This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. These forward-looking statements are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions, whether in the negative or affirmative. Forward-looking statements are based on management's current expectations and assumptions and are not guarantees of future performance. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, the risk factors discussed herein and other factors discussed from time to time in our periodic filings with the Securities and Exchange Commission. Accordingly, there is no assurance that the Company's expectations will be realized. Except as otherwise required by the federal securities laws, the Company disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this report to reflect events, circumstances or changes in expectations after the date of this report.

Overview

We are a lodging focused real estate company that owns, as of October 15, 2008, twenty premium hotels and resorts which contain approximately 9,600 guestrooms. We are committed to maximizing shareholder value through investing in premium full service hotels and, to a lesser extent, premium urban limited service hotels located throughout the United States. Our hotels are concentrated in key gateway cities and in destination resort locations and are all operated under a brand owned by one of the top three national brand companies (Marriott, Starwood or Hilton).

We are owners, as opposed to operators, of hotels. As owners, we receive all of the operating profits or losses generated by our hotels, after we pay the hotel managers a fee based on the revenues and profitability of the hotels and reimburse all of their direct and indirect operating costs.

As owners, we create value by acquiring the right hotels with the right brands in the right markets, prudently financing our hotels, thoughtfully re-investing capital in our hotels, implementing profitable operating strategies and approving the annual operating and capital budgets for our hotels, closely monitoring the performance of our hotels, and deciding if and when to sell our hotels. In addition, we are committed to enhancing the value of our operating platform by being open and transparent in our communications with investors, monitoring our corporate overhead and following corporate governance best practices.

We differentiate ourselves from our competitors because of our adherence to three basic principles:

†          high quality urban and resort focused real estate;

†          conservative capital structure; and

†          thoughtful asset management.

High Quality Urban and Resort Focused Real Estate

We own twenty premium hotels and resorts in North America. These hotels and resorts are primarily categorized as upper upscale as defined by Smith Travel Research and are generally located in high barrier to entry markets with multiple demand generators.

Our properties are concentrated in five key gateway cities (New York City, Los Angeles, Chicago, Boston and Atlanta) and in destination resorts (such as the U.S. Virgin Islands and Vail, Colorado). We believe that these gateway cities and destination resorts are high growth markets because they are attractive business and leisure destinations. We also believe that these locations are better insulated from new supply due to relatively high barriers to entry and expensive construction costs.

We believe that higher quality lodging assets create more dynamic cash flow growth and superior long-term capital appreciation.

Conservative Capital Structure

We are committed to maintaining a conservative and flexible capital structure with prudent leverage levels. During 2004 through early 2007, we took advantage of the low interest rate environment by fixing our debt rates for an extended period of time. Depending on the outlook for interest rates in the future, we maintain the flexibility to modify these strategies.

As of September 5, 2008, 91.0% of our debt carried fixed interest rates, with a weighted-average interest rate of 5.44%, and a weighted-average maturity of 6.5 years. As of September 5, 2008, we had $898.6 million of debt outstanding, representing a net debt-to-enterprise value ratio of 50.6%, which is calculated as our net debt (debt less unrestricted cash) divided by our enterprise value, which is our market capitalization plus net debt.

We prefer a relatively simple but efficient capital structure. We have not invested in joint ventures and have not issued any operating partnership units or preferred stock. We endeavor to structure our hotel acquisitions so that they will not overly complicate our capital structure; however, we will consider a more complex transaction if we believe that the projected returns to our stockholders will significantly exceed the returns that would otherwise be available.

Thoughtful Asset Management

We believe that we are able to create significant value in our portfolio by utilizing our management's extensive experience and our innovative asset management strategies.

Our senior management team has established a broad network of hotel industry contacts and relationships, including relationships with hotel owners, financiers, operators, project managers and contractors and other key industry participants.

We use our broad network to maximize the value of our hotels. Under the regulations governing REITs, we are required to engage a hotel manager through one of our subsidiaries to manage each of our hotels pursuant to a management agreement. Our philosophy is to negotiate management agreements that give us the right to exert significant influence over the management of our properties, annual budgets and all capital expenditures, and then to use those rights to continually monitor and improve the performance of our properties. We cooperatively partner with the managers of our hotels in an attempt to increase operating results and long-term asset values at our hotels. In addition to working directly with the personnel at our hotels, our senior management team also has long-standing professional relationships with our hotel managers' senior executives, and we work directly with these senior executives to improve the performance of our portfolio.

We believe we can create significant value in our portfolio through innovative asset management strategies such as rebranding, renovating and repositioning. We are committed to regularly evaluating our portfolio to determine if we can employ these value-added strategies at our hotels. During 2006, 2007 and the period from January 1, 2008 to September 5, 2008, we completed a significant amount of capital reinvestment in our hotels - completing projects that ranged from room renovations (Courtyard Manhattan/Midtown East, Los Angeles Airport Marriott, Bethesda Marriott Suites, Orlando Airport Marriott, Frenchman's Reef & Morning Star Marriott Beach Resort and Westin Atlanta North at Perimeter) to a total renovation and repositioning of the hotel (Torrance Marriott South Bay and the Oak Brook Hills Marriott Resort) to the addition of new meeting space, spa or restaurant repositioning (Westin Boston Waterfront, Chicago Marriott and Marriott Griffin Gate Resort). By the end of 2008, we expect to have fully renovated nearly all of the hotels in our portfolio. In connection with our planned renovations and repositionings, our senior management team and our asset managers are individually committed to completing these renovations on time, on budget and with minimum disruption at our hotels.

A core tenet of our asset management strategy is to leverage national hotel brands. We strongly believe in the value of powerful national brands because we believe that they are able to produce incremental revenue and profits compared to similar unbranded hotels. Dominant national hotel brands typically have very strong reservation and reward systems and sales organizations, as a result, all of our hotels are operated under a brand owned by one of the top three national brand companies (Marriott, Starwood or Hilton) and all but two of the hotels are operated by the brand company directly. Generally, we are interested in acquiring only those hotels that are operated under a nationally recognized brand or can be converted into a branded hotel.

Key Indicators of Financial Condition and Operating Performance

We use a variety of operating and other information to evaluate the financial condition and operating performance of our business. These key indicators include financial information that is prepared in accordance with GAAP, as well as other financial information that is not prepared in accordance with GAAP. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the performance of individual hotels, groups of hotels and/or our business as a whole. We periodically compare historical information to our internal budgets as well as industry-wide information. These key indicators include:

† Occupancy percentage;

† Average Daily Rate (or ADR);

† Revenue per Available Room (or RevPAR);

† Earnings Before Interest, Income Taxes, Depreciation and Amortization (or EBITDA); and

† Funds From Operations (or FFO).

Occupancy, ADR and RevPAR are commonly used measures within the hotel industry to evaluate operating performance. RevPAR, which is calculated as the product of ADR and occupancy percentage, is an important statistic for monitoring operating performance at the individual hotel level and across our business as a whole. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a company-wide basis. ADR and RevPAR include only room revenue. Room revenue comprised approximately 66% of our total revenues for the fiscal quarter ended September 5, 2008, and is dictated by demand, as measured by occupancy percentage, pricing, as measured by ADR, and our available supply of hotel rooms.

Our ADR, occupancy percentage and RevPAR performance may be impacted by macroeconomic factors such as regional and local employment growth, personal income and corporate earnings, office vacancy rates and business relocation decisions, airport and other business and leisure travel, new hotel construction and the pricing strategies of competitors. In addition, our ADR, occupancy percentage and RevPAR performance is dependent on the continued success of Marriott and its brands as well as the Westin and Conrad brands.

We also use EBITDA and FFO as measures of the financial performance of our business. See "Non-GAAP Financial Matters."

Our Hotels

The following table sets forth certain operating information for each of our hotels for the period from January 1, 2008 to September 5, 2008. The percent change from 2007 RevPAR for the period from January 1, 2007 to September 7, 2007 includes the results of the Westin Boston Waterfront Hotel for the period prior to our acquisition of the hotel.

                                                                                         % Change
                                       Number of   Occupancy                             from 2007
Property                 Location        Rooms        (%)        ADR($)     RevPAR($)     RevPAR
Chicago Marriott       Chicago,
                       Illinois            1,198        73.2 %  $ 205.07   $    150.03        (7.5 )%
Los Angeles Airport    Los Angeles,
Marriott               California          1,004        86.7      114.98         99.68         4.2
Westin Boston          Boston,
Waterfront Hotel (1)   Massachusetts         793        69.9      197.74        138.28        (0.4 )
Renaissance Waverly    Atlanta,
Hotel                  Georgia               521        70.2      142.63        100.08         0.1
Salt Lake City         Salt Lake
Marriott Downtown      City, Utah            510        70.6      135.56         95.68        (3.1 )
Renaissance            Fort Worth,
Worthington            Texas                 504        73.8      176.59        130.38        (0.1 )
Frenchman's Reef &
Morning Star           St. Thomas,
Marriott Beach         U.S. Virgin
Resort (1)             Islands               502        85.6      253.42        216.90         2.2
Renaissance Austin
Hotel                  Austin, Texas         492        69.8      158.71        110.84        (7.4 )
Torrance Marriott      Los Angeles
South Bay              County,
                       California            487        82.3      125.81        103.52         8.2
Orlando Airport        Orlando,
Marriott               Florida               486        74.2      121.79         90.42        (5.7 )
Marriott Griffin       Lexington,
Gate Resort            Kentucky              408        65.1      139.56         90.84         2.9
Oak Brook Hills        Oak Brook,
Marriott Resort        Illinois              386        52.7      133.19         70.18       (10.8 )
Westin Atlanta North   Atlanta,
at Perimeter (1)       Georgia               369        61.8      142.77         88.20        (6.8 )
Vail Marriott
Mountain Resort &      Vail,
Spa (1)                Colorado              346        69.5      254.23        176.69         4.5
Marriott Atlanta       Atlanta,
Alpharetta             Georgia               318        61.8      148.83         92.00        (2.5 )
Courtyard
Manhattan/Midtown      New York, New
East                   York                  312        90.5      289.03        261.43         8.8
Conrad Chicago (1)     Chicago,
                       Illinois              311        75.7      229.61        173.75        (0.7 )
Bethesda Marriott      Bethesda,
Suites                 Maryland              272        72.2      191.47        138.28         2.3
Courtyard
Manhattan/Fifth        New York, New
Avenue                 York                  185        89.3      288.70        257.78         8.0
The Lodge at Sonoma,
a Renaissance          Sonoma,
Resort & Spa           California            182        70.3      225.20        158.36         2.5
TOTAL/WEIGHTED
AVERAGE                                    9,586        73.8 %  $ 176.35   $    130.12        (0.4 )%

Outlook

After several years of above-average growth in the lodging industry, the operating environment has become challenging. The economic drivers that impact underlying lodging demand, such as GDP growth, corporate earnings, consumer confidence and employment, have deteriorated during 2008. We expect that such economic drivers will further weaken during the rest of the year and into 2009. The decline in these lodging demand drivers has resulted in revenue decline for our hotels, and we currently project that our hotel revenues will contract during the fourth quarter of 2008 compared to the same period in 2007.

Furthermore, we believe that the continued slowing of the economy and its impact on demand drivers has resulted in lower transient demand in the lodging industry, primarily from the customers in the corporate and leisure segments that comprise approximately 60% of our room sales. In an uncertain economy where consumers and corporations have a negative outlook, it is very difficult to accurately forecast the behavior of these individual travelers, but it is clear that lodging demand has declined compared to the prior year. We believe that a number of these individual travelers will continue to postpone or eliminate travel, or travel on a reduced budget, until consumer and business sentiment improves. As a result, we currently expect full year RevPAR to contract by 1 to 3 percent.

Moreover, while we are taking cost containment measures at our hotels, certain of our cost categories are increasing at a rate greater than the current rate of inflation, including wages, benefits, utilities and real estate taxes. The combination of declining revenues and increasing operating costs will impact our operating results over the next fiscal quarter and into 2009. In addition, certain of our markets will experience new hotel supply in 2009, the most significant of which is in Fort Worth, Texas, where we have one hotel.

Although negative operating trends are likely to extend for some period of time, we expect operating results to improve when the general economy improves. However, given the current financial markets crisis and general economic conditions, there can be no assurances that our operating results will not continue to decrease. We have a strong balance sheet and have maintained one of the lowest levels of leverage in the industry. The current crisis in the financial markets has resulted in deleveraging throughout the global finance system. The displacement in the current financing market has resulted in a very difficult borrowing environment. We drew an additional $55 million on our credit facility in late September in order to mitigate the medium to long-term liquidity risks of the current market.

Results of Operations

As of September 5, 2008, we owned twenty hotels. Our total assets were $2.1 billion, total liabilities were $1.1 billion, including $898.6 million of debt, and shareholders' equity was approximately $1.0 billion. As of December 31, 2007, our total assets were $2.1 billion, total liabilities were $1.1 billion, including $824.5 million of debt, and shareholders' equity was approximately $1.1 billion.

Comparison of the Fiscal Quarter Ended September 5, 2008 to the Fiscal Quarter Ended September 7, 2007

Our net income for the fiscal quarter ended September 5, 2008 was $12.2 million compared to $15.9 million for the fiscal quarter ended September 7, 2007.

Revenue. Revenue from continuing operations consists primarily of the room, food and beverage and other operating revenues from our hotels. Revenues for the fiscal quarters ended September 5, 2008 and September 7, 2007, respectively, consist of the following (in thousands):

                      Fiscal Quarter        Fiscal Quarter
                           Ended                 Ended
                     September 5, 2008     September 7, 2007

Rooms               $           106,203   $           109,483
Food and beverage                45,512                47,655
Other                             9,680                 9,379
Total revenues      $           161,395   $           166,517

Our total revenues from continuing operations decreased $5.1 million, from $166.5 million for the fiscal quarter ended September 7, 2007 to $161.4 million for the fiscal quarter ended September 5, 2008. This decrease is primarily the result of a 3.0 percent decline in RevPAR at our hotels driven by a 0.6 percent decrease in the average daily rate and a 1.9 percentage point decrease in occupancy. The performance of our hotels was varied by market. For instance, our New York City market and the Frenchman's Reef Resort were stronger, while certain of our other markets, including Chicago, Boston and Atlanta were softer.

Individual hotel revenues for the fiscal quarters ended September 5, 2008 and September 7, 2007, respectively, consist of the following (in millions):

                                           Fiscal Quarter         Fiscal Quarter
                                                Ended                  Ended              Increase
                                          September 5, 2008      September 7, 2007       (Decrease)

Chicago Marriott                         $              24.6    $              25.6    $         (1.0 )
Westin Boston Waterfront Hotel (1)                      18.4                   19.6              (1.2 )
Frenchman's Reef & Morning Star
Marriott Beach Resort (1)                               13.5                   12.6               0.9
Los Angeles Airport Marriott                            13.2                   13.4              (0.2 )
Conrad Chicago (1)                                       7.9                    8.7              (0.8 )
Renaissance Austin Hotel                                 7.5                    7.2               0.3
Courtyard Manhattan/Midtown East                         7.4                    6.8               0.6
Renaissance Waverly Hotel                                7.1                    7.5              (0.4 )
Oak Brook Hills Marriott Resort                          6.8                    8.0              (1.2 )
Renaissance Worthington                                  6.7                    7.0              (0.3 )
Marriott Griffin Gate Resort                             6.7                    6.5               0.2
Torrance Marriott South Bay                              6.3                    6.0               0.3
Salt Lake City Marriott Downtown                         5.9                    6.3              (0.4 )
Vail Marriott Mountain Resort & Spa
(1)                                                      5.2                    5.9              (0.7 )
The Lodge at Sonoma, a Renaissance
Resort & Spa                                             4.9                    5.1              (0.2 )
Westin Atlanta North at Perimeter (1)                    4.2                    4.2                 -
Courtyard Manhattan/Fifth Avenue                         4.2                    3.9               0.3
Orlando Airport Marriott                                 4.1                    4.8              (0.7 )
Bethesda Marriott Suites                                 3.8                    3.9              (0.1 )
Marriott Atlanta Alpharetta                              3.0                    3.5              (0.5 )
Total                                    $             161.4    $             166.5    $         (5.1 )

The following are the key hotel operating statistics for our hotels for the fiscal quarters ended September 5, 2008 and September 7, 2007, respectively.

                Fiscal Quarter        Fiscal Quarter
                     Ended                 Ended
               September 5, 2008     September 7, 2007           % Change
Occupancy %                  76.5 %                78.4 % (1.9) percentage points
ADR           $            169.00   $            169.97           (0.6)%
RevPAR        $            129.33   $            133.27           (3.0)%

Hotel operating expenses. Hotel operating expenses from continuing operations consist primarily of operating expenses of our hotels, including non-cash ground rent expense. The operating expenses for the fiscal quarters ended September 5, 2008 and September 7, 2007, respectively, consist of the following (in millions):

                                            Fiscal Quarter        Fiscal Quarter
                                                 Ended                 Ended
                                           September 5, 2008     September 7, 2007
Rooms departmental expenses               $              25.4   $              25.7
Food and beverage departmental expenses                  33.0                  33.8
Other hotel expenses                                     46.7                  45.9
Base management fees                                      4.4                   4.5
Yield support                                               -                  (0.3 )
Incentive management fees                                 2.4                   2.6
Property taxes                                            5.1                   5.5
Ground rent-Contractual                                   0.5                   0.4
Ground rent-Non-cash                                      1.8                   1.8
Total hotel operating expenses            $             119.3   $             119.9

Depreciation and amortization. Depreciation and amortization is recorded on our hotel buildings over 40 years for the periods subsequent to acquisition. Depreciable lives of hotel furniture, fixtures and equipment are estimated as the time period between the acquisition date and the date that the hotel furniture, fixtures and equipment will be replaced. Our depreciation and amortization expense increased $1.1 million from $17.2 million for the fiscal quarter ended September 7, 2007 to $18.3 million for the fiscal quarter ended September 5, 2008 due to increased capital expenditures in 2008, primarily consisting of the significant capital projects at the Chicago Marriott and the Westin Boston Waterfront Hotel.

Corporate expenses. Our corporate expenses decreased $0.1 million from $3.3 million for the fiscal quarter ended September 7, 2007 to $3.2 million for the fiscal quarter ended September 5, 2008. Corporate expenses principally consist of employee-related costs, including base payroll, bonus and restricted stock. Corporate expenses also include corporate operating costs, professional fees and directors' fees.

Interest expense. Our interest expense decreased $0.1 million from $11.7 million for the fiscal quarter ended September 7, 2007 to $11.6 million for the fiscal quarter ended September 5, 2008. The decrease in interest expense is primarily attributable to the lower interest rate on outstanding borrowings under our credit facility during the third fiscal quarter of 2008 due to the decrease in LIBOR. The 2008 interest expense is comprised of mortgage debt ($10.8 million), amortization of deferred financing costs ($0.2 million) and interest and unused facility fees on our credit facility ($0.6 million). The . . .