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                                              Filed pursuant to Rule 424 (B)(3) 
                                              Registration No. 333-32169

PROSPECTUS SUPPLEMENT
(To Prospectus dated August 5, 1997)
 
                                 800,000 SHARES
 
                           INTERSTATE HOTELS COMPANY
 
                                  COMMON STOCK
 
     This Prospectus Supplement supplements the Prospectus dated August 5, 1997
(the "Prospectus") of Interstate Hotels Company. This Prospectus Supplement is
not complete and the use thereof without an accompanying Prospectus is not
authorized by the Company. Terms used in this Prospectus Supplement that are
defined in the Prospectus are used herein as so defined.
 
     On September 3, 1997, Trust Leasing and Trust Management agreed to sell an
aggregate of 800,000 shares of Common Stock to Smith Barney Inc. ("Smith
Barney") for $28.00 per share. Smith Barney may resell the shares from time to
time to purchasers directly in negotiated transactions at market prices
prevailing at the time of sale, at prices relating to such prevailing market
prices or at negotiated prices. In connection with any such resale, Smith Barney
may be deemed to have received compensation equal to the difference between the
amount received by Smith Barney upon the resale of such Common Stock and the
price paid by Smith Barney. Immediately following the sale to Smith Barney,
Trust Leasing and Trust Management together beneficially owned 1,157,895 shares
of Common Stock, which represented 3.3% of the shares of Common Stock
outstanding.
 
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     On September 3, 1997, the last reported sale price of the Common Stock on
the New York Stock Exchange was $28 13/16 per share. POTENTIAL PURCHASERS OF
COMMON STOCK ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS.
 
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  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
                               CRIMINAL OFFENSE.
 
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          The date of this Prospectus Supplement is September 3, 1997.