8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 3, 2005

MERISTAR HOSPITALITY CORPORATION

(Exact name of registrant as specified in its charter)

1-11903

(Commission File Number)

MARYLAND	72-2648842
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

4501 NORTH FAIRFAX DRIVE

ARLINGTON, VIRGINIA 22203

(Address of principal executive offices)

Registrant’s telephone number, including area code: (703) 812-7200

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On August 3, 2005, MeriStar Hospitality Corporation (the “Company”) issued a press release announcing its results for the second quarter ended June 30, 2005. The press release is attached hereto as Exhibit 99.1 and is incorporated by reference into this item. The supplemental earnings release financial information made available on the Company’s website in conjunction with the press release is attached hereto as Exhibit 99.2 and is incorporated by reference into this item. The information in this Current Report is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as shall be expressly set forth by specific reference in any such filing.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(c) Exhibits.

99.1 Press release of MeriStar Hospitality Corporation dated August 3, 2005.

99.2 Supplemental earnings release financial information.

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 hereunto duly authorized.

MERISTAR HOSPITALITY CORPORATION
BY:	/s/ Jerome J. Kraisinger
	Jerome J. Kraisinger Executive Vice President, Secretary and General Counsel

Date: August 3, 2005

EX-99.1

Exhibit 99.1

For Immediate Release
Contact:
Mike Bauer	Jerry Daly or Carol McCune
Sr. Director, Finance and Investor Relations	Daly Gray Public Relations (Media)
(703) 812-7202	(703) 435-6293

MeriStar Hospitality Corporation Reports Second Quarter 2005 Results,

Increases Adjusted FFO per Share Guidance

ARLINGTON, Va., August 3, 2005—MeriStar Hospitality Corporation (NYSE: MHX), one of the nation’s largest hotel real estate investment trusts (REIT), today announced financial results for the second quarter ended June 30, 2005. Highlights of the company’s strong quarterly performance include¹:

• Net income increased to $0.9 million or $0.01 per diluted share compared to a net loss of $(11.6) million or $(0.14) per diluted share for the 2004 second quarter;

• Adjusted funds from operations (FFO) per share of $0.32 increased 33 percent compared to $0.24 per share for the 2004 second quarter;

• Adjusted EBITDA of $62.0 million increased over 19 percent compared to $51.9 million in the 2004 second quarter;

• Revenue per available room (RevPAR) increased 9.9 percent for the comparable hotels, as the average daily rate (ADR) rose 9.6 percent and occupancy improved 0.3 percent;

• Comparable hotel gross operating profit margins improved 196 basis points and comparable hotel EBITDA margins improved 209 basis points; and

• Business interruption (BI) insurance gain of $2.0 million (based on insurer recognition to date from losses resulting from the 2004 Florida hurricanes) included in net income, adjusted FFO and adjusted EBITDA.

¹ FFO, Adjusted FFO, Adjusted EBITDA, and comparable hotel EBITDA margins are non-GAAP financial measures. See the notes to financial information for further discussion of these non-GAAP financial measures.

“The positive operating trends produced by our portfolio in recent quarters carried over into the second quarter, and our hotels continue to gain operating momentum,” said Paul W.

Whetsell, chairman and chief executive officer. “We continue to realize returns from our ongoing renovation program, reflected in higher rate levels achieved at those properties. Our ability to raise rate was the primary contributor to the 209 basis point expansion in our comparable hotel EBITDA margins. With the improved asset quality of our portfolio, we plan to continue aggressively driving rate to take advantage of the additional upside potential we see in this area,” he added.

“We realized double-digit RevPAR gains in several of our key markets, including a 19.8 percent increase in Southern California and a 12.0 percent increase in Washington D.C. Significantly, our 49.99 percent equity investment in the Radisson Lexington in Midtown Manhattan, although not included in our comparable hotel results, achieved a RevPAR gain of 30 percent in the second quarter. The strong performance of the property resulted in distributable cash on our equity interest of nearly $800,000 in the quarter in addition to the $1.4 million preferred return on the $40 million mezzanine loan.”

Renovation Program

In the second quarter, the company invested $24.3 million in non-hurricane related capital improvements at its properties as part of its $100 million strategic renovation program for 2005. “Year to date, we have invested more than $60 million in non-hurricane related capital projects at our properties that have enhanced the quality of our product. The positive impact of these upgrades will continue to allow us to drive strong rate increases and generate better bottom lines at the property level,” Whetsell stated.

The Embassy Suites in Center City Philadelphia, which underwent a complete guestroom renovation, lobby remodeling and an exterior façade repair in the past year, achieved a RevPAR increase in the second quarter of 15.8 percent, led by a 11.5 percent increase in ADR. Also, the

Marriott in Somerset, N.J., which recently renovated its guestrooms, fitness center and other public areas, saw RevPAR increase 25.9 percent and operating profits more than double in the quarter.

Asset Sales

In May, the company sold its Hilton Monterey, Calif. property for $20.5 million. In July, the company completed the sale of its Marina Hotel – San Pedro property for $5.8 million.

The company expects to expand its asset disposition activity for the year in response to strong market conditions for dispositions and expressed interest. The company intends to use the proceeds to repay more expensive debt, particularly its 10  ¹/2 percent senior notes which are callable in December. “Last quarter we announced we were exploring additional asset sales given the current favorable environment for asset dispositions and the opportunity to improve our capital structure. We now expect to generate approximately $250 to $300 million of asset sales in total for the year. The sale of these assets is more opportunistic in nature and dispositions will be completed only if pricing levels are met,” Whetsell added.

The company recently announced the addition of John Plunket as Senior Vice President – Real Estate who will be responsible for overseeing the company’s disposition and acquisition program.

Capital Structure

“We completed a number of financial transactions since the first quarter aimed at improving our capital structure,” said Donald D. Olinger, chief financial officer. In June, the company completed the placement of a 5.68 percent fixed-rate, 10-year, $44.0 million mortgage on the Hilton Clearwater hotel in

Florida. During the second quarter, the company repurchased $21.5 million of its senior notes bearing interest between 9 and 10  ¹/2 percent. In the third quarter, the company has repurchased an additional $12.8 million of senior notes. Also, the company sent notice to call the remaining $32.7 million of 8  ³/4 percent senior subordinated notes at par on August 15, 2005. “We have taken advantage of the current rate environment to replace high interest rate debt with long-term, lower-cost debt. In addition, retiring our senior subordinated debt will lower our overall interest expense and remove the company’s most restrictive debt covenants.”

In August, the company restructured its secured revolver, expanding the credit line from $50 million to $150 million. “This transaction will create additional liquidity and flexibility as we proceed with our renovation program, work toward resolution of our hurricane insurance claim, and allow us to reduce debt ahead of receiving proceeds from our expanded asset sales program,” Olinger stated.

The company also expects to close on the refinancing of its $300 million CMBS portfolio in August by defeasing the current loan and replacing it with approximately $335 million of new CMBS debt using the same collateral package at a rate over 300 basis points lower. “Not only will this transaction produce run-rate interest savings of approximately $9 million per year, it will also provide us with much greater flexibility in the management of our cash as well as the assets in this portfolio. This refinancing will free up nearly $50 million currently held in restricted cash,” Olinger added. “The results are net present value positive, even with the defeasance cost, and will produce a number of operating benefits.

“Through these transactions, we are making considerable progress in improving our credit statistics, strengthening our balance sheet, and creating shareholder value.”

Florida Hotels Update

Strong growth in the Florida travel market was reflected in the performance of the company’s hotels that were open in the second quarter. The two open Orlando and two Tampa Bay/Clearwater properties reported combined RevPAR gains of 15 percent for the period.

The company continues to make significant progress on repairing its hotels affected by the hurricanes that hit Florida last year. “Four of the five inns on Sanibel Island reopened in the second quarter,” Whetsell remarked. “These properties are restored to exceptional physical condition and their performance since re-opening has been promising. The overall restoration of the quality of the product following our rebuilding efforts is being reflected in the results.” The Best Western Sanibel Island, the fifth Sanibel property, is expected to open in August. The Holiday Inn Walt Disney World is scheduled to reopen in the fourth quarter. South Seas Island Resort on Captiva Island is gradually reopening as condominium units are already being returned for rental and many of the facilities will be fully operating by year-end.

Including the BI insurance gain recognized by the insurers to date, the company’s seven Florida hotels that were substantially closed at the start of the quarter (four of which reopened during the quarter), together with the Dunes Golf and Tennis Club on Sanibel Island, contributed a total of $1.2 million of EBITDA ($0.4 million net loss) in the second quarter 2005, compared to $3.2 million of EBITDA ($0.6 million net income) in the second quarter 2004. In total, these properties contributed $3.8 million of EBITDA ($0.4 million net income) in the first half of 2005, compared to $9.7 million ($4.4 million net income) in the first half of 2004. Additionally, total revenue reported by these properties in the second quarter was $4.4 million in 2005 compared to $26.5 million in 2004.

Total adjusted EBITDA of $62.0 million in the second quarter included $2.0 million of BI insurance gain. “The operating results from our comparable hotels provided for another strong quarter, despite the fact that the insurers have thus far allowed recognition of only a very conservative BI insurance gain in the quarter,” Olinger said. “The $2.0 million of BI recognized in the quarter represents minimum profit recognition independent from the claim payment process and is below both what we ultimately expect to recognize and the $2.5 to $5.0 million included in our guidance for the quarter. We remain quite confident that we will be compensated for lost profits at a level in excess of what we have recognized so far this year, however the timing of the recognition between this year’s quarters will continue to be challenging to predict.”

To date, the company has received over $100 million of hurricane recovery insurance payments. “We have been receiving regular cash payments from our insurers and expect these payments to continue as we work through our claim,” Olinger added. “However, in order to recognize gains resulting from BI insurance for lost income, all contingencies related to the recoveries must be resolved, which is difficult to achieve with the insurers until the claim is more advanced.”

Guidance

The company is revising its 2005 guidance to reflect the strong performance of its portfolio, the additional asset sales, and capital markets activity. “Our revised assumptions on the timing and quantity of asset sales, debt reductions, including calling between $175 and $200 million of our 10 1/2 percent senior notes in December, and refinancings result in an increase in our estimated adjusted FFO per share,” Olinger remarked. RevPAR is projected to increase 9 to 10 percent in the third quarter, and the full year RevPAR is estimated to increase 8.5 to 9.5 percent. Comparable hotel EBITDA margins are expected to

increase 150 to 200 basis points in the third quarter and for the full year. Additionally, the company provides the following range of estimates for the third quarter and full year:

• Net loss of $18 million to $21 million for the third quarter and $42 million to $46 million for the full year;

• Net loss per diluted share of $(0.20) to $(0.24) for the third quarter and $(0.48) to $(0.52) for the full year;

• FFO per diluted share of $0.04 to $0.08 for the third quarter and $0.59 to $0.63 for the full year;

• Adjusted FFO per diluted share of $0.04 to $0.08 for the third quarter and $0.63 to $0.68 for the full year; and

• Adjusted EBITDA of $37 million to $40 million for the third quarter and $185 million to $190 million for the full year.

See reconciliations of net loss to FFO per diluted share and Adjusted FFO per diluted share and net loss to Adjusted EBITDA included in the tables of this press release. FFO, Adjusted FFO, and Adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization and other items) are non-GAAP financial measures and should not be considered as alternatives to any measures of operating results under GAAP. See the notes to financial information for further discussion of these non-GAAP financial measures.

MeriStar will hold a conference call to discuss its second-quarter results today, August 3, 2005, at 10 a.m. Eastern time. Interested parties may visit the company’s Web site at www.meristar.com and click on Investor Relations and then the webcast link.

Interested parties also may listen to an archived webcast of the conference call on the Web site, or may dial (800) 405-2236, reference number 11034186, to hear a telephone replay. The telephone replay will be available through midnight on Wednesday, August 10, 2005.

Arlington, Va.-based MeriStar Hospitality Corporation owns 71 principally upscale, full-service hotels in major markets and resort locations with 19,889 rooms in 22 states and the District of Columbia. The company owns hotels under such internationally known brands as Hilton, Sheraton, Marriott, Ritz-Carlton, Westin, Doubletree and Radisson. For more information about MeriStar Hospitality, visit the company’s Web site: www.meristar.com.

This press release contains 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. Forward-looking statements, which are based on various assumptions and describe our future plans, strategies and expectations, are generally identified by our use of words such as “intend,” “plan,” “may,” “should,” “will,” “project,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “opportunity,” and similar expressions, whether in the negative or affirmative. We cannot guarantee that we actually will achieve these plans, intentions or expectations. All statements regarding our expected financial position, business and financing plans are forward-looking statements. Except for historical information, matters discussed in this press release are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to: economic conditions generally and the real estate market specifically; supply and demand for hotel rooms in our current and proposed market areas; other factors that may influence the travel industry, including health, safety and economic factors; competition; cash flow generally, including the availability of capital generally, cash available for capital expenditures, and our ability to refinance debt; the effects of threats of terrorism and increased security precautions on travel patterns and demand for hotels; the threatened or actual outbreak of hostilities and international political instability; governmental actions, including new laws and regulations and particularly changes to laws governing the taxation of real estate investment trusts; weather conditions generally and natural disasters; rising interest rates; and changes in U.S. generally accepted accounting principles, policies and guidelines applicable to real estate investment trusts. These risks and uncertainties should be considered in evaluating any forward-looking statements contained in this press release or incorporated by reference herein. All forward-looking statements speak only as of the date of this press release or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section. We undertake no obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Revenue:
Hotel operations:
Rooms	$	142,908		$	137,230		$	266,669		$	265,197
Food and beverage		61,006			57,028			112,187			105,572
Other hotel operations		11,815			15,694			23,039			30,945
Office rental, parking and other revenue		1,212			1,328			3,069			2,625
Total revenue		216,941			211,280			404,964			404,339
Hotel operating expenses:
Rooms		33,785			33,208			64,409			64,153
Food and beverage		40,903			39,877			77,752			76,141
Other hotel operating expenses		7,623			9,943			14,626			19,323
Office rental, parking and other expenses		612			670			1,436			1,255
Other operating expenses:
General and administrative, hotel		31,771			30,152			63,095			61,946
General and administrative, corporate		2,828			3,473			6,361			7,106
Property operating costs		31,294			30,048			60,452			59,300
Depreciation and amortization		23,837			24,356			48,256			49,464
Property taxes, insurance and other		12,098			15,232			22,882			31,345
Loss on asset impairments		—			310			—			310
Operating expenses		184,751			187,269			359,269			370,343
Equity in income/loss of and interest earned from unconsolidated affiliates		2,940			1,600			4,575			3,200
Hurricane business interruption gain		2,009			—			4,290			—
Operating income		37,139			25,611			54,560			37,196
Minority interest (expense) income		(39	)		671			308			1,617
Interest expense, net		(30,698	)		(30,090	)		(61,411	)		(64,592	)
Loss on early extinguishments of debt		(947	)		(1,980	)		(1,007	)		(7,903	)
Income (loss) before income taxes and discontinued operations		5,455			(5,788	)		(7,550	)		(33,682	)
Income tax (expense) benefit		(812	)		(38	)		(834	)		455
Income (loss) from continuing operations		4,643			(5,826	)		(8,384	)		(33,227	)
Discontinued operations:
Loss from discontinued operations before income tax		(3,709	)		(5,784	)		(4,126	)		(18,747	)
Income tax benefit		—			55			—			175
Loss from discontinued operations		(3,709	)		(5,729	)		(4,126	)		(18,572	)
Net income (loss)	$	934		$	(11,555	)	$	(12,510	)	$	(51,799	)
Basic earnings (loss) per share:
Earnings (loss) from continuing operations	$	0.05		$	(0.07	)	$	(0.10	)	$	(0.44	)
Loss from discontinued operations		(0.04	)		(0.07	)		(0.04	)		(0.24	)
Earnings (loss) per basic share	$	0.01		$	(0.14	)	$	(0.14	)	$	(0.68	)
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations	$	0.05		$	(0.08	)	$	(0.10	)	$	(0.45	)
Loss from discontinued operations		(0.04	)		(0.06	)		(0.04	)		(0.23	)
Earnings (loss) per diluted share	$	0.01		$	(0.14	)	$	(0.14	)	$	(0.68	)

RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS (a)

(In thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Funds From Operations:
Net income (loss)	$	934		$	(11,555	)	$	(12,510	)	$	(51,799	)
Depreciation and amortization of real estate assets		22,503			23,617			45,997			48,120
Loss on disposal of assets		1,037			4,584			1,037			11,530
Unconsolidated affiliate adjustments		1,163			—			2,417			—
Minority interest to common OP unit holders		(628	)		(671	)		(1,215	)		(1,759	)
Interest on convertible debt		4,038			—			—			—
Funds from operations	$	29,047		$	15,975		$	35,726		$	6,092
Weighted average number of shares of common stock outstanding		104,263	(b)		85,333			87,529			78,234
Funds from operations per diluted share	$	0.28		$	0.19		$	0.41		$	0.08
Funds From Operations, as adjusted:
Funds from operations	$	29,047		$	15,975		$	35,726		$	6,092
Loss on asset impairments		2,836			2,430			2,836			7,441
Loss on early extinguishments of debt		947			1,980			1,007			7,903
Write off of deferred financing fees		199			453			210			1,719
Minority interest to common OP unit holders		(101	)		—			(98	)		—
Funds from operations, as adjusted	$	32,928		$	20,838		$	39,681		$	23,155
Weighted average number of shares of common stock and common stock equivalents outstanding		104,263	(b)		85,333			87,529			78,234
Funds from operations per diluted share, as adjusted	$	0.32		$	0.24		$	0.45		$	0.30

(a) See the notes to the financial information for discussion of non-GAAP measures.

(b) The 104,263 weighted average shares of common stock outstanding for diluted FFO and diluted Adjusted FFO for the three months ended June 30, 2005, includes 16,700 incremental shares that are not issued or outstanding, but that are dilutive in calculating FFO per diluted share and adjusted FFO per diluted share, and would be issued upon conversion of our convertible subordinated notes. These $170.0 million notes are convertible into common stock at a ratio of $10.18 per share.

RECONCILIATION OF NET LOSS TO EBITDA (a)

(In thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
EBITDA and Adjusted EBITDA:
Net income (loss)	$	934		$	(11,555	)	$	(12,510	)	$	(51,799	)
Loss from discontinued operations		(3,709	)		(5,729	)		(4,126	)		(18,572	)
Income (loss) from continuing operations		4,643			(5,826	)		(8,384	)		(33,227	)
Interest expense, net		30,698			30,090			61,411			64,592
Income tax expense (benefit)		812			38			834			(455	)
Depreciation and amortization (b)		23,837			24,356			48,256			49,464
EBITDA from continuing operations		59,990			48,658			102,117			80,374
Loss on asset impairments		—			310			—			310
Minority interest expense (income)		39			(671	)		(308	)		(1,617	)
Loss on early extinguishments of debt		947			1,980			1,007			7,903
Equity investment adjustments:
Equity in (income) loss of affiliates		(206	)		—			1,164			—
Distributions accrued from equity investments		791			—			791			—
Adjusted EBITDA from continuing operations	$	61,561		$	50,277		$	104,771		$	86,970
Loss from discontinued operations	$	(3,709	)	$	(5,729	)	$	(4,126	)	$	(18,572	)
Interest expense, net		—			(367	)		—			(478	)
Income tax benefit		—			(55	)		—			(175	)
Depreciation and amortization		237			1,077			704			3,130
EBITDA from discontinued operations		(3,472	)		(5,074	)		(3,422	)		(16,095	)
Loss on asset impairments		2,836			2,120			2,836			7,131
Loss on disposal of assets		1,037			4,584			1,037			11,530
Adjusted EBITDA from discontinued operations	$	401		$	1,630		$	451		$	2,566
Adjusted EBITDA, total operations	$	61,962		$	51,907		$	105,222		$	89,536

(a) See the notes to the financial information for discussion of non-GAAP measures.

(b) Depreciation and amortization includes the write-off of deferred financing costs totaling $0.2 million and $0.5 million for the three months ended June 30, 2005 and 2004, respectively, and $0.2 million and $1.7 million for the six months ended June 30, 2005 and 2004, respectively, related to our early extinguishments of debt during these periods.

HOTEL OPERATIONAL DATA

SCHEDULE OF COMPARABLE HOTEL RESULTS (a)

(In thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Number of hotels		61			61			61			61
Number of rooms		17,480			17,480			17,480			17,480
Comparable hotel revenues:
Rooms	$	129,140		$	117,441		$	241,827		$	226,288
Food and beverage		53,865			50,087			99,045			93,847
Other hotel operations		8,771			8,452			16,833			16,666
Comparable hotel revenues (b)		191,776			175,980			357,705			336,801
Comparable hotel expenses:
Room		30,811			28,780			59,178			56,453
Food and beverage		36,088			34,495			68,684			67,169
Other		5,970			5,846			11,622			11,614
General and administrative		28,751			27,206			57,115			54,990
Property operating costs, less management fees		24,074			22,467			46,958			44,888
Comparable hotel expenses (c)		125,694			118,794			243,557			235,114
Comparable Hotel Gross Operating Profit		66,082			57,186			114,148			101,687
Margin		34.5	%		32.5	%		31.9	%		30.2	%
Management Fees (c)		(4,791	)		(4,390	)		(8,936	)		(8,407	)
Property taxes, insurance and other (c)		(9,547	)		(8,986	)		(18,685	)		(18,175	)
Comparable Hotel EBITDA, excluding BI (d)	$	51,744		$	43,810		$	86,527		$	75,105
Margin		27.0	%		24.9	%		24.2	%		22.3	%
Hurricane business interruption gain		692			—			970			—
Comparable Hotel EBITDA, including BI (d)	$	52,436		$	43,810		$	87,497		$	75,105
Margin		27.3	%		24.9	%		24.5	%		22.3	%

(a) See the notes to the financial information for discussion of non-GAAP measures, and comparable hotel results and statistics.

(b) The reconciliation of total revenues per the consolidated statements of operations to the comparable hotel revenues is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Revenues per the consolidated statements of operations	$	216,941		$	211,280		$	404,964		$	404,339
Non-comparable hotel revenues		(23,953	)		(33,972	)		(44,190	)		(64,913	)
Office rental, parking and other revenue		(1,212	)		(1,328	)		(3,069	)		(2,625	)
Comparable hotel revenues	$	191,776		$	175,980		$	357,705		$	336,801

(c) The reconciliation of operating costs per the consolidated statements of operations to the comparable hotel expenses, management fees, property taxes, insurance and other is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Operating expenses per the consolidated statements of operations	$	184,751		$	187,269		$	359,269		$	370,343
Non-comparable hotel expenses		(18,054	)		(26,960	)		(33,474	)		(51,767	)
General and administrative, corporate		(2,828	)		(3,473	)		(6,361	)		(7,106	)
Depreciation and amortization		(23,837	)		(24,356	)		(48,256	)		(49,464	)
Loss on asset impairments		—			(310	)		—			(310	)
Comparable hotel expenses, management fees, property taxes, insurance and other	$	140,032		$	132,170		$	271,178		$	261,696

(d) The reconciliation of comparable hotel EBITDA to operating income per the consolidated statements of operations is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Comparable hotel EBITDA, including BI	$	52,436		$	43,810		$	87,497		$	75,105
Non-comparable results, net (e)		5,899			7,012			10,716			13,146
Office rental, parking and other revenue		1,212			1,328			3,069			2,625
General and administrative, corporate		(2,828	)		(3,473	)		(6,361	)		(7,106	)
Depreciation and amortization		(23,837	)		(24,356	)		(48,256	)		(49,464	)
Loss on asset impairments		—			(310	)		—			(310	)
Equity in income/loss of and interest earned from unconsolidated affiliates		2,940			1,600			4,575			3,200
Hurricane business interruption gain at non-comparable hotels		1,317			—			3,320			—
Operating Income	$	37,139		$	25,611		$	54,560		$	37,196

(e) Non-comparable results, net represent all revenues and expenses, other than those of our comparable hotels, and specific revenues and expenses identified above: office rental, parking and other revenue; general and administrative, corporate; depreciation and amortization; loss on asset impairments and equity in income/loss of and interest earned from unconsolidated affiliates.

RECONCILIATION OF NET INCOME TO EBITDA (HURRICANE PROPERTIES)

(In thousands)

In August and September 2004, hurricanes caused substantial damage to a number of our hotels located in Florida. The hurricane damage and local evacuation orders also caused significant business interruption at many of our Florida properties, including the complete closure of certain hotels. As a result, seven of our hotels were substantially closed for the first quarter of 2005.

During the second quarter, Sanibel Inn, Seaside Inn, Song of the Sea, and Sundial Beach Resort reopened but were not fully operational for the entire quarter. Best Western Sanibel Island is expected to open in August and Holiday Inn Walt Disney World is expected to open in the fourth quarter. South Seas Island Resort on Captiva Island is gradually reopening as condominium units are already being returned for rental and many of the facilities will be fully operating by year-end.

The following is a reconciliation of Net Income to EBITDA for those seven hotels and Dunes Golf and Tennis Club on Sanibel Island:

	Three Months Ended June 30,					Six Months Ended June 30,
	2005			2004		2005		2004
EBITDA:
Net income (loss) (a)	$	(410	)	$	586	$	474	$	4,387
Depreciation and amortization		1,645			2,642		3,289		5,288
EBITDA (a)	$	1,235		$	3,228	$	3,763	$	9,675

(a) Includes $1.3 million and $3.3 million of business interruption insurance gain at these seven hotels and Dunes Golf and Tennis Club in the three and six months ended June 30, 2005, respectively. We received an additional $0.7 million and $1.0 million of business interruption gain included in the 61 comparable hotels in the three and six months ended June 30, 2005, respectively.

DETAILED OPERATING STATISTICS BY MARKET, REGION AND LOCATION

Comparable hotels, same store basis (a)

			2nd Quarter 2005						2nd Quarter 2004						Percent Change in RevPAR
Market/Region/Location	Hotels	Rooms	ADR		Occ%		RevPAR		ADR		Occ%		RevPAR
Washington DC Metro (b)	10	2,112	$	144.80	84.6	%	$	122.45	$	133.46	81.9	%	$	109.33	12.0	%
New Jersey	4	1,120	$	132.44	66.7	%	$	88.35	$	131.79	60.7	%	$	79.96	10.5	%
Southern California (b)	3	1,034	$	125.58	76.2	%	$	95.72	$	105.94	75.4	%	$	79.90	19.8	%
Northern California	2	764	$	127.74	74.7	%	$	95.45	$	118.97	78.7	%	$	93.61	2.0	%
Orlando (c)	2	1,231	$	90.80	72.3	%	$	65.11	$	74.84	75.7	%	$	56.62	15.0	%
Chicago	2	857	$	123.26	71.2	%	$	87.71	$	101.37	76.3	%	$	77.33	13.4	%
Colorado	2	736	$	91.05	60.9	%	$	55.44	$	83.33	64.4	%	$	53.65	3.3	%
Atlanta	2	650	$	94.18	75.6	%	$	71.19	$	81.37	80.3	%	$	65.37	8.9	%
Dallas	2	598	$	93.18	64.1	%	$	59.68	$	89.75	57.2	%	$	51.30	16.3	%
Houston	2	597	$	113.49	68.8	%	$	78.05	$	106.26	69.0	%	$	73.36	6.4	%
All other markets (c)	30	7,781	$	102.88	70.6	%	$	72.63	$	96.02	70.2	%	$	67.37	7.8	%
All Markets	61	17,480	$	112.48	72.2	%	$	81.19	$	102.60	72.0	%	$	73.87	9.9	%
Middle Atlantic (b)	16	3,718	$	140.56	79.1	%	$	111.17	$	131.84	75.3	%	$	99.34	11.9	%
South Central	11	3,281	$	105.09	69.1	%	$	72.63	$	99.66	66.9	%	$	66.69	8.9	%
South Atlantic (c)	12	4,101	$	100.48	71.8	%	$	72.15	$	89.19	73.9	%	$	65.88	9.5	%
Pacific (b)	8	2,593	$	123.27	70.1	%	$	86.45	$	110.05	71.0	%	$	78.16	10.6	%
North Central	7	1,789	$	103.69	70.0	%	$	72.56	$	92.11	72.3	%	$	66.63	8.9	%
Mountain	6	1,798	$	83.63	69.3	%	$	57.93	$	78.12	70.2	%	$	54.80	5.7	%
New England	1	200	$	91.07	74.7	%	$	68.02	$	77.14	81.4	%	$	62.80	8.3	%
All Regions	61	17,480	$	112.48	72.2	%	$	81.19	$	102.60	72.0	%	$	73.87	9.9	%
Urban (b)	19	4,933	$	134.63	78.0	%	$	104.97	$	120.84	78.6	%	$	94.96	10.5	%
Resort (c)	7	2,678	$	107.58	69.8	%	$	75.13	$	95.47	74.3	%	$	70.90	6.0	%
Airport (b)	12	3,751	$	93.21	73.2	%	$	68.25	$	83.51	73.3	%	$	61.20	11.5	%
Suburban	23	6,118	$	106.88	67.9	%	$	72.59	$	101.55	64.9	%	$	65.91	10.1	%
All Locations	61	17,480	$	112.48	72.2	%	$	81.19	$	102.60	72.0	%	$	73.87	9.9	%

(a) See notes to financial information for discussion of comparable hotel operating results and statistics.

(b) Excludes hotels acquired during the second quarter.

(c) Excludes hotels significantly affected by the hurricanes in Florida.

DETAILED OPERATING STATISTICS BY MARKET, REGION AND LOCATION

Comparable hotels, same store basis (a)

			Six Months Ended June 30, 2005						Six Months Ended June 30, 2004						Percent Change in RevPAR
Market/Region/Location	Hotels	Rooms	ADR		Occ%		RevPAR		ADR		Occ%		RevPAR
Washington DC Metro (b)	10	2,112	$	142.14	74.6	%	$	106.07	$	126.50	75.3	%	$	95.21	11.4	%
New Jersey	4	1,120	$	130.42	59.0	%	$	76.92	$	129.19	55.7	%	$	71.99	6.8	%
Southern California (b)	3	1,034	$	123.32	76.3	%	$	94.12	$	110.15	76.1	%	$	83.87	12.2	%
Northern California	2	764	$	120.31	71.7	%	$	86.31	$	113.30	76.3	%	$	86.47	-0.2	%
Orlando (c)	2	1,231	$	95.68	76.6	%	$	73.32	$	79.83	75.3	%	$	60.09	22.0	%
Chicago	2	857	$	113.54	60.6	%	$	68.80	$	95.39	65.6	%	$	62.58	9.9	%
Colorado	2	736	$	87.67	54.0	%	$	47.36	$	81.40	61.1	%	$	49.76	-4.8	%
Atlanta	2	650	$	93.96	76.9	%	$	72.27	$	81.95	82.5	%	$	67.59	6.9	%
Dallas	2	598	$	91.66	61.9	%	$	56.78	$	88.48	58.1	%	$	51.43	10.4	%
Houston	2	597	$	110.84	68.5	%	$	75.93	$	113.47	72.9	%	$	82.70	-8.2	%
All other markets (c)	30	7,781	$	103.01	68.9	%	$	70.99	$	96.54	69.4	%	$	66.96	6.0	%
All Markets	61	17,480	$	110.65	69.1	%	$	76.44	$	101.63	70.0	%	$	71.16	7.4	%
Middle Atlantic (b)	16	3,718	$	137.66	69.9	%	$	96.24	$	126.64	69.1	%	$	87.48	10.0	%
South Central	11	3,281	$	100.94	66.5	%	$	67.09	$	98.55	66.2	%	$	65.25	2.8	%
South Atlantic (c)	12	4,101	$	105.26	73.5	%	$	77.36	$	93.05	74.8	%	$	69.61	11.1	%
Pacific (b)	8	2,593	$	119.90	70.4	%	$	84.36	$	110.84	71.9	%	$	79.71	5.8	%
North Central	7	1,789	$	97.72	62.8	%	$	61.35	$	87.97	65.4	%	$	57.53	6.6	%
Mountain	6	1,798	$	83.82	66.3	%	$	55.61	$	78.88	68.7	%	$	54.16	2.7	%
New England	1	200	$	88.40	71.1	%	$	62.81	$	74.65	80.7	%	$	60.22	4.3	%
All Regions	61	17,480	$	110.65	69.1	%	$	76.44	$	101.63	70.0	%	$	71.16	7.4	%
Urban (b)	19	4,933	$	127.35	72.2	%	$	92.00	$	115.31	74.1	%	$	85.42	7.7	%
Resort (c)	7	2,678	$	114.84	72.5	%	$	83.26	$	101.94	74.9	%	$	76.31	9.1	%
Airport (b)	12	3,751	$	93.99	71.3	%	$	67.01	$	83.75	73.0	%	$	61.10	9.7	%
Suburban	23	6,118	$	104.69	63.7	%	$	66.68	$	101.15	62.8	%	$	63.57	4.9	%
All Locations	61	17,480	$	110.65	69.1	%	$	76.44	$	101.63	70.0	%	$	71.16	7.4	%

(a) See notes to financial information for discussion of comparable hotel operating results and statistics.

(b) Excludes hotels acquired during the second quarter.

(c) Excludes hotels significantly affected by the hurricanes in Florida.

FORECASTED RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS

(In millions, except per share amounts)

	Three Months Ending September 30, 2005
	Low-end of range			High-end of range
Forecasted Funds from Operations:
Net loss (a)	$	(21	)	$	(18	)
Adjustments to forecasted net loss:
Depreciation and amortization of real estate assets		25			25
Unconsolidated affiliate adjustments		1			1
Minority interest to common OP unit holders		(1	)		(1	)
Loss on disposal of assets		—			—
Funds from operations	$	4		$	7
Weighted average diluted shares of common stock and common OP units outstanding		90			90
Funds from operations per diluted share	$	0.04		$	0.08
Funds From Operations, as adjusted:
Funds from operations	$	4		$	7
Loss on asset impairments		—			—
Loss on early extinguishments of debt		—			—
Funds from operations, as adjusted	$	4		$	7
Weighted average number of shares of common stock and common stock equivalents outstanding		90			90
Funds from operations per diluted share, as adjusted	$	0.04		$	0.08
	Year Ending December 31, 2005
	Low-end of range			High-end of range
Forecasted Funds from Operations:
Net loss (a)	$	(46	)	$	(42	)
Adjustments to forecasted net loss:
Depreciation and amortization of real estate assets		95			95
Unconsolidated affiliate adjustments		4			4
Minority interest to common OP unit holders		(1	)		(1	)
Loss on disposal of assets		1			1
Funds from operations	$	53		$	57
Weighted average number of shares of common stock and common OP units outstanding		90			90
Funds from operations per diluted share	$	0.59		$	0.63
Funds From Operations, as adjusted:
Funds from operations	$	53		$	57
Loss on asset impairments		3			3
Loss on early extinguishments of debt		1			1
Funds from operations, as adjusted	$	57		$	61
Weighted average number of shares of common stock and common stock equivalents outstanding		90			90
Funds from operations per diluted share, as adjusted	$	0.63		$	0.68

(a) Forecasted net loss does not include any possible future losses on asset impairments, gains or losses on the sale of assets, gains or losses on early extinguishment of debt, or gains or losses on property damage insurance recoveries.

FORECASTED RECONCILIATION OF NET LOSS TO EBITDA

(In millions)

	Three Months Ending September 30, 2005
	Low-end of range			High-end of range
EBITDA and Adjusted EBITDA:
Net loss (a)	$	(21	)	$	(18	)
Interest expense, net		32			32
Depreciation and amortization		26			26
EBITDA		37			40
Loss on asset impairments		—			—
Loss on early extinguishments of debt		—			—
Equity investment adjustments:
Equity in (income) loss of affiliates		—			—
Distributions accrued from equity investments		1			1
Minority interest to common OP unit holders		(1	)		(1	)
Adjusted EBITDA	$	37			40
	Year Ending December 31, 2005
	Low-end of range			High-end of range
EBITDA and Adjusted EBITDA:
Net loss (a)	$	(46	)	$	(42	)
Interest expense, net		123			124
Depreciation and amortization		100			100
		177			182
EBITDA
Loss on asset impairments		3			3
Loss on early extinguishments of debt		1			1
Equity investment adjustments:
Equity in (income) loss of affiliates		1			1
Distributions accrued from equity investments		3			3
Minority interest to common OP unit holders		(1	)		(1	)
Loss on disposal of assets		1			1
Adjusted EBITDA	$	185			190

(a) Forecasted net loss does not include any possible future losses on asset impairments, gains or losses on the sale of assets, gains or losses on early extinguishment of debt, or gains or losses on property damage insurance recoveries.

NOTES TO FINANCIAL INFORMATION

Funds From Operations

Substantially all of our non-current assets consist of real estate, and, in accordance with accounting principles generally accepted in the United States, or GAAP, those assets are subject to straight-line depreciation, which reflects the assumption that the value of real estate assets, other than land, will decline ratably over time. That assumption is often not true with respect to the actual market values of real estate assets (and, in particular, hotels), which fluctuate based on economic, market and other conditions. As a result, management and many industry investors believe the presentation of GAAP operating measures for real estate companies to be more informative and useful when other measures, adjusted for depreciation and amortization, are also presented.

In an effort to address these concerns, the National Association of Real Estate Investment Trusts, or NAREIT, adopted a definition of Funds From Operations, or FFO. NAREIT defines FFO as net income (computed in accordance with GAAP) excluding gains or losses from sales of real estate, real estate-related depreciation and amortization, and after comparable adjustments for our portion of these items related to unconsolidated partnerships and joint ventures. Extraordinary items and cumulative effect of changes in accounting principles as defined by GAAP are also excluded from the calculation of FFO. As defined by NAREIT, FFO also does not include reductions from asset impairment charges. The SEC, however, recommends that FFO include the effect of asset impairment charges, which is the presentation we have adopted for all historical presentations of FFO. We believe FFO is an indicative measure of our operating performance due to the significance of our hotel real estate assets and provides beneficial information to investors.

Adjusted FFO represents FFO excluding the effects of gains or losses on early extinguishments of debt, write-offs of deferred financing costs and, in accordance with the NAREIT definition of FFO, asset impairment charges. We exclude the effects of gains or losses on early extinguishments of debt, write-offs of deferred financing costs and asset impairment charges because we believe that including them in Adjusted FFO does not fully reflect the operating performance of our remaining assets. We believe Adjusted FFO is useful for the same reasons we believe that FFO is useful, but we also believe that Adjusted FFO enables us and the investor to consider our operating performance without considering the items we exclude from our definition of Adjusted FFO, which have no cash effect in the periods considered.

Consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization

EBITDA represents consolidated earnings before interest, income taxes, depreciation and amortization and includes operations from the assets included in discontinued operations. We further adjust EBITDA for the effect of capital market transactions that would result in a gain or loss on early extinguishments of debt, the earnings effect and distributions accrued related to equity method investments, as well as the earnings effect of asset dispositions and any impairment assessments, resulting in the measure that we refer to as “Adjusted EBITDA.” We exclude the effect of gains or losses on early extinguishments of debt, the earnings effect and distributions accrued related to equity method investments, as well as the earnings effect of asset dispositions and impairment assessments because we believe that including them in Adjusted EBITDA does not fully reflect the operating performance of our remaining assets.

We also believe Adjusted EBITDA provides useful information to investors regarding our financial condition and results of operations because Adjusted EBITDA is useful in evaluating our operating performance. Furthermore, we use Adjusted EBITDA to provide a measure of performance that can be isolated on an asset by asset basis to determine overall property performance. We believe that the rating agencies and a number of our lenders also use Adjusted EBITDA for those purposes. We also use Adjusted EBITDA as one measure in determining the value of acquisitions and dispositions.

Comparable Hotel Operating Results and Statistics

We present certain operating statistics (i.e., RevPAR, ADR and average occupancy) and operating results (revenues, expenses and operating profit) for the periods included in this report on a comparable hotel basis as supplemental information for investors. We define our comparable hotels as properties (i) that are owned by us and the operations of which are included in our consolidated results for the entirety of the reporting periods being compared, (ii) that have not sustained substantial property damage during the reporting periods being compared, and (iii) that are not planned for disposition as of the end of the period. Of the 72 hotels that we owned as of June 30, 2005, 61 have been classified as comparable hotels. The operating results of seven hotels significantly affected by the hurricanes in Florida in August and September 2004, one sold in July, one which we intend to dispose of, and the two hotels acquired in 2004 that we owned as of June 30, 2005, are excluded from comparable hotel results for these periods.

We present these comparable hotel operating results by eliminating corporate-level revenues and expenses, as well as depreciation and amortization and loss on asset impairments. We eliminate corporate-level revenues and expenses to arrive at property-level results because we believe property-level results provide investors with supplemental information into the ongoing operating performance of our hotels and the effectiveness of management in running our business on a property-level basis. We eliminate depreciation and amortization because, even though depreciation and amortization are property-level expenses, these non-cash expenses, which are based on historical cost accounting for real estate assets, implicitly assume that the value of real estate assets diminishes over time. Because real estate values have historically risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. We eliminate loss on asset impairments because these non-cash expenses are primarily related to our non-comparable properties, and do not reflect the operating performance of our comparable assets.

As a result of the elimination of corporate-level costs and expenses and depreciation and amortization, the comparable hotel operating results we present do not represent our total revenues, expenses or operating profit and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items to the extent that they are material to operating decisions or assessments of our operating performance. Our consolidated statements of operations include such amounts, all of which should be considered by investors when evaluating our performance.

We present these hotel operating results on a comparable hotel basis because we believe that doing so provides investors and management with useful information for evaluating the period-to-period performance of our hotels and facilitates comparisons with other hotel REITs and hotel owners. In particular, these measures assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at comparable hotels (which represent the vast majority of our portfolio) or from other factors, such as the effect of acquisitions or dispositions. While management believes that presentation of comparable hotel results is a “same store” supplemental measure that provides useful information in evaluating the ongoing performance of the Company, this measure is not used to allocate resources or to assess the operating performance of each of these hotels, as these decisions are based on data for individual hotels and are not based on comparable hotel results. For these reasons, we believe that comparable hotel operating results, when combined with the presentation of GAAP operating profit, revenues and expenses, provide useful information to investors and management.

EX-99.2

Exhibit 99.2

MERISTAR HOSPITALITY CORPORATION

SUPPLEMENTAL

EARNINGS RELEASE

FINANCIAL INFORMATION

Three and Six Months Ended

June 30, 2005

This supplemental earnings release financial information should be used in

conjunction with the second quarter 2005 earnings release issued August 3, 2005,

which can be found on the Company’s website at www.meristar.com.

MeriStar Hospitality Corporation

June 30, 2005

INDEX

	Page Number
Consolidated Statements of Operations Three and Six Months Ended June 30, 2005 and 2004	3
Consolidated Balance Sheets June 30, 2005 and December 31, 2004	4
Reconciliation of Net Loss to Funds From Operations Three and Six Months Ended June 30, 2005 and 2004	5
Reconciliation of Net Loss to EBITDA Three and Six Months Ended June 30, 2005 and 2004	6
Hotel Operational Data Schedule of Comparable Hotel Results Three and Six Months Ended June 30, 2005 and 2004	7
Reconciliation of Net Income to EBITDA (Hurricane Properties) Three and Six Months Ended June 30, 2005 and 2004	9
Portfolio Data Portfolio Distribution at June 30, 2005 By Market, Region, Brand and Location	10
Detailed Operating Statistics By Market, Region and Location	11
Capital Structure Total Enterprise Value and Total Debt	13
Forecasted Reconciliation of Net Loss to Funds From Operations Three Months Ending September 30, 2005 and Year Ending December 31, 2005	14
Forecasted Reconciliation of Net Loss to EBITDA Three Months Ending September 30, 2005 and Year Ending December 31, 2005	15
Hotel Portfolio Listing	16
Notes to Financial Information	18

2

MeriStar Hospitality Corporation

June 30, 2005

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Revenue:
Hotel operations:
Rooms	$	142,908		$	137,230		$	266,669		$	265,197
Food and beverage		61,006			57,028			112,187			105,572
Other hotel operations		11,815			15,694			23,039			30,945
Office rental, parking and other revenue		1,212			1,328			3,069			2,625
Total revenue		216,941			211,280			404,964			404,339
Hotel operating expenses:
Rooms		33,785			33,208			64,409			64,153
Food and beverage		40,903			39,877			77,752			76,141
Other hotel operating expenses		7,623			9,943			14,626			19,323
Office rental, parking and other expenses		612			670			1,436			1,255
Other operating expenses:
General and administrative, hotel		31,771			30,152			63,095			61,946
General and administrative, corporate		2,828			3,473			6,361			7,106
Property operating costs		31,294			30,048			60,452			59,300
Depreciation and amortization		23,837			24,356			48,256			49,464
Property taxes, insurance and other		12,098			15,232			22,882			31,345
Loss on asset impairments		—			310			—			310
Operating expenses		184,751			187,269			359,269			370,343
Equity in income/loss of and interest earned from unconsolidated affiliates		2,940			1,600			4,575			3,200
Hurricane business interruption gain		2,009			—			4,290			—
Operating income		37,139			25,611			54,560			37,196
Minority interest (expense) income		(39	)		671			308			1,617
Interest expense, net		(30,698	)		(30,090	)		(61,411	)		(64,592	)
Loss on early extinguishments of debt		(947	)		(1,980	)		(1,007	)		(7,903	)
Income (loss) before income taxes and discontinued operations		5,455			(5,788	)		(7,550	)		(33,682	)
Income tax (expense) benefit		(812	)		(38	)		(834	)		455
Income (loss) from continuing operations		4,643			(5,826	)		(8,384	)		(33,227	)
Discontinued operations:
Loss from discontinued operations before income tax		(3,709	)		(5,784	)		(4,126	)		(18,747	)
Income tax benefit		—			55			—			175
Loss from discontinued operations		(3,709	)		(5,729	)		(4,126	)		(18,572	)
Net income (loss)	$	934		$	(11,555	)	$	(12,510	)	$	(51,799	)
Basic earnings (loss) per share:
Earnings (loss) from continuing operations	$	0.05		$	(0.07	)	$	(0.10	)	$	(0.44	)
Loss from discontinued operations		(0.04	)		(0.07	)		(0.04	)		(0.24	)
Earnings (loss) per basic share	$	0.01		$	(0.14	)	$	(0.14	)	$	(0.68	)
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations	$	0.05		$	(0.08	)	$	(0.10	)	$	(0.45	)
Loss from discontinued operations		(0.04	)		(0.06	)		(0.04	)		(0.23	)
Earnings (loss) per diluted share	$	0.01		$	(0.14	)	$	(0.14	)	$	(0.68	)

3

MeriStar Hospitality Corporation

June 30, 2005

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

	June 30, 2005			December 31, 2004
ASSETS
Property and equipment	$	2,655,676		$	2,581,720
Accumulated depreciation		(545,023	)		(506,632	)
		2,110,653			2,075,088
Assets held for sale		5,063			—
Investment in and advances to unconsolidated affiliates		71,066			84,796
Prepaid expenses and other assets		32,918			34,533
Insurance claim receivable		34,458			76,056
Accounts receivable, net of allowance for doubtful accounts of $349 and $691		42,250			32,979
Restricted cash		69,317			58,413
Cash and cash equivalents – unrestricted		90,974			60,540
	$	2,456,699		$	2,422,405
LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-term debt	$	1,625,585		$	1,573,276
Accounts payable and accrued expenses		90,228			97,326
Accrued interest		39,949			41,165
Other liabilities		13,578			11,553
Total liabilities		1,769,340			1,723,320
Minority interests		13,112			14,053
Stockholders’ equity:
Preferred stock, par value $0.01 per share
Authorized – 100,000 shares
Issued – none		—			—
Common stock, par value $0.01 per share
Authorized – 100,000 shares
Issued – 89,975 and 89,739 shares		900			897
Additional paid-in capital		1,468,162			1,465,658
Accumulated deficit		(750,903	)		(738,393	)
Common stock held in treasury – 2,479 and 2,372 shares		(43,912	)		(43,130	)
Total stockholders’ equity		674,247			685,032
	$	2,456,699		$	2,422,405

4

MeriStar Hospitality Corporation

June 30, 2005

RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS (a)

(In thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Funds From Operations:
Net income (loss)	$	934		$	(11,555	)	$	(12,510	)	$	(51,799	)
Depreciation and amortization of real estate assets		22,503			23,617			45,997			48,120
Loss on disposal of assets		1,037			4,584			1,037			11,530
Unconsolidated affiliate adjustments		1,163			—			2,417			—
Minority interest to common OP unit holders		(628	)		(671	)		(1,215	)		(1,759	)
Interest on convertible debt		4,038			—			—			—
Funds from operations	$	29,047		$	15,975		$	35,726		$	6,092
Weighted average number of shares of common stock outstanding		104,263	(b)		85,333			87,529			78,234
Funds from operations per diluted share	$	0.28		$	0.19		$	0.41		$	0.08
Funds From Operations, as adjusted:
Funds from operations	$	29,047		$	15,975		$	35,726		$	6,092
Loss on asset impairments		2,836			2,430			2,836			7,441
Loss on early extinguishments of debt		947			1,980			1,007			7,903
Write off of deferred financing fees		199			453			210			1,719
Minority interest to common OP unit holders		(101	)		—			(98	)		—
Funds from operations, as adjusted	$	32,928		$	20,838		$	39,681		$	23,155
Weighted average number of shares of common stock and common stock equivalents outstanding		104,263	(b)		85,333			87,529			78,234
Funds from operations per diluted share, as adjusted	$	0.32		$	0.24		$	0.45		$	0.30

(a) See the notes to the financial information for discussion of non-GAAP measures.

(b) The 104,263 weighted average shares of common stock outstanding for diluted FFO and diluted Adjusted FFO for the three months ended June 30, 2005, includes 16,700 incremental shares that are not issued or outstanding, but that are dilutive in calculating FFO per diluted share and adjusted FFO per diluted share, and would be issued upon conversion of our convertible subordinated notes. These $170.0 million notes are convertible into common stock at a ratio of $10.18 per share.

5

MeriStar Hospitality Corporation

June 30, 2005

RECONCILIATION OF NET LOSS TO EBITDA (a)

(In thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
EBITDA and Adjusted EBITDA:
Net income (loss)	$	934		$	(11,555	)	$	(12,510	)	$	(51,799	)
Loss from discontinued operations		(3,709	)		(5,729	)		(4,126	)		(18,572	)
Income (loss) from continuing operations		4,643			(5,826	)		(8,384	)		(33,227	)
Interest expense, net		30,698			30,090			61,411			64,592
Income tax expense (benefit)		812			38			834			(455	)
Depreciation and amortization (b)		23,837			24,356			48,256			49,464
EBITDA from continuing operations		59,990			48,658			102,117			80,374
Loss on asset impairments		—			310			—			310
Minority interest expense (income)		39			(671	)		(308	)		(1,617	)
Loss on early extinguishments of debt		947			1,980			1,007			7,903
Equity investment adjustments:
Equity in (income) loss of affiliates		(206	)		—			1,164			—
Distributions accrued from equity investments		791			—			791			—
Adjusted EBITDA from continuing operations	$	61,561		$	50,277		$	104,771		$	86,970
Loss from discontinued operations	$	(3,709	)	$	(5,729	)	$	(4,126	)	$	(18,572	)
Interest expense, net		—			(367	)		—			(478	)
Income tax benefit		—			(55	)		—			(175	)
Depreciation and amortization		237			1,077			704			3,130
EBITDA from discontinued operations		(3,472	)		(5,074	)		(3,422	)		(16,095	)
Loss on asset impairments		2,836			2,120			2,836			7,131
Loss on disposal of assets		1,037			4,584			1,037			11,530
Adjusted EBITDA from discontinued operations	$	401		$	1,630		$	451		$	2,566
Adjusted EBITDA, total operations	$	61,962		$	51,907		$	105,222		$	89,536

(a) See the notes to the financial information for discussion of non-GAAP measures.

(b) Depreciation and amortization includes the write-off of deferred financing costs totaling $0.2 million and $0.5 million for the three months ended June 30, 2005 and 2004, respectively, and $0.2 million and $1.7 million for the six months ended June 30, 2005 and 2004, respectively, related to our early extinguishments of debt during these periods.

6

MeriStar Hospitality Corporation

June 30, 2005

HOTEL OPERATIONAL DATA

SCHEDULE OF COMPARABLE HOTEL RESULTS (a)

(In thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Number of hotels		61			61			61			61
Number of rooms		17,480			17,480			17,480			17,480
Comparable hotel revenues:
Rooms	$	129,140		$	117,441		$	241,827		$	226,288
Food and beverage		53,865			50,087			99,045			93,847
Other hotel operations		8,771			8,452			16,833			16,666
Comparable hotel revenues (b)		191,776			175,980			357,705			336,801
Comparable hotel expenses:
Room		30,811			28,780			59,178			56,453
Food and beverage		36,088			34,495			68,684			67,169
Other		5,970			5,846			11,622			11,614
General and administrative		28,751			27,206			57,115			54,990
Property operating costs, less management fees		24,074			22,467			46,958			44,888
Comparable hotel expenses (c)		125,694			118,794			243,557			235,114
Comparable Hotel Gross Operating Profit		66,082			57,186			114,148			101,687
Margin		34.5	%		32.5	%		31.9	%		30.2	%
Management Fees (c)		(4,791	)		(4,390	)		(8,936	)		(8,407	)
Property taxes, insurance and other (c)		(9,547	)		(8,986	)		(18,685	)		(18,175	)
Comparable Hotel EBITDA, excluding BI (d)	$	51,744		$	43,810		$	86,527		$	75,105
Margin		27.0	%		24.9	%		24.2	%		22.3	%
Hurricane business interruption gain		692			—			970			—
Comparable Hotel EBITDA, including BI (d)	$	52,436		$	43,810		$	87,497		$	75,105
Margin		27.3	%		24.9	%		24.5	%		22.3	%

(a) See the notes to the financial information for discussion of non-GAAP measures, and comparable hotel results and statistics.

7

MeriStar Hospitality Corporation

June 30, 2005

(b) The reconciliation of total revenues per the consolidated statements of operations to the comparable hotel revenues is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Revenues per the consolidated statements of operations	$	216,941		$	211,280		$	404,964		$	404,339
Non-comparable hotel revenues		(23,953	)		(33,972	)		(44,190	)		(64,913	)
Office rental, parking and other revenue		(1,212	)		(1,328	)		(3,069	)		(2,625	)
Comparable hotel revenues	$	191,776		$	175,980		$	357,705		$	336,801

(c) The reconciliation of operating costs per the consolidated statements of operations to the comparable hotel expenses, management fees, property taxes, insurance and other is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Operating expenses per the consolidated statements of operations	$	184,751		$	187,269		$	359,269		$	370,343
Non-comparable hotel expenses		(18,054	)		(26,960	)		(33,474	)		(51,767	)
General and administrative, corporate		(2,828	)		(3,473	)		(6,361	)		(7,106	)
Depreciation and amortization		(23,837	)		(24,356	)		(48,256	)		(49,464	)
Loss on asset impairments		—			(310	)		—			(310	)
Comparable hotel expenses, management fees, property taxes, insurance and other	$	140,032		$	132,170		$	271,178		$	261,696

(d) The reconciliation of comparable hotel EBITDA to operating income per the consolidated statements of operations is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Comparable hotel EBITDA, including BI	$	52,436		$	43,810		$	87,497		$	75,105
Non-comparable results, net (e)		5,899			7,012			10,716			13,146
Office rental, parking and other revenue		1,212			1,328			3,069			2,625
General and administrative, corporate		(2,828	)		(3,473	)		(6,361	)		(7,106	)
Depreciation and amortization		(23,837	)		(24,356	)		(48,256	)		(49,464	)
Loss on asset impairments		—			(310	)		—			(310	)
Equity in income/loss of and interest earned from unconsolidated affiliates		2,940			1,600			4,575			3,200
Hurricane business interruption gain at non-comparable hotels		1,317			—			3,320			—
Operating Income	$	37,139		$	25,611		$	54,560		$	37,196

(e) Non-comparable results, net represent all revenues and expenses, other than those of our comparable hotels, and specific revenues and expenses identified above: office rental, parking and other revenue; general and administrative, corporate; depreciation and amortization; loss on asset impairments and equity in income/loss of and interest earned from unconsolidated affiliates.

8

MeriStar Hospitality Corporation

June 30, 2005

RECONCILIATION OF NET INCOME TO EBITDA (HURRICANE PROPERTIES)

(In thousands)

In August and September 2004, hurricanes caused substantial damage to a number of our hotels located in Florida. The hurricane damage and local evacuation orders also caused significant business interruption at many of our Florida properties, including the complete closure of certain hotels. As a result, seven of our hotels were substantially closed for the first quarter of 2005.

During the second quarter, Sanibel Inn, Seaside Inn, Song of the Sea, and Sundial Beach Resort reopened but were not fully operational for the entire quarter. Best Western Sanibel Island is expected to open in August and Holiday Inn Walt Disney World is expected to open in the fourth quarter. South Seas Island Resort on Captiva Island is gradually reopening as condominium units are already being returned for rental and many of the facilities will be fully operating by year-end.

The following is a reconciliation of Net Income to EBITDA for those seven hotels and Dunes Golf and Tennis Club on Sanibel Island:

	Three Months Ended June 30,					Six Months Ended June 30,
	2005			2004		2005		2004
EBITDA:
Net income (loss) (a)	$	(410	)	$	586	$	474	$	4,387
Depreciation and amortization		1,645			2,642		3,289		5,288
EBITDA (a)	$	1,235		$	3,228	$	3,763	$	9,675

(a) Includes $1.3 million and $3.3 million of business interruption insurance gain at these seven hotels and Dunes Golf and Tennis Club in the three and six months ended June 30, 2005, respectively. We received an additional $0.7 million and $1.0 million of business interruption gain included in the 61 comparable hotels in the three and six months ended June 30, 2005, respectively.

9

MeriStar Hospitality Corporation

June 30, 2005

PORTFOLIO DATA

Portfolio Distribution at June 30, 2005 (a)

Market	Hotels	Rooms	% of Total Rooms		% of 2004 YTD Revenue
Washington DC Metro	11	2,478	12.5	%	20.3	%
Southwest Florida	6	1,026	5.2	%	1.5	%
Southern California	4	1,519	7.6	%	10.0	%
New Jersey	4	1,120	5.6	%	7.0	%
Orlando	3	1,545	7.8	%	5.6	%
Chicago	2	857	4.3	%	3.9	%
Northern California	2	764	3.8	%	4.0	%
Colorado	2	736	3.7	%	2.3	%
Atlanta	2	650	3.3	%	3.4	%
Dallas	2	598	3.0	%	2.5	%
Houston	2	597	3.0	%	3.4	%
All other markets	31	7,999	40.2	%	36.1	%
Total Markets	71	19,889	100.0	%	100.0	%
Region	Hotels	Rooms	% of Total Rooms		% of 2004 YTD Revenue
South Atlantic	20	5,659	28.5	%	22.3	%
Middle Atlantic	17	4,084	20.5	%	29.9	%
South Central	11	3,281	16.5	%	15.7	%
Pacific	9	3,078	15.5	%	18.0	%
North Central	7	1,789	9.0	%	7.1	%
Mountain	6	1,798	9.0	%	6.3	%
New England	1	200	1.0	%	0.7	%
Total Regions	71	19,889	100.0	%	100.0	%
Brand	Hotels	Rooms	% of Total Rooms		% of 2004 YTD Revenue
Hilton
Hilton	15	4,238	21.3	%	24.8	%
Doubletree	8	2,664	13.4	%	10.5	%
Embassy Suites	3	728	3.7	%	3.4	%
Starwood
Sheraton	10	3,220	16.2	%	17.2	%
Westin	1	495	2.5	%	2.8	%
Marriott
Marriott	4	1,696	8.5	%	10.2	%
Courtyard by Marriott	3	587	3.0	%	2.6	%
Ritz-Carlton	1	366	1.8	%	4.8	%
Intercontinental
Holiday Inn	5	1,229	6.2	%	3.7	%
Crowne Plaza	3	972	4.9	%	3.5	%
Independent	8	1,242	6.2	%	4.9	%
Radisson	5	1,337	6.7	%	6.6	%
Other	5	1,115	5.6	%	5.0	%
Total Brands	71	19,889	100.0	%	100.00	%
Location	Hotels	Rooms	% of Total Rooms		% of 2004 YTD Revenue
Urban	20	5,299	26.6	%	34.2	%
Resort	14	4,018	20.2	%	15.8	%
Airport	13	4,236	21.3	%	20.1	%
Suburban	24	6,336	31.9	%	29.9	%
Total Locations	71	19,889	100.0	%	100.0	%

10

MeriStar Hospitality Corporation

June 30, 2005

DETAILED OPERATING STATISTICS BY MARKET, REGION AND LOCATION

Comparable hotels, same store basis (a)

			2nd Quarter 2005						2nd Quarter 2004						Percent Change in RevPAR
Market/Region/Location	Hotels	Rooms	ADR		Occ%		RevPAR		ADR		Occ%		RevPAR
Washington DC Metro (b)	10	2,112	$	144.80	84.6	%	$	122.45	$	133.46	81.9	%	$	109.33	12.0	%
New Jersey	4	1,120	$	132.44	66.7	%	$	88.35	$	131.79	60.7	%	$	79.96	10.5	%
Southern California (b)	3	1,034	$	125.58	76.2	%	$	95.72	$	105.94	75.4	%	$	79.90	19.8	%
Northern California	2	764	$	127.74	74.7	%	$	95.45	$	118.97	78.7	%	$	93.61	2.0	%
Orlando (c)	2	1,231	$	90.80	72.3	%	$	65.11	$	74.84	75.7	%	$	56.62	15.0	%
Chicago	2	857	$	123.26	71.2	%	$	87.71	$	101.37	76.3	%	$	77.33	13.4	%
Colorado	2	736	$	91.05	60.9	%	$	55.44	$	83.33	64.4	%	$	53.65	3.3	%
Atlanta	2	650	$	94.18	75.6	%	$	71.19	$	81.37	80.3	%	$	65.37	8.9	%
Dallas	2	598	$	93.18	64.1	%	$	59.68	$	89.75	57.2	%	$	51.30	16.3	%
Houston	2	597	$	113.49	68.8	%	$	78.05	$	106.26	69.0	%	$	73.36	6.4	%
All other markets (c)	30	7,781	$	102.88	70.6	%	$	72.63	$	96.02	70.2	%	$	67.37	7.8	%
All Markets	61	17,480	$	112.48	72.2	%	$	81.19	$	102.60	72.0	%	$	73.87	9.9	%
Middle Atlantic (b)	16	3,718	$	140.56	79.1	%	$	111.17	$	131.84	75.3	%	$	99.34	11.9	%
South Central	11	3,281	$	105.09	69.1	%	$	72.63	$	99.66	66.9	%	$	66.69	8.9	%
South Atlantic (c)	12	4,101	$	100.48	71.8	%	$	72.15	$	89.19	73.9	%	$	65.88	9.5	%
Pacific (b)	8	2,593	$	123.27	70.1	%	$	86.45	$	110.05	71.0	%	$	78.16	10.6	%
North Central	7	1,789	$	103.69	70.0	%	$	72.56	$	92.11	72.3	%	$	66.63	8.9	%
Mountain	6	1,798	$	83.63	69.3	%	$	57.93	$	78.12	70.2	%	$	54.80	5.7	%
New England	1	200	$	91.07	74.7	%	$	68.02	$	77.14	81.4	%	$	62.80	8.3	%
All Regions	61	17,480	$	112.48	72.2	%	$	81.19	$	102.60	72.0	%	$	73.87	9.9	%
Urban (b)	19	4,933	$	134.63	78.0	%	$	104.97	$	120.84	78.6	%	$	94.96	10.5	%
Resort (c)	7	2,678	$	107.58	69.8	%	$	75.13	$	95.47	74.3	%	$	70.90	6.0	%
Airport (b)	12	3,751	$	93.21	73.2	%	$	68.25	$	83.51	73.3	%	$	61.20	11.5	%
Suburban	23	6,118	$	106.88	67.9	%	$	72.59	$	101.55	64.9	%	$	65.91	10.1	%
All Locations	61	17,480	$	112.48	72.2	%	$	81.19	$	102.60	72.0	%	$	73.87	9.9	%

(a) See notes to financial information for discussion of comparable hotel operating results and statistics.

(b) Excludes hotels acquired during the second quarter.

(c) Excludes hotels significantly affected by the hurricanes in Florida.

11

MeriStar Hospitality Corporation

June 30, 2005

DETAILED OPERATING STATISTICS BY MARKET, REGION AND LOCATION

Comparable hotels, same store basis (a)

			Six Months Ended June 30, 2005						Six Months Ended June 30, 2004						Percent Change in RevPAR
Market/Region/Location	Hotels	Rooms	ADR		Occ%		RevPAR		ADR		Occ%		RevPAR
Washington DC Metro (b)	10	2,112	$	142.14	74.6	%	$	106.07	$	126.50	75.3	%	$	95.21	11.4	%
New Jersey	4	1,120	$	130.42	59.0	%	$	76.92	$	129.19	55.7	%	$	71.99	6.8	%
Southern California (b)	3	1,034	$	123.32	76.3	%	$	94.12	$	110.15	76.1	%	$	83.87	12.2	%
Northern California	2	764	$	120.31	71.7	%	$	86.31	$	113.30	76.3	%	$	86.47	-0.2	%
Orlando (c)	2	1,231	$	95.68	76.6	%	$	73.32	$	79.83	75.3	%	$	60.09	22.0	%
Chicago	2	857	$	113.54	60.6	%	$	68.80	$	95.39	65.6	%	$	62.58	9.9	%
Colorado	2	736	$	87.67	54.0	%	$	47.36	$	81.40	61.1	%	$	49.76	-4.8	%
Atlanta	2	650	$	93.96	76.9	%	$	72.27	$	81.95	82.5	%	$	67.59	6.9	%
Dallas	2	598	$	91.66	61.9	%	$	56.78	$	88.48	58.1	%	$	51.43	10.4	%
Houston	2	597	$	110.84	68.5	%	$	75.93	$	113.47	72.9	%	$	82.70	-8.2	%
All other markets (c)	30	7,781	$	103.01	68.9	%	$	70.99	$	96.54	69.4	%	$	66.96	6.0	%
All Markets	61	17,480	$	110.65	69.1	%	$	76.44	$	101.63	70.0	%	$	71.16	7.4	%
Middle Atlantic (b)	16	3,718	$	137.66	69.9	%	$	96.24	$	126.64	69.1	%	$	87.48	10.0	%
South Central	11	3,281	$	100.94	66.5	%	$	67.09	$	98.55	66.2	%	$	65.25	2.8	%
South Atlantic (c)	12	4,101	$	105.26	73.5	%	$	77.36	$	93.05	74.8	%	$	69.61	11.1	%
Pacific (b)	8	2,593	$	119.90	70.4	%	$	84.36	$	110.84	71.9	%	$	79.71	5.8	%
North Central	7	1,789	$	97.72	62.8	%	$	61.35	$	87.97	65.4	%	$	57.53	6.6	%
Mountain	6	1,798	$	83.82	66.3	%	$	55.61	$	78.88	68.7	%	$	54.16	2.7	%
New England	1	200	$	88.40	71.1	%	$	62.81	$	74.65	80.7	%	$	60.22	4.3	%
All Regions	61	17,480	$	110.65	69.1	%	$	76.44	$	101.63	70.0	%	$	71.16	7.4	%
Urban (b)	19	4,933	$	127.35	72.2	%	$	92.00	$	115.31	74.1	%	$	85.42	7.7	%
Resort (c)	7	2,678	$	114.84	72.5	%	$	83.26	$	101.94	74.9	%	$	76.31	9.1	%
Airport (b)	12	3,751	$	93.99	71.3	%	$	67.01	$	83.75	73.0	%	$	61.10	9.7	%
Suburban	23	6,118	$	104.69	63.7	%	$	66.68	$	101.15	62.8	%	$	63.57	4.9	%
All Locations	61	17,480	$	110.65	69.1	%	$	76.44	$	101.63	70.0	%	$	71.16	7.4	%

(a) See notes to financial information for discussion of comparable hotel operating results and statistics.

(b) Excludes hotels acquired during the second quarter.

(c) Excludes hotels significantly affected by the hurricanes in Florida.

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MeriStar Hospitality Corporation

June 30, 2005

CAPITAL STRUCTURE

Total Enterprise Value

(In thousands, except per share information, ratios and percentages)

	As of June 30, 2005			As of December 31, 2004
Common shares outstanding, net		87,496			87,367
Operating partnership units		2,258			2,298
Combined shares and units		89,754			89,665
Common stock price at end of period	$	8.60		$	8.35
Common equity capitalization	$	771,884		$	748,703
Total debt		1,625,585			1,573,276
Total cash		(160,291	)		(118,953	)
Total enterprise value (TEV)	$	2,237,178		$	2,203,026
TEV per room	$	111		$	108
Rooms owned		20,115			20,319

Total Debt

Total debt as of June 30, 2005 consisted of the following:

	Encumbered Hotels	Maturity	Interest Rate		June 30, 2005			December 31, 2004
Senior Subordinated Notes	—	2007	8.75	%		32,552			33,976
Secured Revolver	6	2007	LIBOR + 450 bps			—			—
Senior Unsecured Notes	—	2008	9.00	%		265,196			270,130
Senior Unsecured Notes	—	2009	10.50	%		214,966			223,343
CMBS	19	2009	LIBOR + 444 bps			299,765			302,979
Convertible Notes	—	2010	9.50	%		170,000			170,000
Senior Unsecured Notes	—	2011	9.13	%		345,479			353,178
Mortgage Debt and other	5	Various	Various			205,233			125,051
CMBS	4	2013	6.88	%		98,498			99,293
						1,631,689			1,577,950
Fair value adjustment for interest rate swap						(6,104	)		(4,674	)
	34				$	1,625,585		$	1,573,276
Average Maturity						4.77 Years
Average Interest Rate						8.54	%

13

MeriStar Hospitality Corporation

June 30, 2005

FORECASTED RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS

(In millions, except per share amounts)

	Three Months Ending September 30, 2005
	Low-end of range			High-end of range
Forecasted Funds from Operations:
Net loss (a)	$	(21	)	$	(18	)
Adjustments to forecasted net loss:
Depreciation and amortization of real estate assets		25			25
Unconsolidated affiliate adjustments		1			1
Minority interest to common OP unit holders		(1	)		(1	)
Loss on disposal of assets		—			—
Funds from operations	$	4		$	7
Weighted average diluted shares of common stock and common OP units outstanding		90			90
Funds from operations per diluted share	$	0.04		$	0.08
Funds From Operations, as adjusted:
Funds from operations	$	4		$	7
Loss on asset impairments		—			—
Loss on early extinguishments of debt		—			—
Funds from operations, as adjusted	$	4		$	7
Weighted average number of shares of common stock and common stock equivalents outstanding		90			90
Funds from operations per diluted share, as adjusted	$	0.04		$	0.08
	Year Ending December 31, 2005
	Low-end of range			High-end of range
Forecasted Funds from Operations:
Net loss (a)	$	(46	)	$	(42	)
Adjustments to forecasted net loss:
Depreciation and amortization of real estate assets		95			95
Unconsolidated affiliate adjustments		4			4
Minority interest to common OP unit holders		(1	)		(1	)
Loss on disposal of assets		1			1
Funds from operations	$	53		$	57
Weighted average number of shares of common stock and common OP units outstanding		90			90
Funds from operations per diluted share	$	0.59		$	0.63
Funds From Operations, as adjusted:
Funds from operations	$	53		$	57
Loss on asset impairments		3			3
Loss on early extinguishments of debt		1			1
Funds from operations, as adjusted	$	57		$	61
Weighted average number of shares of common stock and common stock equivalents outstanding		90			90
Funds from operations per diluted share, as adjusted	$	0.63		$	0.68

(a) Forecasted net loss does not include any possible future losses on asset impairments, gains or losses on the sale of assets, gains or losses on early extinguishment of debt, or gains or losses on property damage insurance recoveries.

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MeriStar Hospitality Corporation

June 30, 2005

FORECASTED RECONCILIATION OF NET LOSS TO EBITDA

(In millions)

	Three Months Ending September 30, 2005
	Low-end of range			High-end of range
EBITDA and Adjusted EBITDA:
Net loss (a)	$	(21	)	$	(18	)
Interest expense, net		32			32
Depreciation and amortization		26			26
EBITDA		37			40
Loss on asset impairments		—			—
Loss on early extinguishments of debt		—			—
Equity investment adjustments:
Equity in (income) loss of affiliates		—			—
Distributions accrued from equity investments		1			1
Minority interest to common OP unit holders		(1	)		(1	)
Adjusted EBITDA	$	37			40
	Year Ending December 31, 2005
	Low-end of range			High-end of range
EBITDA and Adjusted EBITDA:
Net loss (a)	$	(46	)	$	(42	)
Interest expense, net		123			124
Depreciation and amortization		100			100
		177			182
EBITDA
Loss on asset impairments		3			3
Loss on early extinguishments of debt		1			1
Equity investment adjustments:
Equity in (income) loss of affiliates		1			1
Distributions accrued from equity investments		3			3
Minority interest to common OP unit holders		(1	)		(1	)
Loss on disposal of assets		1			1
Adjusted EBITDA	$	185			190

(a) Forecasted net loss does not include any possible future losses on asset impairments, gains or losses on the sale of assets, gains or losses on early extinguishment of debt, or gains or losses on property damage insurance recoveries.

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MeriStar Hospitality Corporation

June 30, 2005

HOTEL PORTFOLIO LISTING

Hotel	Location	Guest Rooms
Arizona
Embassy Suites Tucson	Tucson	204
California
Courtyard by Marriott Marina Del Rey	Marina Del Rey	276
Crowne Plaza San Jose	San Jose	239
Doral Palm Springs	Palm Springs	285
Hilton Irvine	Irvine	289
Hilton Sacramento	Sacramento	331
Marina Hotel San Pedro	San Pedro	226
LA Marriott Downtown	Los Angeles	469
Marriott Irvine	Irvine	485
Sheraton Fisherman’s Wharf	San Francisco	525
Colorado
Embassy Suites Denver	Englewood	236
Sheraton Colorado Springs	Colorado Springs	500
Connecticut
Doubletree Hotel Bradley International Airport	Windsor Locks	200
Florida
Best Western Sanibel Island Resort	Sanibel Island	46
Doubletree Hotel Westshore	Tampa	496
Doubletree Universal	Orlando	742
Hilton Clearwater	Clearwater	426
Hilton Hotel Cocoa Beach	Cocoa Beach	296
Holiday Inn Fort Lauderdale Beach	Ft. Lauderdale	240
Holiday Inn Walt Disney World Village	Lake Buena Vista	314
Sanibel Inn	Sanibel Island	96
Seaside Inn	Sanibel Island	32
Sheraton Beach Resort Key Largo	Key Largo	200
Sheraton Safari Lake Buena Vista	Lake Buena Vista	489
Song of the Sea	Sanibel Island	30
South Seas Plantation Resort & Yacht Harbor	Captiva	579
Sundial Beach Resort	Sanibel Island	243
Georgia
Doubletree Atlanta	Atlanta	155
Westin Atlanta	Atlanta	495
Wyndham Marietta	Marietta	218
Illinois
Crowne Plaza Chicago O’Hare	Rosemont	507
Radisson Chicago	Chicago	350
Indiana
Doubletree Indianapolis	Indianapolis	137
Kentucky
Hilton Seelbach	Louisville	321
Radisson Lexington	Lexington	367
Louisiana
Hilton Lafayette	Lafayette	327
Holiday Inn Select New Orleans	Kenner	303
Hotel Maison de Ville	New Orleans	23
Maryland
Radisson Annapolis	Annapolis	219
Radisson Cross Keys	Baltimore	148
Sheraton Columbia	Columbia	287

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MeriStar Hospitality Corporation

June 30, 2005

Hotel	Location	Guest Rooms
Michigan
Hilton Detroit	Romulus	151
Hilton Hotel Grand Rapids	Grand Rapids	224
New Jersey
Courtyard by Marriott Secaucus	Secaucus	165
Doral Forrestal	Princeton	290
Marriott Somerset	Somerset	440
Sheraton Crossroads Hotel Mahwah	Mahwah	225
New Mexico
Doubletree Albuquerque	Albuquerque	295
Wyndham Albuquerque Airport Hotel	Albuquerque	276
North Carolina
Courtyard by Marriott Durham	Durham	146
Hilton Hotel Durham	Durham	194
Sheraton Charlotte Airport	Charlotte	222
Oklahoma
Sheraton Oklahoma City	Oklahoma City	395
Pennsylvania
Embassy Suites Philadelphia	Philadelphia	288
Sheraton Great Valley	Frazer	198
Texas
Doubletree Austin	Austin	350
Doubletree Hotel Dallas Galleria	Dallas	289
Hilton Arlington	Arlington	309
Hilton Houston Westchase	Houston	295
Marriott West Loop Houston	Houston	302
Utah
Hilton Salt Lake City Airport	Salt Lake City	287
Virginia
Hilton Arlington	Arlington	209
Hilton Crystal City	Arlington	386
Holiday Inn Historic District Alexandria	Alexandria	178
Radisson Old Town Alexandria	Alexandria	253
The Ritz-Carlton, Pentagon City	Arlington	366
Washington
Sheraton Bellevue	Bellevue	179
Washington, D.C.
Georgetown Inn	Washington, D.C.	96
Hilton Embassy Row	Washington, D.C.	193
Latham Georgetown	Washington, D.C.	143
Wisconsin
Crowne Plaza Madison	Madison	226
Holiday Inn Madison	Madison	194
Total Rooms		20,115

17

MeriStar Hospitality Corporation

June 30, 2005

NOTES TO FINANCIAL INFORMATION

Funds From Operations

Substantially all of our non-current assets consist of real estate, and, in accordance with accounting principles generally accepted in the United States, or GAAP, those assets are subject to straight-line depreciation, which reflects the assumption that the value of real estate assets, other than land, will decline ratably over time. That assumption is often not true with respect to the actual market values of real estate assets (and, in particular, hotels), which fluctuate based on economic, market and other conditions. As a result, management and many industry investors believe the presentation of GAAP operating measures for real estate companies to be more informative and useful when other measures, adjusted for depreciation and amortization, are also presented.

In an effort to address these concerns, the National Association of Real Estate Investment Trusts, or NAREIT, adopted a definition of Funds From Operations, or FFO. NAREIT defines FFO as net income (computed in accordance with GAAP) excluding gains or losses from sales of real estate, real estate-related depreciation and amortization, and after comparable adjustments for our portion of these items related to unconsolidated partnerships and joint ventures. Extraordinary items and cumulative effect of changes in accounting principles as defined by GAAP are also excluded from the calculation of FFO. As defined by NAREIT, FFO also does not include reductions from asset impairment charges. The SEC, however, recommends that FFO include the effect of asset impairment charges, which is the presentation we have adopted for all historical presentations of FFO. We believe FFO is an indicative measure of our operating performance due to the significance of our hotel real estate assets and provides beneficial information to investors.

Adjusted FFO represents FFO excluding the effects of gains or losses on early extinguishments of debt, write-offs of deferred financing costs and, in accordance with the NAREIT definition of FFO, asset impairment charges. We exclude the effects of gains or losses on early extinguishments of debt, write-offs of deferred financing costs and asset impairment charges because we believe that including them in Adjusted FFO does not fully reflect the operating performance of our remaining assets. We believe Adjusted FFO is useful for the same reasons we believe that FFO is useful, but we also believe that Adjusted FFO enables us and the investor to consider our operating performance without considering the items we exclude from our definition of Adjusted FFO, which have no cash effect in the periods considered.

Consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization

EBITDA represents consolidated earnings before interest, income taxes, depreciation and amortization and includes operations from the assets included in discontinued operations. We further adjust EBITDA for the effect of capital market transactions that would result in a gain or loss on early extinguishments of debt, the earnings effect and distributions accrued related to equity method investments, as well as the earnings effect of asset dispositions and any impairment assessments, resulting in the measure that we refer to as “Adjusted EBITDA.” We exclude the effect of gains or losses on early extinguishments of debt, the earnings effect and distributions accrued related to equity method investments, as well as the earnings effect of asset dispositions and impairment assessments because we believe that including them in Adjusted EBITDA does not fully reflect the operating performance of our remaining assets.

We also believe Adjusted EBITDA provides useful information to investors regarding our financial condition and results of operations because Adjusted EBITDA is useful in evaluating our operating performance. Furthermore, we use Adjusted EBITDA to provide a measure of performance that can be isolated on an asset by asset basis to determine overall property performance. We believe that the rating agencies and a number of our lenders also use Adjusted EBITDA for those purposes. We also use Adjusted EBITDA as one measure in determining the value of acquisitions and dispositions.

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MeriStar Hospitality Corporation

June 30, 2005

Comparable Hotel Operating Results and Statistics

We present certain operating statistics (i.e., RevPAR, ADR and average occupancy) and operating results (revenues, expenses and operating profit) for the periods included in this report on a comparable hotel basis as supplemental information for investors. We define our comparable hotels as properties (i) that are owned by us and the operations of which are included in our consolidated results for the entirety of the reporting periods being compared, (ii) that have not sustained substantial property damage during the reporting periods being compared, and (iii) that are not planned for disposition as of the end of the period. Of the 72 hotels that we owned as of June 30, 2005, 61 have been classified as comparable hotels. The operating results of seven hotels significantly affected by the hurricanes in Florida in August and September 2004, one sold in July, one which we intend to dispose of, and the two hotels acquired in 2004 that we owned as of June 30, 2005, are excluded from comparable hotel results for these periods.

We present these comparable hotel operating results by eliminating corporate-level revenues and expenses, as well as depreciation and amortization and loss on asset impairments. We eliminate corporate-level revenues and expenses to arrive at property-level results because we believe property-level results provide investors with supplemental information into the ongoing operating performance of our hotels and the effectiveness of management in running our business on a property-level basis. We eliminate depreciation and amortization because, even though depreciation and amortization are property-level expenses, these non-cash expenses, which are based on historical cost accounting for real estate assets, implicitly assume that the value of real estate assets diminishes over time. Because real estate values have historically risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. We eliminate loss on asset impairments because these non-cash expenses are primarily related to our non-comparable properties, and do not reflect the operating performance of our comparable assets.

As a result of the elimination of corporate-level costs and expenses and depreciation and amortization, the comparable hotel operating results we present do not represent our total revenues, expenses or operating profit and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items to the extent that they are material to operating decisions or assessments of our operating performance. Our consolidated statements of operations include such amounts, all of which should be considered by investors when evaluating our performance.

We present these hotel operating results on a comparable hotel basis because we believe that doing so provides investors and management with useful information for evaluating the period-to-period performance of our hotels and facilitates comparisons with other hotel REITs and hotel owners. In particular, these measures assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at comparable hotels (which represent the vast majority of our portfolio) or from other factors, such as the effect of acquisitions or dispositions. While management believes that presentation of comparable hotel results is a “same store” supplemental measure that provides useful information in evaluating the ongoing performance of the Company, this measure is not used to allocate resources or to assess the operating performance of each of these hotels, as these decisions are based on data for individual hotels and are not based on comparable hotel results. For these reasons, we believe that comparable hotel operating results, when combined with the presentation of GAAP operating profit, revenues and expenses, provide useful information to investors and management.

19