined that
the fair value of this note payable approximates its carrying value.

4. EARNINGS PER SHARE

The following tables present the computation of basic and diluted earnings per
share:

Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2001 2000 2001 2000
-------- -------- -------- --------

BASIC EARNINGS (LOSS) PER SHARE COMPUTATION:
Net income (loss) .......................... $ (1,120) $ 12,490 $(11,946) $ 14,930
Weighted average number of shares
of common stock outstanding ............. 37,172 33,128 36,787 32,380
-------- -------- -------- --------
Basic earnings (loss) per share ............ $ (0.03) $ 0.38 $ (0.32) $ 0.46
======== ======== ======== ========

DILUTED EARNINGS (LOSS) PER SHARE
COMPUTATION:
Net income (loss) .......................... $ (1,120) $ 12,490 $(11,946) $ 14,930
Minority interest, net of tax .............. -- 999 -- 1,333
-------- -------- -------- --------
Adjusted net income (loss) ................. $ (1,120) $ 13,489 $(11,946) $ 16,263
======== ======== ======== ========

Weighted average number of shares
of common stock outstanding ............. 37,172 33,128 36,787 32,380
Common stock equivalents--stock
options ................................. -- 85 -- 95
Common stock equivalents--operating
partnership units ....................... -- 3,303 -- 3,603
-------- -------- -------- --------
Total weighted average number of
diluted shares of common stock
outstanding ............................. 37,172 36,516 36,787 36,078
======== ======== ======== ========
Diluted earnings (loss) per share .......... $ (0.03) $ 0.37 $ (0.32) $ 0.45
======== ======== ======== ========

Stock options and operating partnership units are not included in the
computation of diluted earnings (loss) per share when their effect is
antidilutive.

5. SUPPLEMENTAL CASH FLOW INFORMATION

Six Months Ended
June 30,
---------------------
2001 2000
-------- --------

Cash paid for interest and income taxes:
Interest .............................................................. $ 5,379 $ 2,353
Income taxes .......................................................... 739 70
Non-cash investing and financing activities:
Conversion of operating partnership units to common stock .......... 3,620 391
Issuance of common stock to BridgeStreet Accommodations
shareholders ..................................................... -- 11,239
Fair value of assets acquired ...................................... (58) 17,271
Fair value of liabilities acquired ................................. (791) (14,001)
Fair value of debt assumed ......................................... -- (12,021)

Operating assets and liabilities transferred in lease conversion:
Accounts receivable .............................................. (52,072) --
Prepaid expenses ................................................. (1,478) --
Deposits and other ............................................... (6,462) --
Furniture, fixtures and other .................................... (315) --
Accumulated depreciation ......................................... 163 --
Investments in and advances to affiliates ........................ (1,796) --
-------- --------
Total operating assets transferred ......................... $(61,960) $ --
======== ========

Accounts payable and accrued expenses ............................ $ 65,706 $ --
Long-term debt ................................................... 32 --
-------- --------
Total liabilities transferred .............................. $ 65,738 $ --
======== ========

6. SEGMENTS

We are organized into three operating divisions: hospitality management,
corporate housing, and golf management. Each division is managed separately
because of its distinctive products and services. In 2000, we were organized
into four operating segments: hospitality management, corporate housing, golf
management, and vacation ownership. In 2001, we discontinued our vacation
ownership division. Hospitality management and corporate housing are reportable
operating segments in 2001 and 2000. We evaluate the performance of each
division based on earnings before interest, taxes, depreciation, and
amortization.

Hospitality Corporate Financial
Management Housing Other Statements
----------- -------- -------- ----------

Three months ended June 30, 2001
Revenues ..................................... $ 57,058 $ 26,488 $ (29) $ 83,517
Earnings before interest, taxes, depreciation,
and amortization ........................... 5,379 243 (1,209) 4,413

Three months ended June 30, 2000
Revenues ..................................... $362,252 $ 9,392 $ 1,040 $372,684
Earnings before interest, taxes, depreciation,
and amortization ........................... 25,049 784 (543) 25,290

Hospitality Corporate Financial
Management Housing Other Statements
----------- -------- -------- ----------

Six months ended June 30, 2001
Revenues ..................................... $ 111,947 $ 50,937 $ 383 $ 163,267
Earnings before interest, taxes, depreciation,
and amortization ........................... 11,251 449 (19,983) (8,283)
Total assets ................................. $ 26,072 $ 17,689 $ 200,113 $ 243,874

Six months ended June 30, 2000
Revenues ..................................... $ 701,089 $ 9,392 $ 2,827 $ 713,308
Earnings before interest, taxes, depreciation,
and amortization ........................... 32,135 784 (521) 32,398
Total assets ................................. $ 180,053 $ 21,139 $ 168,391 $ 369,583

The other items in the tables above represent operating segment activity and
assets for the non-reportable segments and non-operating segment activity and
assets. The non-operating segment activity and assets are primarily unallocated
corporate expenses and intangibles and other miscellaneous assets. In 2001, the
other column also includes costs for the merger; restructuring costs; and the
charges to investments in and advances to affiliates, accounts and notes
receivables, and other.

Revenues for foreign operations for the three months ended June 30 were as
follows:

2001 2000
---- ----
Canada ....... $3,033 $6,527
United Kingdom $7,249 $2,180

Revenues for foreign operations for the six months ended June 30 were as
follows:

2001 2000
---- ----
Canada ....... $ 6,107 $10,952
United Kingdom $14,282 $ 2,180

7. CHARGES TO INVESTMENTS IN AND ADVANCES TO AFFILIATES, ACCOUNTS AND NOTES
RECEIVABLES, AND OTHER

During the first quarter of 2001, we recorded a charge in the amount of $15,298
to record a reserve against accounts and notes receivables and to write-off the
remaining book values of impaired and abandoned assets. The following is a
summary of the amounts comprising this charge.

o During the first quarter of 2001, several of the hotels that we manage for
third-party owners experienced severe financial difficulties, which
affected the collectibility of our accounts and notes receivable from these
hotels. One of the hotel owners filed for bankruptcy. The lender
subsequently foreclosed on this hotel in early July 2001. We terminated our
management agreement with another of the hotel owners in the second quarter
of 2001. As a result we fully reserved for the amounts due from these
entities in the amount of $5,077 and recorded a charge to write-off other
related assets in the amount of $1,799.

o We also wrote-off our investments in an internet services company and
certain real estate ventures. The internet services company significantly
curtailed its operations during the first quarter of 2001. We are involved
in a dispute with our partners in the real estate ventures and believe that
the recorded values of our investments in these real estate ventures have
been impaired as a result of this dispute. We adjusted the book values of
these investments to amounts consistent with the values stipulated in the
partnership agreements. We recorded a charge in the amount of $5,221 to
reduce the book values of these assets.

o In connection with the conversion of our lease contracts to management
contracts, we implemented changes to our business structure, which resulted
in the abandonment of certain fixed assets totaling $2,876.

o One of our former partners in our operating partnership is claiming that we
owe them special distributions under the partnership agreement. We have
estimated the amount of distributions due to the former partner to be $325,
which we accrued at March 31, 2001.

8. PROPOSED MERGER

On February 26, 2001, we mailed a proxy to our shareholders seeking approval of
a merger agreement providing for a merger of a wholly-owned subsidiary of
American Skiing Company, a Delaware corporation, with and into our company and
the other transactions contemplated by that merger agreement. On March 22, 2001,
we and the other parties to the merger agreement mutually agreed to terminate
the merger agreement. Each company cancelled its respective special shareholder
meeting, which were scheduled for March 26, 2001, to vote on the merger. There
were no termination fees payable to any of the parties. During the three and six
months ended June 30, 2001, we incurred $614 and $4,385, respectively, of
expenses related to the proposed merger. These expenses are included in our
statements of operations.

9. RESTRUCTURING EXPENSES

During the second quarter of 2001, we incurred a restructuring charge in
connection with personnel changes primarily as a result of the change to
management contracts with MeriStar Hospitality and the termination of the merger
agreement with American Skiing Company. This restructuring is expected to reduce
our annualized corporate overhead expenditures by approximately 10%, or $3.5
million. The restructuring included eliminating corporate staff positions that
were no longer needed under the new structure.

As a result of the restructuring, we recorded a restructuring charge of $912 in
the second quarter of 2001. A detail of the costs comprising the total charge
incurred in the second quarter is as follows:

Severance ............... $842
Noncancelable lease costs 70
----
Total ................... $912
====

During the second quarter of 2001, approximately $789 in severance costs was
applied against the restructuring reserve. Approximately $123 of the
restructuring accrual remains at June 30, 2001.

10. ACQUISITION

On May 31, 2000, we completed the acquisition of BridgeStreet Accommodations,
Inc. During the second quarter of 2001, we finalized the accounting related to
the acquisition of BridgeStreet. As a result, we reduced goodwill by
approximately $332. We are amortizing the goodwill on a straight line basis over
35 years.

In accordance with accounting principles generally accepted in the United States
of America, the acquisition was accounted for as a purchase. Accordingly, we
have included the operating results of BridgeStreet in our condensed
consolidated financial statements since May 31, 2000, the date of acquisition.
The following unaudited pro forma consolidated results of operations are
presented as if we had acquired BridgeStreet at the beginning of the periods
presented:

Three Months Ended Six Months Ended
June 30, 2000 June 30, 2000
------------- -------------

Revenue .............................. $ 390,227 $ 754,136
Net Income ........................... $ 11,800 $ 13,013
Earnings Per Share:
Basic ........................... $ 0.33 $ 0.36

Diluted ......................... $ 0.32 $ 0.36

The pro forma consolidated results of operations include adjustments to give
effect to amortization of goodwill, interest expense on acquisition debt and
certain other adjustments, together with related income tax effects. The
unaudited pro

forma information is not necessarily indicative of the results of operations
that would have occurred had the purchase been made at the beginning of the
periods presented or the future results of the combined operations.

11. MERISTAR HOSPITALITY MERGER

On May 10, 2001, MeriStar Hospitality announced an agreement to merge with and
into FelCor Lodging Trust. We will continue to operate the hotels formerly owned
by MeriStar Hospitality after the merger is completed. The merger agreement
between MeriStar Hospitality and FelCor requires that MeriStar Hospitality amend
the revolving credit facility it has extended to us so that it matures on
February 28, 2004 and bears interest at a rate of the 30-day London Interbank
Offered Rate plus 600 basis points. A Special Committee of our Board of
Directors established in connection with the MeriStar Hospitality/FelCor merger
approved this amendment. Following the merger, FelCor will assume the
intercompany agreement between MeriStar Hospitality and us.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

We manage, lease and operate a portfolio of hospitality properties and provide
related services in the hotel, corporate housing, resort, conference center, and
golf markets. Our portfolio is diversified by franchise and brand affiliations.
Our subsidiary, MeriStar H&R Operating Company, L.P., conducts all of our
operations. We are the sole general partner of MeriStar H&R and control its
operations.

On August 3, 1998, American General Hospitality Corporation and CapStar Hotel
Company merged together to form MeriStar Hospitality Corporation, a real estate
investment trust. As part of that merger, CapStar Hotel Company formed our
company to become the lessee, manager and operator of substantially all of the
hotels owned or leased by American General and CapStar Hotel Company before the
merger. Until January 1, 2001, we leased these hotels from MeriStar Hospitality.

On May 31, 2000, we completed the acquisition of BridgeStreet Accommodations,
Inc. BridgeStreet provides corporate housing services in the United States,
Canada and the United Kingdom. As of June 30, 2001, BridgeStreet had
approximately 3,900 apartments under lease. Our financial statements include the
operating results of BridgeStreet since May 31, 2000. We operate our corporate
housing division under the name BridgeStreet Corporate Housing Worldwide.

On January 1, 2001, amendments to the Internal Revenue Code that permit real
estate investment trusts to create taxable subsidiaries became law. These
taxable subsidiaries are subject to taxation similar to a subchapter C
corporation and can perform some activities not previously permissible for real
estate investment trusts. As a result, we assigned all 106 leases with MeriStar
Hospitality to taxable subsidiaries of MeriStar Hospitality on January 1, 2001.
In connection with the assignment, we executed management agreements with the
taxable subsidiaries for each of the 106 properties. We structured the
management agreements to substantially mirror the economics of the prior leases.
The conversion did not result in the exchange of any cash consideration among
the parties. Under the management agreements, the annual base management fee is
2.5 percent of total hotel revenue with incentive fees of up to 1.5 percent of
total hotel revenue based in part on our achievement of specified operating
thresholds. Prior to January 1, 2001, we did not record management fees from
these hotels; since January 1, 2001, we earn and record management fees related
to these hotels. Until January 1, 2001, we recorded room, food and beverage and
other operating department revenues and expenses from the leases.

On January 1, 2001, we invested $0.1 million in Flagstone Hospitality Management
LLC, a joint venture established to manage 54 hotels owned by RFS Hotel
Investors, Inc. We own 51% of, and control, the joint venture. We have included
the results of Flagstone in our consolidated financial statements from January
1, 2001.

The following table outlines our portfolio of managed and leased
properties as of the dates indicated:

Managed Leased Total
--------------------- --------------------- ---------------------
Properties Rooms Properties Rooms Properties Rooms
---------- ----- ---------- ----- ---------- -----

June 30, 2001 ....... 218 47,906 50 7,195 268 55,101
December 31, 2000 ... 59 12,172 157 35,141 216 47,313
June 30, 2000 ....... 60 11,795 157 35,142 217 46,937

We also manage or are otherwise affiliated with 11 golf courses. Golf course
management operations are not material to any period presented.

The slowdown in the United States economy has had a negative effect on our hotel
management and corporate housing operations. The conversion of our leases with
MeriStar Hospitality to management contracts on January 1, 2001 has
significantly reduced the earnings volatility from hotel operations. Our managed
hotels were most negatively influenced by a sharp reduction in business travel,
as well as leisure travel in some markets. We expect our managed hotels to
continue experiencing a difficult revenue environment during the remainder of
2001.

Following the close of the second quarter of 2001, we restructured our corporate
housing division as a result of the slowdown in the economy and shifting focus
on certain markets. We are exiting three markets: Jackson, Mississippi;
Lexington, Kentucky; and Denver, Colorado. We are also realigning certain
administrative functions, which should result in cost savings. We expect to
record a restructuring charge of approximately $0.5 million to $1.0 million
during the third and fourth quarters of 2001 for employee severance costs, lease
termination costs and other expenses related to this restructuring. We are
continuing to monitor and evaluate the remaining markets, which may result in
additional market closings and restructuring costs in future quarters. We expect
the slowdown in corporate housing demand to continue for the remainder of 2001.

During the second quarter of 2001, we restructured our corporate office as a
result of the change to management contracts with MeriStar Hospitality and the
termination of the merger agreement with American Skiing Company. This
restructuring is expected to reduce our annualized corporate overhead
expenditures by approximately 10%, or $3.5 million. During the quarter ended
June 30, 2001, we recorded a restructuring charge of $0.9 million for employee
severance costs and lease termination costs.

FINANCIAL CONDITION

JUNE 30, 2001 COMPARED TO DECEMBER 31, 2000

Our total assets decreased by $90.0 million to $243.9 million at June 30, 2001
from $333.9 million at December 31, 2000 primarily due to the following:

o a decrease in operating assets of $65.7 million related to the
assignment of our hotel leases to MeriStar Hospitality;

o a decrease of $9.4 million in investments in and advances to
affiliates primarily due to the asset write-offs that were recorded in
the first quarter of 2001;

o a $9.1 million decrease in net accounts receivable resulting primarily
from the accounts receivable reserves recorded in the first quarter of
2001 and improved collections from our managed hotels;

o a $1.8 million decrease in furniture, fixtures and equipment due
primarily to the write-off of $3.1 million of abandoned assets in the
first quarter of 2001, partially offset by fixed asset additions; and

o the establishment of a $6.3 million net deferred income tax asset
resulting from the net loss in the first two quarters of 2001.

Total liabilities decreased by $76.3 million to $173.1 million at June 30, 2001
from $249.4 million at December 31, 2000 primarily due to the following:

o a decrease in operating liabilities of $65.7 million related to the
assignment of our hotel leases to MeriStar Hospitality;

o an $11.3 million decrease in the amount due to MeriStar Hospitality;

o a $5.5 million reduction in the deferred income tax liability
resulting from the net loss in the first two quarters of 2001;

o a $4.3 million reduction in accounts payable, accrued expenses and
other liabilities during the six months ended June 30, 2001; partially
offset by

o a $9.8 million increase in long-term debt due to borrowings under our
credit facilities to fund short-term liquidity requirements and other
investments.

Minority interest decreased by $4.3 million primarily due to:

o the net operating loss during the six-months ended June 30, 2001; and

o the conversion of $3.6 million of operating partnership units into our
common stock.

Stockholders' equity decreased $9.3 million to $64.0 million from $73.3 million
in 2000 primarily due to:

o the net loss of $11.9 million in the first six months of 2001;

o a $1.3 million increase in accumulated other comprehensive loss
primarily related to the translation adjustment from foreign currency
and the unrealized loss from our derivative financial instruments;
partially offset by

o the conversion of $3.6 million of operating partnership units into our
common stock.

THREE MONTHS ENDED JUNE 30, 2001 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2000

Effective January 1, 2001, we assigned our leases with MeriStar Hospitality to
taxable subsidiaries of MeriStar Hospitality. In connection with the assignment,
the taxable subsidiaries of MeriStar Hospitality executed new management
agreements with one of our subsidiaries for each property that we previously
leased from MeriStar Hospitality. Through December 31, 2000, our results of
operations included both operating revenue and expenses for these hotels.
Beginning January 1, 2001, our results of operations reflect only management fee
revenue from these hotels. Therefore our operating results for the three months
ended June 30, 2001 are not directly comparable to the same period in 2000.

The following table provides our operating statistics for all of our managed and
leased hotels on a same store basis for the three months ended June 30:

2001 2000 Change
---- ---- ------

Revenue per available room ... $ 76.24 $ 80.05 (4.8)%
Average daily rate ........... $106.55 $105.39 1.1%
Occupancy .................... 71.5% 76.0% (5.9)%

For comparative purposes, the following table shows the results for the three
months ended June 30, 2000 on a pro forma basis assuming the leases with
MeriStar Hospitality were converted to management contracts on January 1, 2000
compared to the results for the three months ended June 30, 2001, excluding the
effects of EITF 98-9:

2001 2000
---- ----

Total revenue ......................... $ 83,517 $ 67,156
Total operating expenses .............. 83,304 62,444
Earnings before interest, taxes,
depreciation and amortization ...... 3,951 6,835
Net income (loss) ..................... (1,384) 1,894
Diluted earnings (loss) per share ..... $ (0.04) $ 0.06

As explained above, through December 31, 2000 we recorded the operating revenues
and expenses of the hotels we leased from MeriStar Hospitality in our results of
operations. The pro forma 2000 results reverse the effect of recording the
operating revenues and expenses of these hotels, and instead reflect the
management fee revenue that would have been earned from operating those hotels.
Since the pro forma 2000 operating amounts are more comparable to our actual
2001 results, we will discuss changes relative to those pro forma 2000 amounts
rather than our actual reported 2000 results.

Overall, the slowing United States economy had a major negative effect on our
corporate housing operations during the second quarter of 2001. In addition, the
slowing economy has had a negative effect on our managed and leased hotels, but
to a lesser extent. The general economic slowdown has been marked by a sharp
reduction in business travel, as well as leisure travel in some markets. This is
reflected in the 4.8% reduction in revenue per available room and the 5.9%
reduction in occupancy in the second quarter 2001 compared to 2000.

On a pro forma basis, our total revenue increased $16.3 million to $83.5 million
in the three months ended June 30, 2001 compared to $67.2 million in the three
months ended June 30, 2000 primarily due to the following:

o a $17.1 million increase in revenue generated by BridgeStreet
Corporate Housing Worldwide in 2001 compared to 2000; and

o $1.5 million of revenue generated by Flagstone Hospitality during the
second quarter of 2001; partially offset by

o a $1.6 million decrease in revenue from our leased hotels resulting
from the slowdown in the economy.

Our 2000 results do not include Flagstone's operations since our investment
occurred on January 1, 2001. Our 2000 results also only include one month of
BridgeStreet's operations since our acquisition occurred on May 31, 2000.

On a pro forma basis, our operating expenses increased $20.9 million to $83.3
million in the three months ended June 30, 2001 compared to $62.4 million in the
three months ended June 30, 2000. This increase is primarily the result of the
following:

o $17.7 million increase in operating expenses from BridgeStreet
Corporate Housing Worldwide in 2001 compared to 2000;

o an additional $0.6 million of costs related to the terminated merger
with American Skiing Company recorded in the second quarter of 2001;

o $1.2 million of operating expenses from Flagstone Hospitality in 2001;

o $0.9 million of restructuring expenses recorded during 2001 following
the restructuring of the company to more closely align our operations
with the change to management contracts with MeriStar Hospitality; and

o a $1.3 million increase in depreciation and amortization following the
acquisition of BridgeStreet on May 31, 2000 and depreciation of
additional fixed assets.

On a pro forma basis, earnings before interest, taxes, depreciation and
amortization decreased to $4.0 million in the three months ended June 30, 2001
compared to $6.8 million in the three months ended June 30, 2000. The decrease
is primarily due to the $0.9 million of restructuring expenses and $0.6 million
of merger costs that were recorded during 2001. In addition, the effect of the
slowing economy reduced BridgeStreet's earnings before interest, taxes,
depreciation and amortization by approximately $0.5 million.

SIX MONTHS ENDED JUNE 30, 2001 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2000

Effective January 1, 2001, we assigned our leases with MeriStar Hospitality to
taxable subsidiaries of MeriStar Hospitality. In connection with the assignment,
the taxable subsidiaries of MeriStar Hospitality executed new management
agreements with one of our subsidiaries for each property that we previously
leased from MeriStar Hospitality. Through December 31, 2000, our results of
operations included both operating revenue and expenses for these hotels.
Beginning January 1, 2001, our results of operations reflect only management fee
revenue from these hotels. Therefore our operating results for the six months
ended June 30, 2001 are not directly comparable to the same period in 2000.

The following table provides our operating statistics for all of our managed and
leased hotels on a same store basis for the six months ended June 30:

2001 2000 Change
---- ---- ------

Revenue per available room .... $ 76.35 $ 76.83 (0.1)%
Average daily rate ............ $109.20 $106.17 2.9%
Occupancy ..................... 69.9% 72.4% (3.5)%

For comparative purposes, the following table shows the results for the six
months ended June 30, 2000 on a pro forma basis assuming the leases with
MeriStar Hospitality were converted to management contracts on January 1, 2000
compared to the results for the six months ended June 30, 2001, excluding the
effects of EITF 98-9:

2001 2000
---- ----

Total revenue ................................... $ 163,267 $ 120,638
Total operating expenses ........................ 178,807 113,973
Earnings (loss) before interest, taxes,
depreciation and amortization ................. (8,554) 10,303
Net income (loss) ............................... (12,101) 2,251
Diluted earnings (loss) per share ............... $ (0.33) $ 0.07

Overall, the slowing United States economy had a major negative effect on our
corporate housing operations during the second quarter of 2001. In addition, the
slowing economy has had a negative effect on our managed and leased hotels, but
to a lesser extent. The general economic slowdown has been marked by a sharp
reduction in business travel, as well as leisure travel in some markets. This
slowdown became more pronounced during the second quarter of 2001.

On a pro forma basis, our total revenue increased $42.7 million to $163.3
million in the six months ended June 30, 2001 compared to $120.6 million in the
six months ended June 30, 2000 primarily due to the following:

o a $41.5 million increase in revenue generated by BridgeStreet
Corporate Housing Worldwide during 2001 compared to 2000; and

o $ 2.9 million of revenue generated by Flagstone Hospitality during the
six months ended June 30, 2001; partially offset by

o a $1.1 million decrease in revenue from our leased hotels resulting
from the slowdown of the economy.

On a pro forma basis, our operating expenses increased $64.8 million to $178.8
million in the first six months of 2001 compared to $114.0 million in the first
six months of 2000. This increase is primarily the result of the following:

o a $41.9 million increase in operating expenses from BridgeStreet
Corporate Housing Worldwide in 2001;

o a charge of $15.3 million related to the reserves recorded against
accounts and notes receivables, and write-offs of impaired and
abandoned assets during the first quarter of 2001;

o $4.4 million of costs related to the terminated merger with American
Skiing Company in 2001;

o $0.9 million of costs related to the corporate restructuring during
2001; and

o $2.4 million of operating expenses from Flagstone Hospitality in 2001.

On a pro forma basis, earnings (loss) before interest, taxes, depreciation and
amortization decreased to a loss of $8.6 million in the first six months of 2001
compared to income of $10.3 million in the first six months of 2000. The
decrease is primarily due to the $15.3 million charge for reserves recorded
against accounts and notes receivable, and write-offs of impaired and abandoned
assets, the $4.4 million of merger costs, and the $0.9 million of restructuring
expenses that were recorded in 2001.

Emerging Issues Task Force Issue No. 98-9, "Accounting for Contingent Rent in
Interim Financial Periods," requires a lessee to recognize contingent rental
expense for interim periods prior to the achievement of the specified target
that triggers the contingent rental expense, if the achievement of that target
by the end of the fiscal year is considered probable. This accounting
pronouncement relates only to our recognition of lease expense in interim
periods for financial reporting purposes; it has no effect on the timing of rent
payments under our leases or our annual lease expense calculations. We made cash
lease payments in excess of the expense we were required to recognize under EITF
No. 98-9 during the interim periods ended June 30, 2001 and 2000. As of June 30,
2001 and 2000, this resulted in prepaid expense balances of $0.3 million and
$10.1 million, respectively, which are included on our condensed consolidated
balance sheets.

LIQUIDITY AND CAPITAL RESOURCES

SOURCES OF CASH

Our continuing operations are funded through cash generated from hotel
management and corporate housing operations. We finance capital expenditures,
business acquisitions and investments in affiliates through a combination of
internally generated cash, external borrowings and the issuance of partnership
interests and/or common stock.

We generated $10.0 million of cash from financing activities during the first
six months of 2001 primarily from net borrowings of $9.8 million on our credit
facilities.

USES OF CASH

We used $8.2 million of cash in operations during the first six months of 2001
primarily as a result of the reduction in the payable to MeriStar Hospitality
and other operating activity.

We used $8.0 million of cash in investing activities during the six months ended
June 30, 2001 primarily due to:

o the $3.8 million of hotel operating cash transferred to the taxable
subsidiaries of MeriStar Hospitality as part of the assignment of the
leases on January 1, 2001; and

o a $3.6 million increase in intangible assets primarily due to amounts
incurred to acquire management contracts on five hotels.

REVOLVING CREDIT FACILITIES

On August 3, 1998, we entered into a three-year, $75 million revolving credit
facility with MeriStar Hospitality. This facility was subsequently amended on
February 29, 2000 to reduce the maximum borrowing limit to $50 million and to
change the maturity date to 91 days after the maturity date of our senior
secured credit facility. This loan contains covenants regarding financial
ratios, reporting requirements and other customary restrictions. The interest
rate on this loan is based on the 30-day London Interbank Offered Rate plus 650
basis points. As of June 30, 2001, we had $36.0 million outstanding under this
facility at a weighted average effective interest rate of 10.9%. The merger
agreement between MeriStar Hospitality and FelCor Lodging Trust Incorporated,
which was signed on May 9, 2001, requires that MeriStar Hospitality amend the
revolving credit facility so that it matures on February 28, 2004 and bears
interest at a rate of the 30-day London Interbank Offered Rate plus 600 basis
points. A Special Committee of our Board of Directors established in connection
with the MeriStar Hospitality/FelCor merger approved this amendment.

On February 29, 2000, we entered into a $100 million senior secured credit
facility among a syndicate of banks. The credit facility bears interest at the
30-day London Interbank Offered Rate plus 350 basis points and expires in
February 2002, with a one-year extension at our option. As of June 30, 2001, we
had $74.0 million outstanding under this facility at a weighted average
effective interest rate of 8.7%.

SUMMARY

We believe cash generated by our operations, together with anticipated borrowing
capacity under our credit facilities, will be sufficient to fund our
requirements for working capital, capital expenditures, and debt service. We
expect to continue to seek acquisitions of hotel and golf management businesses
and management contracts. In addition, we expect to expand our corporate housing
business by entering selected new markets in the United States and Europe. We
expect to finance future acquisitions through a combination of additional
borrowings under our credit facilities and the issuance of partnership interests
and/or our common stock. We believe these sources of capital will be sufficient
to provide for our long-term capital needs.

SEASONALITY

Demand in the lodging industry is affected by recurring seasonal patterns. For
non-resort properties, demand is lower in the winter months due to decreased
travel and higher in the spring and summer months during peak travel season. For
resort properties, demand is generally higher in the winter and early spring.
Since the majority of our hotels are non-resort properties, our operations
generally reflect non-resort seasonality patterns. We expect to have lower
revenue, operating income and cash flow in the first and fourth quarters and
higher revenue, operating income and cash flow in the second and third quarters.

Corporate housing activity peaks in the summer months and declines during the
fourth quarter and the first part of the first quarter. We expect to have lower
revenue, operating income and cash flow from corporate housing in the first and
fourth quarters.

RECENT DEVELOPMENT

On May 10, 2001, MeriStar Hospitality and FelCor Lodging Trust Incorporated
announced they had signed an agreement and plan of merger under which MeriStar
Hospitality would merge with and into FelCor. The merger agreement requires that
MeriStar Hospitality amend the revolving credit facility it has extended to us
so it matures on February 28, 2004 and bears interest at a rate of the 30-day
London Interbank Offered Rate plus 600 basis points. A Special Committee of our
Board of Directors established in connection with the MeriStar
Hospitality/FelCor merger approved this amendment. Following the merger, FelCor
will assume the intercompany agreement between MeriStar Hospitality and us. The
intercompany agreement provides, among other things, that MeriStar Hospitality
has the right of first refusal with respect to some of our hotel real estate
opportunities and that we have a right of first refusal with respect to some of
MeriStar Hospitality's hotel management opportunities (excluding hotels that
MeriStar Hospitality elects to have managed by a hotel brand).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in interest rates on our credit
facilities. Our interest rate risk management objective is to limit the impact
of interest rate changes on earnings and cash flows and to lower our overall
borrowing costs.

In April 2001, we entered into a $50 million one-year interest rate swap
agreement with a financial institution to hedge against the affect that future
interest rate fluctuations may have on our floating rate debt. The swap
agreement effectively fixes the 30-day London Interbank Offered Rate at 4.4%.
During the quarter ended June 30, 2001, we received $6 thousand under this
agreement. The fair value of the interest rate swap agreement was $178 thousand
at June 30, 2001.

In April 2000, we entered into a $40 million 23-month periodic rate collar
agreement with a financial institution in order to hedge against the affect that
future interest rate fluctuations may have on our floating rate debt. The rate
collar agreement establishes the 30-day London Interbank Offered Rate at a floor
rate of 6.05% and a ceiling rate of 8.5%. During the three and six months ended
June 30, 2001, we paid $152 thousand and $187 thousand, respectively, under this
agreement. The fair value of the rate collar agreement was $576 thousand at June
30, 2001.

Our senior secured debt of $74.0 million at June 30, 2001 matures in February
2002 with an optional one-year extension. Interest on the debt is variable,
based on the 30-day London Interbank Offered Rate plus 350 basis points. The
weighted average effective interest rate was 8.7% at June 30, 2001. We have
determined that the fair value of the debt approximates its carrying value.

Our $36.0 million of long-term debt under the MeriStar Hospitality revolving
credit facility at June 30, 2001 matures 91 days after the maturity date of our
senior secured credit facility. Interest on the debt is variable, based on the
30-day London Interbank Offered Rate plus 650 basis points. The weighted average
effective interest rate was 10.9% at June 30, 2001. We have determined that the
fair value of the debt approximates its carrying value. The merger agreement
between MeriStar Hospitality and FelCor Lodging Trust, which was signed on May
9, 2001, requires that MeriStar Hospitality amend the revolving credit facility
so that it matures on February 28, 2004 and bears interest at a rate of the
30-day London Interbank Offered Rate plus 600 basis points. A Special Committee
of our Board of Directors established in connection with the MeriStar
Hospitality/FelCor merger approved this amendment.

A 1.0% change in the 30-day London Interbank Offered Rate would have changed our
interest expense by approximately $0.1 million and $0.3 million during the three
and six months ended June 30, 2001, respectively.

Although we conduct business in Canada and the United Kingdom, these foreign
operations were not material to our consolidated financial position, results of
operations or cash flows as of and for the three and six months ended June 30,
2001. Additionally, foreign currency transaction gains and losses were not
material to our results of operations for the three and six months ended June
30, 2001. Accordingly, we were not subject to material foreign currency exchange
rate risk from the effects that exchange rate movements of foreign currencies
would have on our future costs or on future cash flows we would receive from our
foreign subsidiaries. To date, we have not entered into any significant foreign
currency forward exchange contracts or other derivative financial instruments to
hedge the effects of adverse fluctuations in foreign currency exchange rates.

PART II. OTHER INFORMATION

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

Our annual meeting of the stockholders was held on June 14, 2001.

At that meeting, the following matters were submitted to a vote of our
stockholders:

ITEM No. 1

To reelect two members of the Board of Directors to serve three-year terms
expiring at the Annual Meeting in 2004.

Election of Directors For Against
--------------------- --- -------
Steven D. Jorns 28,047,686 5,140,829
Daniel Doctoroff 26,263,063 6,925,452

ITEM No. 2

To ratify the amendment of the MeriStar Hotels & Resorts, Inc. Non-Employee
Director's Plan to increase the maximum number of shares of common stock that
may be issued pursuant to awards granted under the Directors Plan from 125,000
to 500,000 shares.

For 27,969,957
Against 5,198,340
Abstain 20,218

ITEM No. 3

To amend our charter to prohibit the ownership of more than 35% of our
common stock (based on either voting power or total outstanding shares) by one
or more persons who directly or indirectly own more than 34.9% of the
outstanding shares of the common stock of MeriStar Hospitality Corporation.

For 22,909,350
Against 2,979,824
Abstain 41,567
Broker Non-Votes 7,257,838

ITEM No. 4

To ratify the appointment of KPMG LLP as independent auditors for the fiscal
year ending December 31, 2001.

For 30,813,891
Against 2,351,872
Abstain 22,752

ITEM 5. OTHER INFORMATION

Forward-Looking Statements

Some information both included and incorporated by reference in this quarterly
report on Form 10-Q may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and as such may involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements.
Forward-looking statements, which are based on certain assumptions and describe
our future plans, strategies and expectations are generally identifiable by use
of the words "may," "will," "should," "expect," "anticipate," "estimate,"
"believe," intend," or "project," or the negative thereof or other variations
thereon or comparable terminology. Factors which could have material adverse
effect on our operations and future prospects include, but are not limited to,
changes in: economic conditions generally in the real estate market
specifically, legislative or regulatory changes (including changes to law
governing the taxation of real estate investment trusts), availability of
capital, interest rates, competition, and supply and demand for lodging
facilities in our current and proposed market areas. These risks and
uncertainties, along with the risks of uncertainties described in our annual
report on Form 10-K for the year ended December 31, 2000 under the caption,
"Risk Factors", should be considered in evaluating any forward-looking
statements contained or incorporated by reference in this report.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits - none
(b) Reports on Form 8-K - Current Report on Form 8-K dated and filed
May 2, 2001 regarding the conversion of our lease contacts with
MeriStar Hospitality to management contracts.

SIGNATURES

Pursuant to the requirements 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.

MeriStar Hotels & Resorts, Inc.

Dated: August 10, 2001 /s/ James A. Calder
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James A. Calder
Chief Financial Officer