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 March 31, 2002 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
May 13, 2002 was 37,188,574.

MERISTAR HOTELS & RESORTS, INC.

INDEX

Page
----
PART I. FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)

Condensed Consolidated Balance Sheets -
March 31, 2002 and December 31, 2001............................................ 3

Condensed Consolidated Statements of Operations and Other Comprehensive
Income (Loss) - Three Months Ended March 31, 2002 and 2001...................... 4

Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2002 and 2001...................................... 5

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

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................... 12

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK..................................................................... 20

PART II. OTHER INFORMATION

ITEM 5: OTHER INFORMATION............................................................... 21

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K................................................ 21

PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
MERISTAR HOTELS & RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

March 31, 2002 December 31, 2001
-------------- -----------------
(unaudited)

Assets
Current Assets:
Cash and cash equivalents................................................... $ 8,342 $ 4,584
Accounts receivable, net of allowance for doubtful accounts of $3,493
and $3,422................................................................ 10,221 10,155
Due from MeriStar Hospitality Corporation................................... 3,968 -
Prepaid expenses............................................................ 6,869 5,668
Deposits and other.......................................................... 2,924 3,527
-------- ---------
Total current assets............................................................... 32,324 23,934
-------- ---------

Fixed assets:
Furniture, fixtures, and equipment............................................ 32,576 32,595
Accumulated depreciation...................................................... (16,099) (14,712)
-------- ---------
Total fixed assets, net............................................................ 16,477 17,883
-------- ---------
Investments in and advances to affiliates.......................................... 30,019 30,003
Goodwill and intangible assets, net of accumulated amortization of $9,137
and $18,498.................................................................. 163,303 163,352
Deferred income taxes.............................................................. 8,954 7,765
-------- ---------
$251,077 $ 242,937
======== =========

Liabilities, Minority Interests, and Stockholders' Equity
Current Liabilities:
Accounts payable, accrued expenses and other liabilities...................... $ 50,431 $ 50,149
Due to MeriStar Hospitality Corporation....................................... - 8,877
Income taxes payable.......................................................... 600 1,300
Long-term debt, current portion............................................... 80,000 10,000
-------- ---------
Total current liabilities.......................................................... 131,031 70,326
Derivative financial instruments................................................... 105 687
Long-term debt..................................................................... 58,069 108,500
-------- ---------
Total liabilities.................................................................. 189,205 179,513
-------- ---------
Minority interests................................................................. 6,031 6,293
Stockholders' equity:
Common stock, par value $0.01 per share:
Authorized - 100,000 shares
Issued and outstanding - 37,189 shares.................................... 372 372
Additional paid-in capital.................................................... 78,841 78,841
Deficit....................................................................... (22,876) (21,093)
Accumulated other comprehensive income (loss):
Translation adjustment.................................................... (423) (313)
Unrealized loss on derivative financial instruments....................... (105) (687)
Unrealized gain on investments............................................ 32 11
-------- ---------
Total stockholders' equity......................................................... 55,841 57,131
-------- ---------
$251,077 $ 242,937
======== =========

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
March 31,
---------

2002 2001
---- ----

Revenue:
Rooms..................................................... $ 28,591 $ 37,540
Food and beverage......................................... 1,769 3,134
Other operating departments............................... 1,248 1,944
Corporate housing......................................... 24,246 24,449
Management and other fees................................. 10,656 12,683
--------- ---------
66,510 79,750

Other revenue from managed properties.................... 112,399 120,840
--------- ---------
Total revenue................................................ 178,909 200,590
--------- ---------

Operating expenses by department
Rooms..................................................... 6,506 8,505
Food and beverage......................................... 1,318 2,340
Other operating departments' expenses..................... 789 1,042
Corporate housing......................................... 18,821 17,341
Undistributed operating expenses:
Administrative and general................................ 17,197 19,162
Property operating costs.................................. 6,775 8,964
Participating lease expense............................... 12,652 16,136
Depreciation and amortization............................. 2,229 3,135
Merger costs.............................................. 260 3,771
Charges to investments in and advances to affiliates,
accounts and notes receivables, and other............. - 15,298
--------- ---------
66,547 95,694

Other expenses from managed properties....................... 112,399 120,840
--------- ---------
Total operating expenses..................................... 178,946 216,534
--------- ---------

Net operating loss........................................... (37) (15,944)
Interest expense, net........................................ 2,836 2,885
Equity in (income) loss of affiliates........................ 234 (113)
--------- ---------
Loss before minority interests and income taxes.............. (3,107) (18,716)
Minority interests........................................... (135) (672)
--------- ---------

Loss before income taxes..................................... (2,972) (18,044)
Income tax benefit........................................... (1,189) (7,218)
--------- ---------
Net loss..................................................... (1,783) (10,826)

Other comprehensive loss:
Foreign currency translation adjustment.................. (110) (848)
Unrealized gain (loss) on derivative financial instruments 582 (358)
Unrealized gain on investments........................... 21 23
--------- ---------
Comprehensive loss........................................... $ (1,290) $ (12,009)
========== ==========

Loss per share:
Basic.................................................. $ (0.05) $ (0.30)
========== ==========

Diluted................................................ $ (0.05) $ (0.30)
========== =========

See accompanying notes to condensed consolidated financial statements.

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

Three months ended
March 31,
---------

2002 2001
---- ----

Operating activities:
Net loss............................................................................. $ (1,783) $ (10,826)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................... 2,229 3,135
Minority interests.............................................................. (135) (672)
Equity in (income) loss of affiliates........................................... 234 (113)
Deferred income taxes........................................................... (1,189) (7,415)
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.................................................... (66) 6,403
Prepaid expenses............................................................ (1,201) (38)
Deposits and other.......................................................... 603 686
Accounts payable, accrued expenses and other liabilities.................... 282 (4,515)
Income taxes payable........................................................ (700) (5)
Due to MeriStar Hospitality Corporation..................................... 224 (11,513)
-------- ---------

Net cash used in operating activities................................................ (1,502) (9,575)
-------- ---------

Investing activities:
Purchases of fixed assets....................................................... (146) (446)
Purchases of intangible assets.................................................. (114) (20)
Investments in and advances to affiliates, net.................................. (192) (1,056)
Hotel operating cash transferred in connection with lease conversions........... - (3,778)
-------- ---------

Net cash used in investing activities................................................ (452) (5,300)
-------- ---------
Financing activities:
Proceeds from issuance of long-term debt........................................ 9,000 36,000
Principal payments on long-term debt............................................ (2,500) (18,055)
Proceeds from issuances of common stock, net.................................... - 175
Contributions by minority investors............................................. - 25
Distributions to minority investors............................................. (127) -
Deferred financing costs........................................................ (612) -
-------- ---------

Net cash provided by financing activities............................................ 5,761 18,145
-------- ---------

Effect of exchange rate changes on cash.............................................. (49) (365)
-------- ---------

Net increase in cash and cash equivalents............................................ 3,758 2,905
Cash and cash equivalents, beginning of period....................................... 4,584 7,645
-------- ---------

Cash and cash equivalents, end of period............................................. $ 8,342 $ 10,550
======== =========

See accompanying notes to condensed consolidated financial statements.

MERISTAR HOTELS & RESORTS, INC.
MARCH 31, 2002 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
We were created in connection with the August 3, 1998 merger of American General
Hospitality Corporation and CapStar Hotel Company. At the time of the merger,
CapStar distributed all of the shares of our common stock to its shareholders
and we became a separate, publicly traded company. The merger created MeriStar
Hospitality Corporation, a real estate investment trust. We are the manager and
operator of all of the hotels owned by MeriStar Hospitality.

MeriStar H&R Operating Company, L.P., our subsidiary operating partnership,
indirectly holds substantially all of our assets. We are the sole general
partner of that partnership. We, one of our directors and approximately 63
independent third parties are limited partners of that partnership. The
partnership agreement gives the general partner full control over the business
and affairs of the partnership.

We have an intercompany agreement with MeriStar Hospitality. That agreement
provides each of us the right to participate in certain transactions entered
into by the other company. The intercompany agreement provides MeriStar
Hospitality with a right of first refusal with respect to some of our hotel real
estate opportunities and it also provides us with 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, risk
management, legal, tax, information technology, human resources, acquisition
identification and due diligence and operational services.

On May 31, 2000, we completed the acquisition of BridgeStreet Accommodations,
Inc. BridgeStreet provides corporate housing services in the United States,
Canada, the United Kingdom and France. We operate our corporate housing division
under the name BridgeStreet Corporate Housing Worldwide.

Until January 1, 2001, we leased MeriStar Hospitality's hotels and operated
them. As of January 1, 2001, we assigned these participating leases to
wholly-owned taxable subsidiaries of MeriStar Hospitality. In connection with
the assignment, MeriStar Hospitality's taxable subsidiaries executed new
management agreements with us to manage these hotels. Under these management
agreements, MeriStar Hospitality's taxable subsidiaries pay us a management fee
for each property. The management agreements were structured to substantially
mirror the economics of the former leases. We and MeriStar Hospitality did not
exchange any cash consideration as a result of these transactions except for the
transfer of hotel operating assets and liabilities to the taxable subsidiaries.
Under the management agreements, the base management fee is 2.5% of total hotel
revenue plus incentives payments, based on meeting performance thresholds that
could total up to 1.5% of total hotel revenue. The agreements (except for four
agreements which have annual terms) have an initial term of 10 years with three
renewal periods of five years each at our option, subject to some exceptions.
Because these leases have been assigned to MeriStar Hospitality's taxable
subsidiaries, those taxable subsidiaries now bear the operating risk associated
with these hotels.

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 owned 51% of, and controlled the joint venture during 2001. We have included
the results of Flagstone in our consolidated financial statements since January
1, 2001. Effective January 1, 2002, Flagstone became a single member LLC, of
which we own 100%.

On August 17, 2001, our Corporate Housing division acquired Paris-based
Apalachee Bay Properties. Apalachee Bay is an apartment finder service, third
party manager and a property sales brokerage business and represents 300 units.
Apalachee Bay has been renamed BridgeStreet Paris. Our consolidated financial
statements include the operating results of BridgeStreet Paris since August 17,
2001.

As of March 31, 2002, we leased or managed 277 hotels with 58,311 rooms in 43
states, the District of Columbia and Canada. In addition, at March 31, 2002, we
had 3,286 apartments under lease in the United States, Canada, the United
Kingdom and France.

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, 2001. Certain 2001 amounts have been
reclassified to conform to the 2002 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
(except for four agreements which have annual terms) have initial terms of 10
years, with three five-year extensions at our option. The annual base management
fee is 2.5% of total hotel revenue with incentives of up to an additional 1.5%
of total hotel revenue based in part on our achievement of specified operating
thresholds.

Our hotel participating leases have noncancelable remaining terms ranging from 9
to 12 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.

In June 2001, the FASB issued SFAS No. 141, "Business Combinations". This
standard requires that all business combinations be accounted for using the
purchase method of accounting. The adoption of this statement, on January 1,
2002, did not have an impact on our financial position or results of operations.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets".
This standard requires among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that we identify reporting units for the purposes of
assessing potential future impairments of goodwill, reassess the useful lives of
our existing recognized intangible assets, and cease amortization of intangible
assets with an indefinite useful life. An intangible asset with an indefinite
useful life should be tested for impairment in accordance with the guidance in
SFAS 142. SFAS 142 requires us to complete a transitional goodwill impairment
test six months from the date of adoption. We are also required to reassess the
useful lives of our intangible assets within the first quarter after adoption.

We completed our initial impairment evaluation as of January 1, 2002, the date
of adoption. In this transitional analysis and at least annually hereafter, we
will perform an analysis to determine the impairment of goodwill and intangible
assets' (with indefinite lives) carrying values. To test intangible assets with
indefinite lives for impairment, we perform an analysis to compare the fair
value of the intangible asset to its carrying value. We make estimates of the
fair value of the intangible asset using discounted cash flows from the expected
future operations of the assets. If the analysis indicates that the fair value
is less than the carrying value, the asset is written down to the estimated fair
value and an impairment loss is recognized. To test goodwill for impairment, we
perform an analysis to compare the fair value of the reporting unit to which the
goodwill is assigned to the carrying value of the reporting unit. We make
estimates of the discounted cash flows from the expected future operations of
the reporting unit. If the analysis indicates that the fair value of the
reporting unit is less than its carrying value, we do an analysis to compare the
implied fair value of the reporting unit goodwill with the carrying amount of
that goodwill. The implied fair value of the goodwill is determined by
allocating the fair value of the reporting unit to all the assets and
liabilities of that unit as if the reporting unit had been acquired in a
business combination. The excess of the fair value of reporting unit over the
amounts assigned to its assets and liabilities is the implied fair value of the
goodwill. If the implied fair value of the goodwill is less than the carrying
value, an impairment loss is recognized in an amount equal to that excess. Any
impairment losses are recorded as operating expenses. We did not recognize any
impairment losses in 2002 related to the initial impairment evaluation.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". This statement establishes standards for accounting for
obligations associated with the retirement of tangible long-lived assets. The
implementation of the provisions of SFAS No. 143 is required effective January
1, 2003. We do not expect the implementation of this statement to have a
significant impact on our financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". This statement addresses financial accounting
and reporting for the impairment and disposal of long-lived assets. The adoption
of this statement, on January 1, 2002, did not have an impact on our financial
position or results of operations.

In 2001, the FASB issued Topic No. D-103, "Income Statement Characterization of
Reimbursements for Out-of-Pocket Expenses Incurred". In January, 2002, the
Emerging Issues Task Force recharacterized Topic No. D-103 to EITF No. 01-14.
This pronouncement establishes standards for accounting for reimbursements
received for out-of-pocket expenses incurred and the characterization as revenue
and expense in the income statement. Pursuant to this pronouncement, revenue and
expenses from managed properties are included in our reported results beginning
January 1, 2002. These amounts relate primarily to payroll costs at managed
properties where we are the employer, and the reimbursement to us for those
costs. The 2001 revenue and expenses have been reclassified to conform with the
2002 presentation. On May 7, 2002, we issued a press release that contained
financial results for the quarters ended March 31, 2002 and 2001; those results
did not include the revenues and expenses from managed properties shown in our
consolidated financial statements in this Form 10-Q. Subsequent to our press
release, we have concluded that the presentation in this Form 10-Q is the
appropriate way in which to disclose this information pursuant to the new FASB
guidance. This new presentation has no effect on our operating loss, net loss or
EPS calculation.

3. LONG-TERM DEBT

Long-term debt consists of the following:

March 31, December 31,
2002 2001
---- ----

Senior secured credit facility................................... $ 80,000 $ 82,500
Revolving credit facility with MeriStar Hospitality Corporation.. 45,000 36,000
Term loan with MeriStar Hospitality Corporation.................. 13,069 -
-------- --------
138,069 118,500
Less current portion............................................. (80,000) (10,000)
-------- --------
$ 58,069 $108,500
======== ========

Senior Secured Credit Facility--On February 29, 2000, we entered into a $100,000
senior secured credit facility among a syndicate of banks. Our senior secured
credit facility has only a revolving credit facility and no term facilities. The
interest rate on the facility was the 30-day London Interbank Offered Rate plus
350 basis points. The senior secured credit facility originally was to expire in
February 2002, with a one-year extension at our option. The senior credit
facility contains certain covenants, including maintenance of financial ratios
at the end of each quarter, reporting requirements and other customary
restrictions.

On January 28, 2002, we amended our senior secured credit facility to provide
more flexibility with certain financial covenants and allow us to extend the
maturity from February 2002 until February 2003. The interest rate on the
facility was increased to the 30-day London Interbank Offered Rate plus 450
basis points. In addition, the amendment reduced our availability to $82,500.
The amendment also sets restrictions on investments and capital expenditures as
well as requiring that availability under the facility be reduced by $2,500 on
each of February 28, 2002, June 30, 2002, September 30, 2002 and December 31,
2002. In addition, on January 31, 2003, the amount available under the senior
credit facility will be further reduced by the amount that our EBITDA for 2002
exceeds $20,000. We met our obligation to reduce the facility by $2,500 in
February 2002. The entire balance of $80,000 due on this facility is classified
as short term on the Condensed Consolidated Balance Sheet at March 31, 2002. The
interest rate on borrowings under our senior credit facility as of March 31,
2002 was 6.4%. We incurred interest expense of $1,243 and $2,210 on this
facility during the first quarters of 2002 and 2001, respectively.

Revolving Credit Facility with MeriStar Hospitality--In 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. On January 25, 2002, we
amended our credit facility with MeriStar Hospitality Corporation to provide
financial covenant relief similar to that in our senior credit facility. The
maturity date and interest rate remained the same. Interest on the facility is
variable, based on the 30-day London Interbank Offered Rate plus 650 basis
points. The interest rate as of March 31, 2002 was 8.4%. We incurred interest
expense of $908 and $1,075 on this facility during the first quarters of 2002
and 2001, respectively.

Term Note with MeriStar Hospitality-- In January 2002, in connection with the
execution of the amendment to the revolving credit facility with MeriStar
Hospitality, we executed a Term Note payable to MeriStar Hospitality in the
amount of $13,069, which refinances our account payable due to MeriStar
Hospitality. The Term Note bears interest at the 30-day London Interbank Offered

Rate plus 650 basis points and matures on the same date as the revolving credit
facility with MeriStar Hospitality. The interest rate as of March 31, 2002 was
8.4%. We incurred interest expense of $273 on this facility during the first
quarter of 2002.

We have determined that the fair value of our outstanding borrowings on our
senior credit facility, and notes payable to MeriStar Hospitality approximates
their carrying values at March 31, 2002.

4. LOSS PER SHARE

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

Three Months Ended
March 31,
---------

2002 2001
---- ----

Net loss.................................................. $ (1,783) $(10,826)
Weighted average number of shares of common stock
outstanding (in thousands)............................ 37,189 36,401
--------- --------

Basic and diluted loss per share.......................... $ (0.05) $ (0.30)
========== ========

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

5. GOODWILL AND INTANGIBLE ASSETS

Amortized intangible assets consists of the following:

March 31, 2002 December 31, 2001
-------------- -----------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
------ ------------ ------ ------------

Management Contract Costs $34,677 $(6,245) $34,563 $(5,779)
Franchise Fees 637 (223) 637 (212)
Lease Contract Costs 6,576 (953) 6,576 (898)
Deferred Financing Costs 2,260 (1,716) 1,647 (1,474)
------- ------- ------- -------
Total $44,150 $(9,137) $43,423 $(8,363)
======= ======= ======= =======

We incurred aggregate amortization expense of $774 and $600 on these assets
during the first quarters of 2002 and 2001, respectively.

Estimated Amortization Expense for the next five years is expected to be as
follows:

Year ended December 31, 2002 $2,862
Year ended December 31, 2003 $2,182
Year ended December 31, 2004 $2,127
Year ended December 31, 2005 $1,787
Year ended December 31, 2006 $1,750

Our unamortized intangible asset consists of costs incurred for the Doral
tradename. At March 31, 2002 and December 31, 2001 this asset had a carrying
value of $3,358. As of January 1, 2002, we no longer record amortization related
to this asset.

The carrying amount of goodwill by reportable segment as of March 31, 2002 is as
follows:

Hospitality Management $ 90,740
Corporate Housing 34,192
--------
Total $124,932
--------

We had no changes in the carrying amount of goodwill during the three months
ended March 31, 2002.

SFAS 142 requires that we cease amortization of goodwill and intangible assets
with an indefinite useful life. We initially applied this statement on January
1, 2002. Net loss and loss per share are presented for the three months ended
March 31, 2001 as if the statement

had been adopted on January 1, 2001.

For the Three months Ended March 31,
------------------------------------
2002 2001
---- ----

Reported Net Loss $ (1,783) $ (10,826)
Add back: Goodwill amortization - 527
Add back: Doral tradename amortization - 13
-------- ---------
Adjusted Net Loss $ (1,783) $(10,286)
========= =========

For the Three months Ended March 31,
------------------------------------
2002 2001
---- ----

Basic and Diluted Loss per Share $ (0.05) $ (0.30)
Add back: Goodwill amortization - 0.02
Add back: Doral tradename amortization - -
-------- ---------
Adjusted Basic and Diluted Loss Per Share $ (0.05) $ (0.28)
========= =========

6. SUPPLEMENTAL CASH FLOW INFORMATION

Three months ended
March 31,
---------

2002 2001
---- -----

Cash paid for interest and income taxes:
Interest................................................................ $ 2,370 $ 2,380
Income taxes............................................................ 772 362
Non-cash investing and financing activities:
Conversion of operating partnership units to common stock........... - 3,597
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, net................................ - 152
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
======== ========

7. SEGMENTS

We are organized into two operating divisions: hotel management and corporate
housing, both of which are reportable operating segments. Each division is
managed separately because of its distinctive products and services. In 2001, we
reorganized our golf operations and included them in our hotel management
segment. We also eliminated our vacation ownership segment in 2001. We evaluate
the performance of each division based on earnings before interest, taxes,
depreciation, and amortization.

Hotel Corporate Financial
Management Housing Other Statements
---------- ------- ----- ----------

Three months ended March 31, 2002
Revenues................................................... $ 42,250 $ 24,246 $ 14 $ 66,510
Earnings before interest, taxes, depreciation,
and amortization........................................ $ 3,640 $ (1,131) $ (551) $ 1,958

Total assets............................................... $187,540 $ 54,055 $ 9,482 $ 251,077

Three months ended March 31, 2001
Revenues................................................... $ 55,188 $ 24,486 $ 76 $ 79,750
Earnings before interest, taxes, depreciation,
and amortization........................................ $ 6,362 $ (157) $(18,901) $ (12,696)

Total assets............................................... $197,088 $ 53,177 $ 4,715 $ 254,980

The other items in the tables above represent operating segment activity and
assets for the non-reportable segments. The non-operating segment activity
includes merger costs, charges to investments and advances to affiliates,
accounts and notes receivable, equity in earnings (losses), and other costs. The
non-operating segment assets include deferred tax assets and deferred financing
costs.

Revenues for foreign operations for the three months ended March 31 were as
follows:

2002 2001
----- ----
Canada $2,151 $3,074
United Kingdom $6,605 $7,033
France $ 85 $ -

8. RESTRUCTURING EXPENSES

At December 31, 2001, we had restructuring accruals of $205 remaining relating
to lease termination costs incurred in connection with closing offices in four
BridgeStreet markets and realigning and eliminating certain administrative
functions within the corporate housing division. During the first quarter of
2002, we applied $29 in lease termination costs against the restructuring
accrual, of which $176 remains at March 31, 2002.

Also at December 31, 2001, we had restructuring accruals of $315 relating to
severance costs incurred as a result of the elimination of approximately 15
corporate positions. These actions were taken as a result of declines in our
business due to the slowdown of the national economy. During the first quarter
of 2002, we applied $315 against the restructuring accrual. No accrual remains
at March 31, 2002.

During the second quarter of 2002, we expect to record restructuring charges of
approximately $700 in our corporate housing division, primarily due to closing
of an underperforming market within the corporate housing division.

9. SUBSEQUENT EVENT

On May 2, 2002, we announced an agreement to merge with Interstate Hotels
Corporation, or Interstate. The transaction will be a stock-for-stock merger of
Interstate into MeriStar in which Interstate stockholders will receive 4.6
shares of common stock for each share of Interstate stock outstanding. Holders
of MeriStar common stock and operating partnership units will continue to hold
their stock and units following the merger. In connection with the merger,
Interstate's convertible debt and preferred equity shares will be converted into
shares of common stock of the surviving company. A new $113 million senior
credit facility will replace the senior secured credit facilities of MeriStar
and Interstate. We expect the new facility to have a three-year term loan and
three-year revolver with a one-year option to extend. We expect the interest
rate on the facility to range from London Interbank Offered Rate plus 300 basis
points to London Interbank Offered Rate plus 450, based on certain financial
covenant levels. The combined company will operate approximately 86,000 rooms in
412 hotels. We have incurred $260 in costs related to this merger in the first
quarter of 2002. We expect the transaction to close in the third quarter of
2002.

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

BACKGROUND

Until January 1, 2001, we leased MeriStar Hospitality's hotels and operated
them. As of January 1, 2001, we assigned these participating leases to wholly
owned taxable subsidiaries of MeriStar Hospitality. In connection with the
assignment, MeriStar Hospitality's taxable subsidiaries executed new management
agreements with us to manage these hotels. Under these management agreements,
MeriStar Hospitality's taxable subsidiaries pay us a management fee for each
property. The management agreements were structured to substantially mirror the
economics of the former leases. We and MeriStar Hospitality did not exchange any
cash consideration except for the transfer of hotel operating assets and
liabilities to the taxable subsidiaries. Under the new management agreements,
the base management fee is 2.5% of total hotel revenue plus incentives payments,
based on meeting performance thresholds that could total up to 1.5% of total
hotel revenue. The agreements have an initial term of 10 years with three
renewal periods of five years each at our option, subject to some exceptions.
Because these leases have been assigned to MeriStar Hospitality's taxable
subsidiaries, those taxable subsidiaries now bear the operating risk associated
with these hotels.

On January 1, 2001, we invested $100,000 in Flagstone Hospitality Management
LLC, a joint venture established to manage 54 hotels owned by RFS Hotel
Investors, Inc. We owned 51% of, and controlled the joint venture during 2001.
We have included the results of Flagstone in our consolidated financial
statements since January 1, 2001. Effective January 1, 2002, Flagstone became a
single member LLC, of which we own 100%.

On August 17, 2001, our corporate housing division acquired Paris-based
Apalachee Bay Properties. Apalachee Bay is an apartment finder service, third
party manager and a property sales brokerage business and represents 300 units.
Apalachee Bay has been renamed BridgeStreet Paris. Our consolidated financial
statements include the operating results of BridgeStreet Paris since August 17,
2001.

In April 2002, we launched a national licensing program within our Corporate
Housing segment. This licensing program, called Global Partner Licensing
Program, creates a national distribution system of professional corporate
housing providers nationwide. Our licensees will have access to this
distribution system as well as other marketing, training and communication
tools.

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

Managed Leased Total
------- ------ -----

Properties Rooms Properties Rooms Properties Rooms
---------- ----- ---------- ----- ---------- -----

March 31, 2002............ 229 51,730 48 6,581 277 58,311
December 31, 2001......... 229 51,880 48 6,581 277 58,461
March 31, 2001............ 216 47,692 51 7,344 267 55,036

As discussed above, effective January 1, 2001, we converted 106 leases with
MeriStar Hospitality to long-term management contracts. In addition, in the
fourth quarter of 2001, we terminated three leases with another hotel owner and
converted those leases to long-term management contracts. Our remaining 48
leases are with Winston Hotels, Inc. We have had, and continue to have,
discussions with Winston to convert these leases to long-term management
contracts. We believe management contracts provide an inherently better
alignment of interests between a hotel's owner and operator.

BUSINESS SUMMARY

The sluggish economy and delays and difficulties in travel due to heightened
security measures at airports continue to have a major impact on our operating
results. This is expected to continue throughout the remainder of 2002. In
response to this current operating environment, we are continuing to work with
the owners of hotel properties we manage to implement cost reduction and control
measures to positively affect those properties' operating results. In our
corporate housing segment, we are continuing to closely monitor our inventory of
leased housing units in order to adjust that inventory appropriately in light of
current slower demand levels.

On January 28, 2002, we amended our senior credit facility to provide more
flexibility under certain financial covenants and allow us to extend the
maturity from February 2002 until February 2003. The interest rate on the
revolver increased 100 basis points to the 30-day London Interbank Offered Rate
plus 450 basis points. In addition, the amendment reduced our availability to
$82.5 million. The amendment also sets restrictions on investments and capital
expenditures. The availability under our senior secured credit facility will
also be reduced by $2.5 million on each of the following dates: February 28,
2002, June 30, 2002, September 30, 2002 and December 31, 2002. In addition, on
January 31, 2003, the availability under our senior credit facility will be
further reduced by the amount that our earnings before interest, taxes,
depreciation and amortization for 2002 exceeds $20 million. We met our
obligation to reduce availability under the facility by $2.5 million on February
28, 2002.

On January 25, 2002, we amended our credit facility with MeriStar Hospitality to
provide financial covenant relief similar to that in our senior credit facility.
The maturity date remains 91 days after the maturity of the senior credit
facility. The interest rate also remains the same, at the 30-day London
Interbank Offered Rate plus 650 basis points.

In January 2002, in connection with the execution of the amendment to the
revolving credit facility with MeriStar Hospitality, we executed a Term Note
payable to MeriStar Hospitality in the amount of $13.1 million to refinance our
outstanding account payable due to MeriStar Hospitality. The Term Note bears
interest at the 30-day London Interbank Offered Rate plus 650 basis points and
matures on the same date as our revolving credit facility with MeriStar
Hospitality.

In December 2001, we received notification from the NYSE that we were not in
compliance with the continued listing standards of the NYSE because our average
closing share price was less than $1.00 over a consecutive 30-day trading
period. The NYSE's continued listing standards require that we bring our 30-day
average closing price and our share price above $1.00 by June 20, 2002, subject
to certain conditions. We are currently evaluating our alternatives with regard
to complying with these standards.

On May 2, 2002, we announced an agreement to merge with Interstate. The
transaction will be a stock-for-stock merger of Interstate into MeriStar in
which Interstate stockholders will receive 4.6 shares of common stock for each
share of Interstate stock outstanding. Holders of MeriStar common stock and
operating partnership units will continue to hold their stock and units
following the merger. In connection with the merger, Interstate's convertible
debt and preferred equity shares will be converted into shares of common stock
of the surviving company. A new $113 million senior credit facility will replace
the senior secured credit facilities of MeriStar and Interstate. We expect the
new facility to have a three-year term loan and three-year revolver with a
one-year option to extend. We expect the interest rate on the facility to range
from London Interbank Offered Rate plus 300 basis points to London Interbank
Offered Rate plus 450, based on certain financial covenant levels. The combined
company will operate approximately 86,000 rooms in 412 hotels. We have incurred
$260 in costs related to the merger during the three months ended March 31,
2002. We expect the transaction to close in the third quarter of 2002.

CRITICAL ACCOUNTING POLICIES

Accounting estimates are an integral part of the preparation of our consolidated
financial statements and our financial reporting process and are based on our
current judgments. Certain accounting estimates are particularly sensitive
because of their significance to our consolidated financial statements and
because of the possibility that future events affecting them may differ markedly
from our current judgments.

The most significant accounting policies affecting the Company's consolidated
financial statements relate to:

. the evaluation of impairment of certain long-lived assets;
. estimation of valuation allowances, specifically those related to
income taxes and allowance for doubtful accounts;
. estimates of restructuring and other accruals; and
. the evaluation of the fair value of our derivative instruments.

Impairment of long-lived assets

In accordance with FASB Statement No. 144, "Accounting for the Impairment or
Disposal of Long Lived Assets", whenever events or changes in circumstances
indicate that the carrying values of long -lived assets (intangibles with
definite useful lives) may be impaired, we perform an analysis to determine the
recoverability of the asset's carrying value. We make estimates of the
undiscounted cash flows from the expected future operations of the asset. If the
analysis indicates that the carrying value is not recoverable from future cash
flows, the asset is written down to estimated fair value and an impairment loss
is recognized. Any impairment losses are recorded as operating expenses. We did
not recognize any impairment losses in 2002 or 2001.

We review long-lived assets for impairment when one or more of the following
events have occurred:

a. Current or immediate short-term (future twelve months) projected cash
flows are significantly less than the most recent historical cash
flows.

b A significant loss of management contracts without the realistic
expectation of a replacement.

c. The unplanned departure of an executive officer or other key personnel,
which could adversely affect our ability to maintain our competitive
position and manage future growth.

d A significant adverse change in legal factors or an adverse action or
assessment by a regulator, which could affect the value of the goodwill
or other long-lived assets.

e. Events which could cause significant adverse changes and uncertainty in
business and leisure travel patterns.

In accordance with FASB Statement No. 142, "Goodwill and Other Intangible
Assets," at least annually, we perform an analysis to determine the impairment
of goodwill and intangible assets' (with indefinite lives) carrying values. To
test intangible assets with indefinite lives for impairment, we perform an
analysis to compare the fair value of the intangible asset to its carrying
value. We make estimates of the fair value of the intangible asset using
discounted cash flows from the expected future operations of the assets. If the
analysis indicates that the fair value is less than the carrying value, the
asset is written down to the estimated fair value and an impairment loss is
recognized. To test goodwill for impairment, we perform an analysis to compare
the fair value of the reporting unit to which the goodwill is assigned to the
carrying value of the reporting unit. We make estimates of the discounted cash
flows from the expected future operations of the reporting unit. If the analysis
indicates that the fair value of the reporting unit is less than its carrying
value, we do an analysis to compare the implied fair value of the reporting unit
goodwill with the carrying amount of that goodwill. The implied fair value of
the goodwill is determined by allocating the fair value of the reporting unit to
all the assets and liabilities of that unit as if the reporting unit had been
acquired in a business combination. The excess of the fair value of reporting
unit over the amounts assigned to its assets and liabilities is the implied fair
value of the goodwill. If the implied fair value of the goodwill is less than
the carrying value, an impairment loss shall be recognized in an amount equal to
that excess. Any impairment losses are recorded as operating expenses. We did
not recognize any impairment losses in 2002 or 2001.

We make estimates of the undiscounted and discounted cash flows from the
expected future operations of the asset. In projecting the expected future
operations of the asset, we base our estimates on future budgeted earnings
before income taxes, depreciation and amortization amounts and use growth
assumptions to project these amounts out over the expected life of the
underlying asset. Our growth assumptions are based on assumed future
improvements in the national economy and improvements in the demand for lodging;
if actual conditions differ from those in our assumptions, the actual results of
each asset's actual future operations could be significantly different from the
estimated results we used in our analysis.

Valuation Allowances

We use our judgment in determining our provision for income taxes, our deferred
tax assets and liabilities, and any valuation allowance recorded against our
deferred tax assets. In the fourth quarter of 2001, we recorded a $7.9 million
valuation allowance to reduce our deferred tax assets to the amount that we
believe is more likely than not to be realized. This is an allowance against
some, but not all, of our recorded deferred tax assets. We have considered
estimated future taxable income and prudent and feasible ongoing tax planning
strategies in assessing the need for a valuation allowance. Our estimates of
taxable income require us to make assumptions about various factors that affect
our operating results, such as economic conditions, consumer demand, competition
and other factors. Our actual results may differ from these estimates. Based on
actual results or a revision in future estimates, we might determine that we
would not be able to realize additional portions of our net deferred tax assets
in the future. If that occurred, we would record a charge to the income tax
provision in that period. We also might determine that we would be able to
realize all or part of the deferred tax assets covered by the existing valuation
allowance. If that occurred, we would record a credit to the income tax
provision in that period.

We record an allowance for doubtful accounts based on our judgment in
determining the ability and willingness of our customers to make required
payments. Our judgments in determining customers' ability and willingness are
based on past experience with customers and our assessment of the current and
future operating environments for our customers. If a customer's financial
condition deteriorates or a management contract is terminated in the future,
this could decrease a customer's ability or obligation to make payments. If that
occurred, we might have to make additional allowances, which could reduce our
earnings.

Restructuring and Other Accruals

During 2001, the slowing national economy negatively affected our operations. In
response, we implemented restructuring plans to reduce our overhead costs. These
plans included termination of some personnel positions as well as the
abandonment of some leases. During the second quarter of 2002, we expect to
record restructuring charges based on a plan to shut down a market in our
corporate housing division. We accrue the total estimated cost of the
restructuring at the time the plans are finalized and communicated to our

employees. These estimates require our judgment as to the outcome of net lease
costs. If actual results differ from our estimates, we will be required to
adjust our financial statements when we identify the differences.

Derivative Instruments and Hedging Activities

We enter into derivative instruments for cash flow hedging purposes to limit the
impact of interest rate changes on earnings and cash flows. We have designated
our interest rate swap agreements as hedges against changes in future cash flows
associated with the interest payments of our variable rate debt obligations.
Accordingly, we reflect the interest rate swap agreements at fair value in our
consolidated balance sheet as of March 31, 2002, and we record in stockholders'
equity the related unrealized gains and losses on these contracts. We assess
interest rate cash flow risk by continually identifying and monitoring changes
in interest rate exposures that may adversely impact expected future cash flows
and by evaluating hedging opportunities.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2002 Compared with Three Months Ended March 31,
2001

Revenues
- --------

We earn revenue from leased hotels, management contracts and related services,
and corporate housing operations. We recognize revenue from our leased hotels
from their rooms, food and beverage, and other operating departments as earned
at the close of each business day. Our management and other fees consist of base
and incentive management fees received from third-party owners of hotel
properties, and fees for other related services we provide. We recognize base
fees and fees for other services as revenue when earned in accordance with the
individual management contracts. In accordance with Staff Accounting Bulletin
No. 101, "Revenue Recognition in Financial Statements", we accrue incentive fees
in the period when we are certain they are earned. For contracts with annual
incentive fee measurements, we typically will record any incentive fees in the
last month of the annual contract period. In connection with FASB issued topic
D-103, "Income Statement Characterization of Reimbursements for Out-of Pocket
Expenses Incurred," we have reported revenue and expenses from managed
properties in our reported results beginning January 1, 2002. These amounts
relate primarily to payroll costs at the managed properties where we are the
employer, and the reimbursement to us for those costs. The 2001 revenue and
expenses have been reclassified to conform with the 2002 presentation.

The following table shows the operating statistics for our full-service managed
and limited-service leased hotels on a same store basis for the three months
ended March 31:

2002 2001 Change
---------- --------- ------
Revenue per available room...... $ 63.79 $ 76.77 (16.9%)
Average daily rate.............. $ 101.69 $ 111.58 (8.9%)
Occupancy....................... 62.7% 68.8% (8.9%)

Our total revenue decreased $21.7 million to $178.9 million in the first three
months of 2002 compared to $200.6 million in the first three months of 2001.
Major components of this decrease were:

. Our revenue from our leased hotels (from rooms, food and beverage
and other operating departments) decreased $11.0 million, resulting
from the conversion of three leases to management contracts as well
as the lower average daily rate and occupancy in the properties
that existed in both periods presented.

. Our revenue from existing management contracts decreased $2.0
million due to lower revenues at our managed hotels, as shown by
lower occupancy and average daily rates in 2002 compared to the
same period in 2001.

. Other revenue from managed properties (consisting of payroll costs
reimbursed to us by the hotels we manage) decreased $8.4 million
due to the reduction in the number of employees at the hotels.

Operating expenses by department
- --------------------------------

Our operating expenses by department (rooms, food and beverage, other operating
department expenses and corporate housing) decreased $1.8 million to $27.4
million in the first three months of 2002 compared to $29.2 million in the first
three months of 2001. Major components of this decrease were:

. Our corporate housing expenses increased $1.5 million primarily due
to increased rates on apartment leases.

. Our operating expenses from our leased hotels (from rooms, food and
beverage and other department expenses) decreased
$3.3 million. This was a direct result of the decrease in revenue
from our leased hotels described above.

Undistributed operating expenses
- --------------------------------

Our undistributed operating expenses include the following items:
. administrative and general;
. property operating costs;
. participating lease expense;
. depreciation and amortization;
. loss on asset impairment, merger and lease conversion costs;
. charges to investments in and advances to affiliates, accounts and
notes receivable, and other;
. and restructuring expenses.

Our total undistributed operating expenses decreased $27.4 million to $39.1
million in the first three months of 2002 compared to $66.5 million in the first
three months of 2001. Major components of this are described in the following
paragraphs.

Administrative and general expenses are associated with the management of hotels
and corporate housing facilities and consist primarily of expenses such as
operations management, sales and marketing, finance, information technology
support, human resources and other support services, as well as general
corporate expenses. Administrative and general expenses decreased by $2.0
million from $19.2 million in the first three months of 2001 to $17.2 million in
the first three months of 2002. Approximately $1.1 million of this decrease was
due to the conversion of three leased properties to management contracts. The
remaining decrease is attributable to the realization of cost savings from
restructuring plans carried out in 2001.

Property operating costs include energy costs, repairs and maintenance,
franchise fees, insurance, taxes, management fees and other expenses. Property
operating costs decreased by $2.2 million from $9.0 million in the first three
months of 2001 to $6.8 million in the first three months of 2002. Approximately
$1.1 million of the decrease was due to the conversion of three leased
properties to management contracts. The remainder of the decrease related
primarily to lower energy and franchise costs in existing properties, which is a
result of lower revenue during 2002.

Participating lease expense represents base rent and participating rent that is
based on a percentage of rooms and food and beverage revenues from the leased
hotels. Participating lease expense decreased by $3.4 million from $16.1 million
in the first three months of 2001 to $12.7 million in the first three months of
2002. Approximately $1.8 million of the decrease was due to the conversion of
three leased properties to management contracts. The remainder of the decrease
is directly attributable to the decrease in revenue from existing leased hotels.

Depreciation and amortization decreased by $0.9 million from $3.1 million in the
first three months of 2001 to $2.2 million in the first three months of 2002.
This decrease is a result of the adoption of Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets on January 1, 2002. This
pronouncement requires, among other things, that we no longer amortize goodwill,
but instead test goodwill for impairment at least annually.

Merger costs decreased by $3.5 million from $3.8 million in the first three
months of 2001 to $0.3 million in the first three months of 2002. Merger costs
of $3.8 million for the first three months of 2001 included the expenses related
to our proposed merger with American Skiing Company. On March 22, 2001, we and
the other parties to the merger agreement mutually agreed to terminate the
agreement. There were no termination fees payable to any of the parties. Merger
costs of $0.3 million in the first three months of 2002 relate to our proposed
merger with Interstate Hotels Corporation, announced on May 2, 2002.

Charges to investments in and advances to affiliates, accounts and notes
receivable, and other includes reserves against accounts and notes receivables
and charges to write-off the remaining book values of impaired and abandoned
assets. We incurred expenses totaling $15.3 million in the first three months of
2001. We did not experience any of these expenses in the first three months of
2002.

Other expenses from managed properties
- --------------------------------------

In connection with EITF No. 01-14, "Income Statement Characterization of
Reimbursements for Out-of Pocket Expenses Incurred", we have reported revenue
and expenses from managed properties in our reported results beginning January
1, 2002. These amounts relate primarily to payroll costs at the managed
properties where we are the employer, and the reimbursement to us for those
costs. The revenue and expenses have been reclassified to conform with the 2002
presentation. These costs decreased by $8.4 million to $112.4 million in the
first three months of 2002 from $120.8 million in the first three months of 2001
primarily due to the reduction in headcount at the hotels we manage.

Earnings (loss) before interest, taxes, depreciation and amortization
- ---------------------------------------------------------------------

Earnings (loss) before interest, taxes, depreciation and amortization increased
$14.7 million from $(12.7) million in the first three months of 2001 to $2.0
million in the first three months of 2002. Major components of this increase
were:

. Our Corporate Housing segment's EBITDA decreased by $0.9 million
from $(0.2) million in 2001 to $(1.1) million in 2002 due to an
increase in rental rates from apartment complexes offset by
realization of cost savings from restructuring plans carried out in
2001.

. Our Hotel Management segment's EBITDA decreased by $2.8 million
from $6.4 million in 2001 to $3.6 million in 2002 due to the
decrease in revenue associated with the decrease in average daily
rate and occupancy in the period.

. Our remaining EBITDA increased by $18.4 million primarily due to
the merger costs of $3.8 million recorded in 2001, and the charges
to investments in and advances to affiliates, accounts and notes
receivable, and other of $15.3 million recorded in 2001.

Net loss
- --------

Our net loss decreased by $9.0 million from $(10.8) million in 2001 to $(1.8)
million in 2002. This decrease is due to the increase of $14.7 million in EBITDA
and the decrease of $0.9 million in depreciation and amortization expense as
discussed above. This is offset by the following:
. Our income tax benefit decreased by $6.0 million due to the
decrease of $15.1 million in our loss before income taxes.

. Our losses allocated to minority interest decreased by $0.5 million
due to the decrease in our operating losses.

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 that were below the expense we were required to recognize under
EITF No. 98-9 during the interim period ended March 31, 2002. As of March 31,
2002 this resulted in an accrued liability balance of $9, which is included on
our condensed consolidated balance sheets.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalent assets increased by $3.7 million from $4.6 million
at December 31, 2001 to $8.3 million at March 31, 2002.

Sources of Cash

We fund our continuing operations 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. Factors that may influence our liquidity include:

. Factors that affect our results of operations, including general
economic conditions, demand for business and leisure travel,
public concerns about travel safety and other operating risks
described under the caption, "Risk Factors--Operating Risks" in
our Annual Report on Form 10-K;

. Factors that affect our access to bank financing and the capital
markets, including interest rate fluctuations, operational risks
and other risks described under the caption "Risk
Factors--Financing Risks" in our Annual Report on Form 10-K; and

. The other factors described under the caption, "Forward-Looking
Information."

Our financing activities provided $5.8 million of cash during 2002 primarily
from net borrowings of $6.5 million on our credit facilities. As of April 30,
2002, we had no availability under our senior secured credit facility and
approximately $4.0 million available under our credit facility with MeriStar
Hospitality.

Uses of Cash

We used $1.5 million of cash in operations during the three months ended March
31, 2002, primarily as result of the prepayment of apartment rent and contract
renewals in our Corporate Housing segment as well as payment of income taxes,
offset by other operating activity.

We used $0.5 million of cash in investing activities during the three months
ended March 31, 2002. This relates to the purchase of $0.2 million of fixed
assets, $0.1 million costs incurred to obtain management contracts (referred to
as purchase of intangible assets on the Consolidated Statements of Cash Flows)
and $0.2 million of investments made in and advances made to affiliates. In
January 2002, we acquired a 5% interest in one affiliate for $0.1 million. We
also made an advance of $75,000 to an affiliate.

Revolving Credit Facilities

On January 28, 2002, we amended our senior credit facility to provide more
flexibility under certain financial covenants and allow us to extend the
maturity from February 2002 until February 2003. The interest rate on the
revolver increased 100 basis points to the 30-day London Interbank Offered Rate
plus 450 basis points. In addition, the amendment reduced our availability to
$82.5 million. The amendment also sets restrictions on investments and capital
expenditures. The availability under our senior secured credit facility will
also be reduced by $2.5 million on each of the following dates: February 28,
2002, June 30, 2002, September 30, 2002 and December 31, 2002. In addition, on
January 31, 2003, the availability under our senior credit facility will be
further reduced by the amount that our earnings before interest, taxes,
depreciation and amortization for 2002 exceeds $20 million. We met our
obligation to reduce the facility by $2.5 million on February 28, 2002. The
entire balance of $80,000 due on this facility is classified as a current
liability on the Condensed Consolidated Balance Sheet at March 31, 2002 due to
the maturity date in February 2003. The interest rate on borrowings under our
senior credit facility as of March 31, 2002 was 6.4%. We incurred interest
expense of $1,243 and $2,210 on this facility during the first quarters of 2002
and 2001, respectively.

In connection with the pending Interstate merger, a new $113 million senior
credit facility will replace the existing senior credit facilities of both
companies. We expect the new facility to have a three-year term loan and
three-year revolver with a one-year option to extend. We expect the interest
rate on the facility to range from London Interbank Offered Rate plus 300 basis
points to London Interbank Offered Rate plus 450, based on certain financial
covenant levels.

Contractual Obligations and Maturities of Indebtedness

We lease some hotels under non-cancelable participating leases with remaining
initial terms ranging from 9 to 12 years, expiring through 2013. The
participating leases have minimum base rent requirements. We also lease
apartments for our Corporate Housing operations and corporate office space.
Those leases have terms up to 13 years.

Minimum payments due under our debt and lease obligations as of March 31, 2002
were as follows (in thousands):

Credit Facilities
with MeriStar
Senior Credit Hospitality Non Cancelable
Facility Corporation Operating Leases Total
-------- ----------- ---------------- -----

2002 $ 7,500 $ - $ 31,829 $ 39,329
2003 72,500 58,069 41,072 171,641
2004 - - 39,893 39,893
2005 - - 39,435 39,435
2006 - - 38,350 38,350
2007 and thereafter - - 225,555 225,555
-----------------------------------------------------------------------------------
$ 80,000 $ 58,069 $ 416,134 $ 554,203
===================================================================================

Summary

We believe cash generated by our operations, together with anticipated borrowing
capacity under our new credit facility resulting in connection with the merger
with Interstate, will be sufficient to fund our requirements for working
capital, capital expenditures, and debt service. We expect to continue to seek
acquisitions of hotel 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
anticipated credit facility 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. In the event the merger with Interstate does not close, we
believe cash generated by our operations will be sufficient to fund our
requirements for working capital, capital expenditures, and debt service. We
would be required to refinance or extended our senior secured credit facility,
which expires in 2003. This could have a significant effect on our short term
cash flow requirements. If we are unable to refinance or extend our senior
secured credit facility, this would have a material adverse effect on our
company.

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 the 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 have reflected 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 traditionally 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.

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 effect 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 three months ended March 31, 2002, we paid $315,469 under this
agreement. The fair value of the interest rate swap agreement was $105,000 at
March 31, 2002.

In April 2002, we entered into a $40 million, 10-month rate swap agreement with
a financial institution to hedge against the effect future interest rate
fluctuations may have on our floating rate debt. The swap agreement effectively
fixed the 30-day London Interbank Offered Rate at 4.0%.

Our senior secured credit facility matures in February 2003. At March 31, 2002,
we had borrowings of $80.0 million outstanding on the facility. Interest on the
debt is variable, based on the 30-day London Interbank Offered Rate plus 450
basis points. The weighted average effective interest rate was 6.9% at March 31,
2002. We have determined that the fair value of the debt approximates its
carrying value.

Our $45.0 million of long-term debt under the MeriStar Hospitality revolving
credit facility at March 31, 2002 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 9.9% at March 31, 2002. We have determined that the
fair value of the debt approximates its carrying value.

A 1.0% change in the 30-day London Interbank Offered Rate would have changed our
interest expense by approximately $187,389 million during the three months ended
March 31, 2002.

Our international operations are subject to foreign exchange rate fluctuations.
We derived approximately 13% of our revenue for the three months ended March 31,
2002 from services performed in Canada, the United Kingdom and France. Our
foreign currency transaction gains and losses were not material to our results
of operations for the three months ended March 31, 2002. To date, since most of
our foreign operations have been largely self-contained we have not been exposed
to material foreign exchange risk. Therefore, we have not entered into any
significant foreign currency exchange contracts or other derivative financial
instruments to hedge the effects of adverse fluctuations in foreign currency
exchange rates. In the event that we have large transactions requiring currency
conversion we would reevaluate whether we should engage in hedging activity.

PART II. OTHER INFORMATION

ITEM 5. OTHER INFORMATION

FORWARD-LOOKING INFORMATION

Information both included in and incorporated by reference in this 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 the actual results, performance or achievements of our company
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 described our future
plans, strategies and expectations, are generally identifiable by use of the
words "may," "will," "should," "expect," anticipate," estimate," "believe,"
"intent,: or "project" or the negative thereof or other variations thereon or
comparable terminology. Factors which could have a material adverse effect on
our operations and future prospectus include, but are not limited to, changes
in:
. slowdown of national economy;
. economic conditions generally and the real estate market
specifically;
. the impact of the September 11, 2001 terrorist attacks or other
terrorist attacks;
. legislative/regulatory changes, including changes to laws governing
the taxation of real estate investment trusts;
. disruptions to or restrictions on air travel;
. availability of capital;
. interest rates;
. competition;
. supply and demand for lodging facilities in our current and proposed
market areas; and
. general accounting principles, policies and guidelines applicable to
real estate investment trusts.
. potential de-listing of MeriStar Hotels & Resorts, Inc. by the NYSE.

These risks and uncertainties, along with the risk factors set forth in our
Annual Report on Form 10-K for the year ended December 31, 2001 under "Risk
Factors", should be considered in evaluating any forward-looking statements
contained in this Form 10-Q.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits -
10.10 Employment Agreement, dated as of November 1, 2001,
between MeriStar Hotels & Resorts, Inc., MeriStar
Management Company, LLC and Paul W. Whetsell.
10.12.1 Amendment to Employment Agreement, dated as of
November 1, 2001, between MeriStar Hotels & Resorts,
Inc., MeriStar Management Company, LLC and John
Emery.

(b) Reports on Form 8-K - none

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: May 15, 2002 /s/ James A. Calder
-------------------
James A. Calder
Chief Financial Officer