----

----

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------|

|  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|------------------------------------------------------------------------------------------|

| Maryland                                                       |   | 251811499                            |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or Other Jurisdiction of Incorporation or Organization) |   | (I.R.S. Employer Identification No.) |
|                                                           |   |                                 |
|                                                           |   |                                 |
| 44 Hersha Drive, Harrisburg, PA                                |   | 17102                                |
| (Address of Registrant’s Principal Executive Offices)    |   | (Zip Code)                           |

| Title of each class                                                       |   | Name of each exchange on which registered |
|---------------------------------------------------------------------------|--------|-------------------------------------------|
| Class A Common Shares of Beneficial Interest, par value $.01 per share    |   | New York Stock Exchange                   |
| Series A Cumulative Redeemable Preferred Shares, par value $.01 per share |   | New York Stock Exchange                   |

|   | Large accelerated filer  o           | Accelerated filer                x |   |
|--------|------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|--------|
|   | Non-accelerated filer    o | Small reporting company  o                                                                               |   |

----

----

----

Hersha Hospitality Trust

| Item No.                                 |   |                                                                                                                      | Page   |
|------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|
|                                     |   |                                                                                                                      |   |
| PART I.  FINANCIAL INFORMATION |   |
| Item 1.                                  |   | Financial Statements.                                                                                                     | 3      |
|                                     |   | Consolidated Balance Sheets as of March 31, 2010 [Unaudited] and December 31, 2009                                        | 3      |
|                                     |   | Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009 [Unaudited]                      | 4      |
|                                     |   | Consolidated Statements of Equity and Comprehensive Income for the Three Months Ended March 31, 2010 and 2009 [Unaudited] | 6      |
|                                     |   | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 [Unaudited]                      | 7      |
|                                     |   | Notes to the Consolidated Financial Statements                                                                            | 8      |
| Item 2.                                  |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations.                              | 31     |
| Item 3.                                  |   | Quantitative and Qualitative Disclosures About Market Risk.                                                               | 40     |
| Item 4.                                  |   | Controls and Procedures.                                                                                                  | 41     |
| PART II.  OTHER INFORMATION    |   |
| Item 1.                                  |   | Legal Proceedings.                                                                                                        | 42     |
| Item 1A.                                 |   | Risk Factors.                                                                                                             | 42     |
| Item 2.                                  |   | Unregistered Sales of Equity Securities and Use of Proceeds.                                                              | 42     |
| Item 3.                                  |   | Defaults Upon Senior Securities.                                                                                          | 42     |
| Item 4.                                  |   | Submission of Matters to a Vote of Security Holders.                                                                      | 42     |
| Item 5.                                  |   | Other Information.                                                                                                        | 43     |
| Item 6.                                  |   | Exhibits.                                                                                                                 | 46     |
|                                     |   |                                                                                                                      |   |
|                                     |   | SIGNATURE                                                                                                                 | 47     |

----

Table of Contents

PART I.  FINANCIAL INFORMATION

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

|                                                                                                                                                                                                                                           |   | March 31, 2010 |      |   | December 31, 2009 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|-----------|--------|------------------------|--------|
| Assets:                                                                                                                                                                                                                                        |   |                |      |   |                   |   |
| Investment in Hotel Properties, net of Accumulated Depreciation                                                                                                                                                                                |   | $                   | 1,111,255 |   |                   | $      | 938,954 |   |
| Investment in Unconsolidated Joint Ventures                                                                                                                                                                                                    |   |                | 35,831    |   |                   |   | 39,182 |   |
| Development Loans Receivable                                                                                                                                                                                                                   |   |                | 46,700    |   |                   |   | 46,094 |   |
| Cash and Cash Equivalents                                                                                                                                                                                                                      |   |                | 22,004    |   |                   |   | 11,404 |   |
| Escrow Deposits                                                                                                                                                                                                                                |   |                | 18,112    |   |                   |   | 16,174 |   |
| Hotel Accounts Receivable, net of allowance for doubtful accounts of $109 and $34                                                                                                                                                              |   |                | 8,865     |   |                   |   | 7,103 |   |
| Deferred Financing Costs, net of Accumulated Amortization of $4,690 and $4,262                                                                                                                                                                 |   |                | 8,074     |   |                   |   | 8,696 |   |
| Due from Related Parties                                                                                                                                                                                                                       |   |                | 4,614     |   |                   |   | 2,394 |   |
| Intangible Assets, net of Accumulated Amortization of $864 and $803                                                                                                                                                                            |   |                | 7,771     |   |                   |   | 7,542 |   |
| Other Assets                                                                                                                                                                                                                                   |   |                | 12,663    |   |                   |   | 12,428 |   |
| Assets Held for Sale                                                                                                                                                                                                                           |   |                | 21,073    |   |                   |   | 21,073 |   |
|                                                                                                                                                                                                                                           |   |                |      |   |                   |   |   |   |
| Total Assets                                                                                                                                                                                                                                   |   | $                   | 1,296,962 |   |                   | $      | 1,111,044 |   |
|                                                                                                                                                                                                                                           |   |                |      |   |                   |   |   |   |
| Liabilities and Equity:                                                                                                                                                                                                                        |   |                |      |   |                   |   |   |   |
| Line of Credit                                                                                                                                                                                                                                 |   | $                   | -         |   |                   | $      | 79,200 |   |
| Mortgages and Notes Payable, net of unamortized discount of $1,200 and $49                                                                                                                                                                     |   |                | 657,998   |   |                   |   | 645,351 |   |
| Accounts Payable, Accrued Expenses and Other Liabilities                                                                                                                                                                                       |   |                | 23,067    |   |                   |   | 16,216 |   |
| Dividends and Distributions Payable                                                                                                                                                                                                            |   |                | 8,337     |   |                   |   | 4,293 |   |
| Due to Related Parties                                                                                                                                                                                                                         |   |                | 282       |   |                   |   | 769 |   |
| Liabilities Related to Assets Held for Sale                                                                                                                                                                                                    |   |                | 20,876    |   |                   |   | 20,892 |   |
|                                                                                                                                                                                                                                           |   |                |      |   |                   |   |   |   |
| Total Liabilities                                                                                                                                                                                                                              |   |                | 710,560   |   |                   |   | 766,721 |   |
|                                                                                                                                                                                                                                           |   |                |      |   |                   |   |   |   |
| Redeemable Noncontrolling Interests - Common Units (Note 1)                                                                                                                                                                                    |   | $                   | 15,874    |   |                   | $      | 14,733 |   |
|                                                                                                                                                                                                                                           |   |                |      |   |                   |   |   |   |
| Equity:                                                                                                                                                                                                                                        |   |                |      |   |                   |   |   |   |
| Shareholders' Equity:                                                                                                                                                                                                                          |   |                |      |   |                   |   |   |   |
| Preferred Shares - 8% Series A, $.01 Par Value, 29,000,000 shares authorized, 2,400,000 Shares Issued and Outstanding (Aggregate Liquidation Preference $60,000) at March 31, 2010 and December 31, 2009                                       |   |                | 24        |   |                   |   | 24 |   |
| Common Shares - Class A, $.01 Par Value, 300,000,000 and 150,000,000 Shares Authorized at March 31, 2010 and December 31, 2009, 137,246,278 and 57,682,917 Shares Issued and Outstanding at March 31, 2010 and December 31, 2009, respectively |   |                | 1,372     |   |                   |   | 577 |   |
| Common Shares - Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding                                                                                                                                              |   |                | -         |   |                   |   | - |   |
| Accumulated Other Comprehensive Loss                                                                                                                                                                                                           |   |                | (165      | )      |                   |   | (160 | ) |
| Additional Paid-in Capital                                                                                                                                                                                                                     |   |                | 747,229   |   |                   |   | 487,481 |   |
| Distributions in Excess of Net Income                                                                                                                                                                                                          |   |                | (208,409  | )      |                   |   | (185,725 | ) |
| Total Shareholders' Equity                                                                                                                                                                                                                     |   |                | 540,051   |   |                   |   | 302,197 |   |
|                                                                                                                                                                                                                                           |   |                |      |   |                   |   |   |   |
| Noncontrolling Interests (Note 1):                                                                                                                                                                                                             |   |                |      |   |                   |   |   |   |
| Noncontrolling Interests - Common Units                                                                                                                                                                                                        |   |                | 30,524    |   |                   |   | 27,126 |   |
| Noncontrolling Interests - Consolidated Joint Ventures                                                                                                                                                                                         |   |                | (47       | )      |                   |   | 267 |   |
| Total Noncontrolling Interests                                                                                                                                                                                                                 |   |                | 30,477    |   |                   |   | 27,393 |   |
|                                                                                                                                                                                                                                           |   |                |      |   |                   |   |   |   |
| Total Equity                                                                                                                                                                                                                                   |   |                | 570,528   |   |                   |   | 329,590 |   |
|                                                                                                                                                                                                                                           |   |                |      |   |                   |   |   |   |
| Total Liabilities and Equity                                                                                                                                                                                                                   |   | $                   | 1,296,962 |   |                   | $      | 1,111,044 |   |

----

Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

|                                                                                                |   | Three Months Ended  |    |
|-----------------------------------------------------------------------------------------------------|--------|---------------------|---------|
|                                                                                                |   | March 31, 2010 |    |   | March 31, 2009 |   |
| Revenue:                                                                                            |   |                |    |   |   |   |
| Hotel Operating Revenues                                                                            |   | $                   | 49,388  |   |   | $ | 42,397 |   |
| Interest Income from Development Loans                                                              |   |                | 1,374   |   |   |   | 2,397 |   |
| Other Revenues                                                                                      |   |                | 165     |   |   |   | 229 |   |
| Total Revenues                                                                                      |   |                | 50,927  |   |   |   | 45,023 |   |
|                                                                                                |   |                |    |   |   |   |   |   |
| Operating Expenses:                                                                                 |   |                |    |   |   |   |   |   |
| Hotel Operating Expenses                                                                            |   |                | 32,163  |   |   |   | 28,144 |   |
| Hotel Ground Rent                                                                                   |   |                | 292     |   |   |   | 292 |   |
| Real Estate and Personal Property Taxes and Property Insurance                                      |   |                | 4,045   |   |   |   | 3,198 |   |
| General and Administrative                                                                          |   |                | 2,834   |   |   |   | 1,480 |   |
| Stock Based Compensation                                                                            |   |                | 656     |   |   |   | 421 |   |
| Acquisition and Terminated Transaction Costs                                                        |   |                | 3,336   |   |   |   | 7 |   |
| Depreciation and Amortization                                                                       |   |                | 12,056  |   |   |   | 10,439 |   |
| Total Operating Expenses                                                                            |   |                | 55,382  |   |   |   | 43,981 |   |
|                                                                                                |   |                |    |   |   |   |   |   |
| Operating (Loss) Income                                                                             |   |                | (4,455  | ) |   |   | 1,042 |   |
|                                                                                                |   |                |    |   |   |   |   |   |
| Interest Income                                                                                     |   |                | 41      |   |   |   | 60 |   |
| Interest Expense                                                                                    |   |                | 11,357  |   |   |   | 10,230 |   |
| Other Expense                                                                                       |   |                | 92      |   |   |   | 50 |   |
| Loss on Debt Extinguishment                                                                         |   |                | 731     |   |   |   | - |   |
| Loss before Income (Loss) from Unconsolidated Joint Venture Investments and Discontinued Operations |   |                | (16,594 | ) |   |   | (9,178 | ) |
|                                                                                                |   |                |    |   |   |   |   |   |
| Loss from Unconsolidated Joint Ventures                                                             |   |                | (1,040  | ) |   |   | (1,329 | ) |
| Gain from Remeasurement of Investment in Unconsolidated Joint Venture                               |   |                | 1,818   |   |   |   | - |   |
| Income (Loss) from Unconsolidated Joint Venture Investments                                         |   |                | 778     |   |   |   | (1,329 | ) |
|                                                                                                |   |                |    |   |   |   |   |   |
| Loss from Continuing Operations                                                                     |   |                | (15,816 | ) |   |   | (10,507 | ) |
|                                                                                                |   |                |    |   |   |   |   |   |
| Discontinued Operations  (Note 12):                                                       |   |                |    |   |   |   |   |   |
| Loss from Discontinued Operations                                                                   |   |                | (521    | ) |   |   | (176 | ) |
|                                                                                                |   |                |    |   |   |   |   |   |
| Net Loss                                                                                            |   |                | (16,337 | ) |   |   | (10,683 | ) |
|                                                                                                |   |                |    |   |   |   |   |   |
| Loss Allocated to Noncontrolling Interests                                                          |   |                | 1,715   |   |   |   | 2,053 |   |
| Preferred Distributions                                                                             |   |                | (1,200  | ) |   |   | (1,200 | ) |
|                                                                                                |   |                |    |   |   |   |   |   |
| Net Loss applicable to Common Shareholders                                                          |   | $                   | (15,822 | ) |   | $ | (9,830 | ) |

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Table of Contents

|                                                                |   | Three Months Ended  |   |
|---------------------------------------------------------------------|--------|---------------------|--------|
|                                                                |   | March 31, 2010 |   |   | March 31, 2009 |   |
| Earnings Per Share:                                                 |   |                |   |   |   |   |
| BASIC                                                               |   |                |   |   |   |   |
| Loss from Continuing Operations applicable to Common Shareholders   |   | $                   | (0.16  | ) |   | $ | (0.21 | ) |
| Loss from Discontinued Operations applicable to Common Shareholders |   |                | -      |   |   |   | - |   |
|                                                                |   |                |   |   |   |   |   |   |
| Net Loss applicable to Common Shareholders                          |   | $                   | (0.16  | ) |   | $ | (0.21 | ) |
|                                                                |   |                |   |   |   |   |   |   |
| DILUTED                                                             |   |                |   |   |   |   |   |   |
| Loss from Continuing Operations applicable to Common Shareholders   |   | $                   | (0.16  | ) * |   | $ | (0.21 | ) * |
| Loss from Discontinued Operations applicable to Common Shareholders |   |                | -      | * |   |   | - | * |
|                                                                |   |                |   |   |   |   |   |   |
| Net Loss applicable to Common Shareholders                          |   | $                   | (0.16  | ) * |   | $ | (0.21 | ) * |

| * | Loss allocated to noncontrolling interest in Hersha Hospitality Limited Partnership has been excluded from the numerator and units of limited partnership interest in Hersha Hospitality Limited Partnership have been omitted from the denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the numerator and denominator would have no impact. Weighted average units of limited partnership interest in Hersha Hospitality Limited Partnership outstanding for the three months ended March 31, 2010 and 2009 were 9,515,228 and 8,746,300, respectively. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Unvested stock awards and options to acquire our common shares have been omitted from the denominator for the purpose of computing diluted earnings per share for the three months ended March 31, 2010 and 2009, since the effect of including these awards in the denominator would be anti-dilutive to loss from continuing operations applicable to common shareholders.  For the three months ended March 31, 2010, there were 124,685 anti-dilutive unvested stock awards outstanding and 1,539,416 anti-dilutive options to acquire our common shares outstanding. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

|                                    |   | Shareholders' Equity     |   |   | Noncontrolling Interests |   |   |                 |   |   | Redeemable Noncontrolling Interests |   |
|-----------------------------------------|--------|--------------------------|--------|--------|--------------------------|--------|--------|----------------------|--------|--------|-------------------------------------|--------|
|                                    |   | Series APreferred Shares |   |   | Class ACommon Shares     |   |   | Class BCommon Shares |   |   | AdditionalPaid-InCapital            |   |   | OtherComprehensiveIncome |   |   | Distributionsin Excessof NetEarnings |   |   | Total Shareholders' Equity |   |   | Common Units |   |   | Consolidated Joint Ventures |   |   | Total Noncontrolling Interests |   |   | TotalEquity |   |   | Common Units |   |
| Balance at December 31, 2009            |   | $                        | 24     |   |                     | $      | 577    |                 |   | $      | -                                   |   |   | $ | 487,481 |   |   | $ | (160 | ) |   | $ | (185,725 | ) |   | $ | 302,197 |   |   | $ | 27,126 |   |   | $ | 267 |   |   | $ | 27,393 |   |   | $ | 329,590 |   |   | $ | 14,733 |   |
|                                    |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reallocation of Noncontrolling Interest |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | (1,745 | ) |   |   | - |   |   |   | - |   |   |   | (1,745 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,745 | ) |   |   | 1,745 |   |
| Unit Conversion                         |   |                     | -      |   |                     |   | 1      |                 |   |   | -                                   |   |   |   | 601 |   |   |   | - |   |   |   | - |   |   |   | 602 |   |   |   | (602 | ) |   |   | - |   |   |   | (602 | ) |   |   | - |   |   |   | - |   |
| Units Issued for Acquisitions           |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,299 |   |   |   | - |   |   |   | 5,299 |   |   |   | 5,299 |   |   |   |   |   |
| Common Share Issuance, net of costs     |   |                     | -      |   |                     |   | 794    |                 |   |   | -                                   |   |   |   | 260,233 |   |   |   | - |   |   |   | - |   |   |   | 261,027 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 261,027 |   |   |   | - |   |
| Dividends and Distribution declared:    |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred Shares ($0.50 per share)      |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | - |   |   |   | - |   |   |   | (1,200 | ) |   |   | (1,200 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,200 | ) |   |   | - |   |
| Common Shares ($0.05 per share)         |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | - |   |   |   | - |   |   |   | (6,862 | ) |   |   | (6,862 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (6,862 | ) |   |   | - |   |
| Common Units ($0.05 per share)          |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (350 | ) |   |   | - |   |   |   | (350 | ) |   |   | (350 | ) |   |   | (152 | ) |
| Dividend Reinvestment Plan              |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | 3 |   |   |   | - |   |   |   | - |   |   |   | 3 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3 |   |   |   | - |   |
| Stock Based Compensation                |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted Share Award Vesting          |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | 656 |   |   |   | - |   |   |   | - |   |   |   | 656 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 656 |   |   |   | - |   |
| Comprehensive Loss:                     |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income              |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | - |   |   |   | (5 | ) |   |   | - |   |   |   | (5 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (5 | ) |   |   | - |   |
| Net Loss                                |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | - |   |   |   | - |   |   |   | (14,622 | ) |   |   | (14,622 | ) |   |   | (949 | ) |   |   | (314 | ) |   |   | (1,263 | ) |   |   | (15,885 | ) |   |   | (452 | ) |
| Total Comprehensive Loss                |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (14,627 | ) |   |   | (949 | ) |   |   | (314 | ) |   |   | (1,263 | ) |   |   | (15,890 | ) |   |   | (452 | ) |
|                                    |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at March 31, 2010               |   | $                        | 24     |   |                     | $      | 1,372  |                 |   | $      | -                                   |   |   | $ | 747,229 |   |   | $ | (165 | ) |   | $ | (208,409 | ) |   | $ | 540,051 |   |   | $ | 30,524 |   |   | $ | (47 | ) |   | $ | 30,477 |   |   | $ | 570,528 |   |   | $ | 15,874 |   |
|                                    |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                    |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2008            |   | $                        | 24     |   |                     | $      | 483    |                 |   | $      | -                                   |   |   | $ | 463,772 |   |   | $ | (109 | ) |   | $ | (114,207 | ) |   | $ | 349,963 |   |   | $ | 34,781 |   |   | $ | 1,854 |   |   | $ | 36,635 |   |   | $ | 386,598 |   |   | $ | 18,739 |   |
|                                    |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reallocation of Noncontrolling Interest |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | 155 |   |   |   | - |   |   |   | - |   |   |   | 155 |   |   |   | (112 | ) |   |   | - |   |   |   | (112 | ) |   |   | 43 |   |   |   | (43 | ) |
| Dividends and Distribution declared:    |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred Stock ($0.50 per share)       |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | - |   |   |   | - |   |   |   | (1,200 | ) |   |   | (1,200 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,200 | ) |   |   | - |   |
| Common Stock ($0.18 per share)          |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | - |   |   |   | - |   |   |   | (8,692 | ) |   |   | (8,692 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (8,692 | ) |   |   | - |   |
| Common Units ($0.18 per share)          |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,023 | ) |   |   | - |   |   |   | (1,023 | ) |   |   | (1,023 | ) |   |   | (552 | ) |
| Dividend Reinvestment Plan              |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | 9 |   |   |   | - |   |   |   | - |   |   |   | 9 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 9 |   |   |   | - |   |
| Stock Based Compensation                |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted Share Award Vesting          |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | 421 |   |   |   |   |   |   |   |   |   |   |   | 421 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 421 |   |   |   | - |   |
| Share Grants to Trustees                |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | 37 |   |   |   | - |   |   |   | - |   |   |   | 37 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 37 |   |   |   | - |   |
| Comprehensive Income (Loss):            |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income              |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | - |   |   |   | 51 |   |   |   | - |   |   |   | 51 |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   | 51 |   |   |   | - |   |
| Net Loss                                |   |                     | -      |   |                     |   | -      |                 |   |   | -                                   |   |   |   | - |   |   |   | - |   |   |   | (8,630 | ) |   |   | (8,630 | ) |   |   | (1,026 | ) |   |   | (475 | ) |   |   | (1,501 | ) |   |   | (10,131 | ) |   |   | (552 | ) |
| Total Comprehensive Loss                |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (8,579 | ) |   |   | (1,026 | ) |   |   | (475 | ) |   |   | (1,501 | ) |   |   | (10,080 | ) |   |   | (552 | ) |
|                                    |   |                     |   |   |                     |   |   |                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at March 31, 2009               |   | $                        | 24     |   |                     | $      | 483    |                 |   | $      | -                                   |   |   | $ | 464,394 |   |   | $ | (58 | ) |   | $ | (132,729 | ) |   | $ | 332,114 |   |   | $ | 32,620 |   |   | $ | 1,379 |   |   | $ | 33,999 |   |   | $ | 366,113 |   |   | $ | 17,592 |   |

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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

|                                                                            |   | For the Three Months Ended |     |
|---------------------------------------------------------------------------------|--------|----------------------------|----------|
|                                                                            |   | March 31, 2010        |     |   | March 31, 2009 |   |
| Operating activities                                                            |   |                       |     |   |   |   |
| Net loss                                                                        |   | $                          | (16,337  | ) |   | $ | (10,683 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: |   |                       |     |   |   |   |   |   |
| Acquisition and terminated transaction costs                                    |   |                       | 3,248    |   |   |   | - |   |
| Depreciation                                                                    |   |                       | 11,973   |   |   |   | 10,871 |   |
| Amortization of intangible assets and deferred costs                            |   |                       | 678      |   |   |   | 597 |   |
| Debt extinguishment                                                             |   |                       | 580      |   |   |   | - |   |
| Development loan interest added to principal                                    |   |                       | (606     | ) |   |   | - |   |
| Equity in (income) loss of unconsolidated joint venture investments             |   |                       | (778     | ) |   |   | 1,329 |   |
| Distributions from unconsolidated joint venture investments                     |   |                       | -        |   |   |   | 400 |   |
| Loss (gain) recognized on change in fair value of derivative instrument         |   |                       | 2        |   |   |   | (75 | ) |
| Stock based compensation                                                        |   |                       | 656      |   |   |   | 422 |   |
| Change in assets and liabilities:                                               |   |                       |     |   |   |   |   |   |
| (Increase) decrease in:                                                         |   |                       |     |   |   |   |   |   |
| Hotel accounts receivable                                                       |   |                       | (1,530   | ) |   |   | (93 | ) |
| Escrow deposits                                                                 |   |                       | (1,938   | ) |   |   | (874 | ) |
| Other assets                                                                    |   |                       | 179      |   |   |   | (951 | ) |
| Due from related parties                                                        |   |                       | (2,059   | ) |   |   | 383 |   |
| Increase (decrease) in:                                                         |   |                       |     |   |   |   |   |   |
| Due to related parties                                                          |   |                       | (488     | ) |   |   | (658 | ) |
| Accounts payable, accrued expenses and other liabilities                        |   |                       | 4,955    |   |   |   | (1,066 | ) |
| Net cash provided by operating activities                                       |   |                       | (1,465   | ) |   |   | (398 | ) |
|                                                                            |   |                       |     |   |   |   |   |   |
| Investing activities:                                                           |   |                       |     |   |   |   |   |   |
| Purchase of hotel property assets                                               |   |                       | (164,016 | ) |   |   | - |   |
| Capital expenditures                                                            |   |                       | (1,373   | ) |   |   | (1,998 | ) |
| Investment in development loans receivable                                      |   |                       | -        |   |   |   | (2,000 | ) |
| Advances and capital contributions to unconsolidated joint venture investments  |   |                       | -        |   |   |   | (753 | ) |
| Net cash used in investing activities                                           |   |                       | (165,389 | ) |   |   | (4,751 | ) |
|                                                                            |   |                       |     |   |   |   |   |   |
| Financing activities:                                                           |   |                       |     |   |   |   |   |   |
| (Repayments of) proceeds from borrowings under line of credit, net              |   |                       | (79,200  | ) |   |   | 16,900 |   |
| Principal repayment of mortgages and notes payable                              |   |                       | (31,384  | ) |   |   | (1,380 | ) |
| Proceeds from mortgages and notes payable                                       |   |                       | 31,535   |   |   |   | 169 |   |
| Cash paid for deferred financing costs                                          |   |                       | (8       | ) |   |   | (9 | ) |
| Proceeds from issuance of common shares, net of issuance costs                  |   |                       | 261,027  |   |   |   | - |   |
| Dividends paid on common shares                                                 |   |                       | (2,881   | ) |   |   | (8,683 | ) |
| Dividends paid on preferred shares                                              |   |                       | (1,200   | ) |   |   | (1,200 | ) |
| Distributions paid on common units                                              |   |                       | (435     | ) |   |   | (1,575 | ) |
| Net cash provided by financing activities                                       |   |                       | 177,454  |   |   |   | 4,222 |   |
|                                                                            |   |                       |     |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                            |   |                       | 10,600   |   |   |   | (927 | ) |
| Cash and cash equivalents - beginning of period                                 |   |                       | 11,404   |   |   |   | 15,697 |   |
|                                                                            |   |                       |     |   |   |   |   |   |
| Cash and cash equivalents - end of period                                       |   | $                          | 22,004   |   |   | $ | 14,770 |   |

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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

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|                                 |   | March 31, 2010 |      |   | December 31, 2009 |   |
|--------------------------------------|--------|---------------------|-----------|--------|------------------------|--------|
|                                 |   |                |      |   |                   |   |
| Land                                 |   | $                   | 195,394   |   |                   | $      | 161,449 |   |
| Buildings and Improvements           |   |                | 949,726   |   |                   |   | 814,461 |   |
| Furniture, Fixtures and Equipment    |   |                | 137,237   |   |                   |   | 122,174 |   |
|                                 |   |                | 1,282,357 |   |                   |   | 1,098,084 |   |
|                                 |   |                |      |   |                   |   |   |   |
| Less Accumulated Depreciation        |   |                | (171,102  | )      |                   |   | (159,130 | ) |
|                                 |   |                |      |   |                   |   |   |   |
| Total Investment in Hotel Properties |   | $                   | 1,111,255 |   |                   | $      | 938,954 |   |

| Hotel                                                   |   | Acquisition Date |   | Land   |   |   | Buildings and Improvements |   |    | Furniture Fixtures and Equipment |   |   | Franchise Fees, Loan Costs, and Leasehold Intangible |   |   | Total Purchase Price |   |   | Fair Value of Assumed Debt |   |
|---------------------------------------------------------|--------|------------------|--------|--------|--------|--------|----------------------------|--------|---------|----------------------------------|--------|--------|------------------------------------------------------|--------|--------|----------------------|--------|--------|----------------------------|--------|
| Hilton Garden Inn,    Glastonbury, CT    |   | 1/1/2010         |   | $      | 1,898  |   |                       | $      | 12,981  |                             |   | $      | 2,223                                                |   |   | $                    | 24     |   |                       | $      | 17,126 |   |   | $ | 11,937 |   |
| Hampton Inn,    Times Square, NY         |   | 2/9/2010         |   |   | 10,691 |   |                       |   | 41,637  |                             |   |   | 3,939                                                |   |   |                 | 89     |   |                       |   | 56,356 |   |   |   | - |   |
| Holiday Inn Express,    Times Square, NY |   | 2/9/2010         |   |   | 11,075 |   |                       |   | 43,113  |                             |   |   | 4,078                                                |   |   |                 | 108    |   |                       |   | 58,374 |   |   |   | - |   |
| Candlewood Suites,    Times Square, NY   |   | 2/9/2010         |   |   | 10,281 |   |                       |   | 36,687  |                             |   |   | 4,298                                                |   |   |                 | 93     |   |                       |   | 51,359 |   |   |   | - |   |
| Total                                                   |   |             |   | $      | 33,945 |   |                       | $      | 134,418 |                             |   | $      | 14,538                                               |   |   | $                    | 314    |   |                       | $      | 183,215 |   |   | $ | 11,937 |   |

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|                                                                                    |   | March 31, 2010 |   |
|-----------------------------------------------------------------------------------------|--------|---------------------|--------|
| Hotel                                                                                   |   | Revenue             |   |   | Net(Loss) |   |
| Hilton Garden Inn,    Glastonbury, CT                                    |   | $                   | 1,090  |   |   | $ | (76 | ) |
| Hampton Inn, Holiday Inn Express, Candlewood Suites,    Times Square, NY |   |                | 3,103  |   |   |   | (2,971 | ) |
| Total                                                                                   |   | $                   | 4,193  |   |   | $ | (3,047 | ) |

| Acquisition Date |   | Acquisition Name                         |   | Maximum Earn-Out Payment Amount |   | Earn-Out Period Expiration |
|------------------|--------|------------------------------------------|--------|---------------------------------|--------|----------------------------|
| June 26, 2008    |   | Holiday Inn Express, Camp Springs, MD    |   | $                               | 1,905  |                       | December 31, 2010 |
| August 1, 2008   |   | Hampton Inn & Suites, Smithfield, RI |   |                            | 1,515  |                       | December 31, 2010 |

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|                                                              |   | For the Three Months Ended March 31, |       |
|-------------------------------------------------------------------|--------|-------------------------------------------|------------|
|                                                              |   | 2010                                      |       |   | 2009 |   |
| Pro Forma Total Revenues                                          |   | $                                         | 52,854     |   |   | $ | 47,717 |   |
|                                                              |   |                                      |       |   |   |   |   |   |
| Pro Forma Loss from Continuing Operations                         |   | $                                         | (15,763    | ) |   | $ | (12,120 | ) |
| Loss from Discontinued Operations                                 |   |                                      | (521       | ) |   |   | (176 | ) |
| Pro Forma Net Loss                                                |   |                                      | (16,284    | ) |   |   | (12,296 | ) |
| Loss allocated to Noncontrolling Interest                         |   |                                      | 1,710      |   |   |   | 2,303 |   |
| Preferred Distributions                                           |   |                                      | (1,200     | ) |   |   | (1,200 | ) |
| Pro Forma Net Loss applicable to Common Shareholders              |   | $                                         | (15,774    | ) |   | $ | (11,193 | ) |
|                                                              |   |                                      |       |   |   |   |   |   |
| Pro Forma Loss applicable to Common Shareholders per Common Share |   |                                      |       |   |   |   |   |   |
| Basic                                                             |   | $                                         | (0.16      | ) |   | $ | (0.23 | ) |
| Diluted                                                           |   | $                                         | (0.16      | ) |   | $ | (0.23 | ) |
|                                                              |   |                                      |       |   |   |   |   |   |
| Weighted Average Common Shares Outstanding                        |   |                                      |       |   |   |   |   |   |
| Basic                                                             |   |                                      | 99,311,523 |   |   |   | 47,786,503 |   |
| Diluted                                                           |   |                                      | 99,311,523 |   |   |   | 47,786,503 |   |

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|                                   |   |                                                 |   | Percent |      |   | Preferred |                |   | March 31, |   |   | December 31, |   |
|----------------------------------------|--------|------------------------------------------------------|--------|---------|-----------|--------|-----------|---------------------|--------|----------------|--------|--------|-------------------|--------|
| Joint Venture                          |   | Hotel Properties                                     |   | Owned   |      |   | Return    |                |   | 2010           |   |   | 2009              |   |
|                                   |   |                                                 |   |    |      |   |      |                |   |           |   |   |              |   |
| Inn American Hospitality at Ewing, LLC |   | Courtyard by Marriott,    Ewing, NJ   |   |    | 50.0      | %      |      | 11.0% cumulative    |   |           | $      | 362    |              |   | $ | 459 |   |
| Hiren Boston, LLC                      |   | Courtyard by Marriott,    Boston, MA  |   |    | 50.0      | %      |      | N/A                 |   |           |   | -      |              |   |   | - |   |
| SB Partners, LLC                       |   | Holiday Inn Express,    Boston, MA    |   |    | 50.0      | %      |      | N/A                 |   |           |   | 1,791  |              |   |   | 1,934 |   |
| Mystic Partners, LLC                   |   | Hilton and Marriott branded hotels in CT and RI      |   |    | 8.8%-66.7 | %      |      | 8.5%non-cumulative  |   |           |   | 26,629 |              |   |   | 27,043 |   |
| Metro 29th Street Associates, LLC      |   | Holiday Inn Express,    New York, NY  |   |    | 50.0      | %      |      | N/A                 |   |           |   | 7,049  |              |   |   | 7,431 |   |
| PRA Glastonbury, LLC                   |   | Hilton Garden Inn,    Glastonbury, CT |   |    | 48.0      | %      |      | 11.0% cumulative    |   |           |   | -      |              |   |   | 561 |   |
| PRA Suites at Glastonbury, LLC         |   | Homewood Suites,    Glastonbury, CT   |   |    | 48.0      | %      |      | 10.0%non-cumulative |   |           |   | -      |              |   |   | 1,754 |   |
|                                   |   |                                                 |   |    |      |   |      |                |   |           |   | $      | 35,831            |   |   | $ | 39,182 |   |

|   | · | cash of $253, |
|--------|--------|---------------|

|   | · | our 48% minority membership interest in PRA Suites at Glastonbury, LLC, the owner of the Homewood Suites, Glastonbury, CT; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | · | settlement of a note receivable and accrued interest made to our former joint venture partner with a principal balance of $1,267 and accrued interest receivable of  $141; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our assumption of the outstanding mortgage debt secured by the Hilton Garden Inn, Glastonbury, CT which had an outstanding principal balance of $13,141 as of December 31, 2009, bears interest at a fixed rate of 5.98% per annum and has an anticipated maturity date of April 1, 2016. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                  |   | March 31, 2010 |   |   | March 31, 2009 |   |
|-----------------------------------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|
| Inn American Hospitality at Ewing, LLC                                |   | $                   | (97    | )      |                | $      | (74 | ) |
| Hiren Boston, LLC                                                     |   |                | -      |   |                |   | (233 | ) |
| SB Partners, LLC                                                      |   |                | (144   | )      |                |   | (162 | ) |
| Mystic Partners, LLC                                                  |   |                | (415   | )      |                |   | (409 | ) |
| Metro 29th Street Associates, LLC                                     |   |                | (384   | )      |                |   | (371 | ) |
| PRA Glastonbury, LLC                                                  |   |                | -      |   |                |   | (81 | ) |
| PRA Suites at Glastonbury, LLC                                        |   |                | -      |   |                |   | 1 |   |
| Loss from Unconsolidated Joint Ventures                               |   |                | (1,040 | )      |                |   | (1,329 | ) |
| Gain from Remeasurement of Investment in Unconsolidated Joint Venture |   |                | 1,818  |   |                |   | - |   |
| Net income (loss) from Investment in Unconsolidated Joint Ventures    |   | $                   | 778    |   |                | $      | (1,329 | ) |

| Balance Sheets                      |   |           |    |   |              |   |
|-------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                |   | March 31, |    |   | December 31, |   |
|                                |   | 2010           |    |   | 2009              |   |
| Assets                              |   |           |    |   |              |   |
| Investment in hotel properties, net |   | $              | 165,848 |   |              | $      | 196,842 |   |
| Other Assets                        |   |           | 26,103  |   |              |   | 28,473 |   |
| Total Assets                        |   | $              | 191,951 |   |              | $      | 225,315 |   |
|                                |   |           |    |   |              |   |   |   |
| Liabilities and Equity              |   |           |    |   |              |   |   |   |
| Mortgages and notes payable         |   | $              | 191,846 |   |              | $      | 218,116 |   |
| Other liabilities                   |   |           | 20,266  |   |              |   | 18,219 |   |
| Equity:                             |   |           |    |   |              |   |   |   |
| Hersha Hospitality Trust            |   |           | 40,606  |   |              |   | 44,178 |   |
| Joint Venture Partner(s)            |   |           | (60,767 | )      |              |   | (55,198 | ) |
| Total Equity                        |   |           | (20,161 | )      |              |   | (11,020 | ) |
|                                |   |           |    |   |              |   |   |   |
| Total Liabilities and Equity        |   | $              | 191,951 |   |              | $      | 225,315 |   |

| Statements of Operations                   |   |                |    |   |                |   |
|--------------------------------------------|--------|---------------------|---------|--------|---------------------|--------|
|                                       |   | Three Months Ended  |    |
|                                       |   | March 31, 2010 |    |   | March 31, 2009 |   |
| Room Revenue                               |   | $                   | 15,584  |   |                | $      | 17,105 |   |
| Other Revenue                              |   |                | 4,718   |   |                |   | 5,313 |   |
| Operating Expenses                         |   |                | (14,921 | )      |                |   | (16,572 | ) |
| Interest Expense                           |   |                | (3,391  | )      |                |   | (3,234 | ) |
| Lease Expense                              |   |                | (1,373  | )      |                |   | (1,364 | ) |
| Property Taxes and Insurance               |   |                | (1,547  | )      |                |   | (1,640 | ) |
| Depreciation and Amortization              |   |                | (3,121  | )      |                |   | (3,588 | ) |
| Loss Allocated to Noncontrolling Interests |   |                | 229     |   |                |   | - |   |
| General and Administrative                 |   |                | (1,798  | )      |                |   | (1,833 | ) |
|                                       |   |                |    |   |                |   |   |   |
| Net loss                                   |   | $                   | (5,620  | )      |                | $      | (5,813 | ) |

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|                        |   | March 31, |   |   | December 31, |   |
|-----------------------------|--------|----------------|--------|--------|-------------------|--------|
|                        |   | 2010           |   |   | 2009              |   |
| Company's Share             |   | $              | 40,606 |   |              | $      | 44,178 |   |
| Excess Investment (1)       |   |           | (4,775 | )      |              |   | (4,996 | ) |
| Investment in Joint Venture |   | $              | 35,831 |   |              | $      | 39,182 |   |

|   | (1) | Adjustment to reconcile the Company's share of equity recorded on the joint ventures' financial statements to our investment in unconsolidated joint ventures consists of the following: |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | cumulative impairment of our investment in joint ventures not reflected on the joint ventures' financial statements; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------|

|   | · | our basis in the investment in joint ventures not recorded on the joint ventures' financial statements; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------|

|   | · | accumulated amortization of our equity in joint ventures that reflect our portion of the excess of the fair value of joint ventures' assets on the date of our investment over the carrying value of the assets recorded on the joint ventures’ financial statements.  This excess investment is amortized over the life of the properties, and the amortization is included in Income(Loss) from Unconsolidated Joint Venture Investments on our consolidated statement of operations. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Hotel Property                            |   | Borrower                               |   | Principal Outstanding 3/31/2010 |   |   | Principal Outstanding 12/31/2009 |   |   | Interest Rate |   | Maturity Date (1) |   |
|-------------------------------------------|--------|----------------------------------------|--------|---------------------------------|--------|--------|----------------------------------|--------|--------|---------------|--------|-------------------|--------|
| Operational Hotels                        |   |                                   |   |                            |   |   |                             |   |   |          |   |              |   |
| Holiday Inn - New York, NY                |   | Maiden Hotel, LLC                      |   |                            | 7,000  |   |                             | $      | 7,000  |          |   |              | 20     | % | July 31, 2010 |   |
| Renaissance by Marriott - Woodbridge, NJ  |   | Hersha Woodbridge Associates, LLC      |   |                            | 5,000  |   |                             |   | 5,000  |          |   |              | 11     | % | April 1, 2011 |  * |
| Element Hotel - Ewing, NJ                 |   | American Properties @ Scotch Road, LLC |   |                            | 2,000  |   |                             |   | 2,000  |          |   |              | 11     | % | August 6, 2010 |  * |
| Hilton Garden Inn - Dover, DE             |   | 44 Aasha Hospitality Associates, LLC   |   |                            | 1,000  |   |                             |   | 1,000  |          |   |              | 10     | % | November 1, 2010 |  * |
|                                      |   |                                   |   |                            |   |   |                             |   |   |          |   |              |   |   |   |   |
| Construction Hotels                       |   |                                   |   |                            |   |   |                             |   |   |          |   |              |   |   |   |   |
| Lexington Avenue Hotel - New York, NY (2) |   | 44 Lexington Holding, LLC              |   |                            | 11,910 |   |                             |   | 11,591 |          |   |              | 11     | % | December 31, 2010 |  * |
| Union Square Hotel - New York, NY (2)     |   | Risingsam Union Square, LLC            |   |                            | 11,790 |   |                             |   | 11,503 |          |   |              | 10     | % | December 31, 2010 |   |
| Hampton Inn - New York, NY                |   | SC Waterview, LLC                      |   |                            | 8,000  |   |                             |   | 8,000  |          |   |              | 10     | % | December 31, 2010 |   |
|                                      |   |                                   |   |                            |   |   |                             |   |   |          |   |              |   |   |   |   |
| Total Development Loans Receivable        |   |                                   |   | $                               | 46,700 |   |                             | $      | 46,094 |          |   |              |   |   |   |   |

| * | Indicates borrower is a related party. |
|---|----------------------------------------|

| (1) | Represents current maturity date in effect. Agreements for our development loans receivable typically allow for two one-year extensions which can be exercised by the borrower if the loan is not in default.  As these loans typically finance hotel development projects, it is common for the borrower to exercise their options to extend the loans, in whole or in part, until the project has been completed and the project provides cash flow to the developer or is refinanced by the developer. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | We have amended the following development loans to allow the borrower to elect, quarterly, to pay accrued interest in-kind by adding the accrued interest to the principal balance of the loan: |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                        |   | Interest Income                       |   |   |                                  |   |
|-----------------------------|--------|---------------------------------------|--------|--------|---------------------------------------|--------|
| Borrower                    |   | Three Months EndedMarch 31, 2010 |   |   | CumulativeInterest IncomePaid In-Kind |   |
| 44 Lexington Holding, LLC   |   | $                                     | 319    |   |                                  | $      | 1,910 |   |
| Risingsam Union Square, LLC |   |                                  | 287    |   |                                  |   | 1,790 |   |
|                        |   |                                  |   |   |                                  |   |   |   |
| Total                       |   | $                                     | 606    |   |                                  | $      | 3,700 |   |

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|                                                              |   | March 31,2010 |   |   | December 31, 2009 |   |
|-------------------------------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|
|                                                              |   |               |   |   |                   |   |
| Transaction Costs                                                 |   | $                  | 568    |   |                   | $      | 292 |   |
| Investment in Statutory Trusts                                    |   |               | 1,548  |   |                   |   | 1,548 |   |
| Notes Receivable                                                  |   |               | -      |   |                   |   | 1,412 |   |
| Deposits on Hotel Acquisitions                                    |   |               | 1,500  |   |                   |   | 20 |   |
| Prepaid Expenses                                                  |   |               | 4,517  |   |                   |   | 4,468 |   |
| Interest Receivable from Development Loans to Non-Related Parties |   |               | 2,043  |   |                   |   | 1,573 |   |
| Deposit on Property Improvement Plans                             |   |               | 279    |   |                   |   | 167 |   |
| Hotel Purchase Option                                             |   |               | 933    |   |                   |   | 933 |   |
| Other                                                             |   |               | 1,275  |   |                   |   | 2,015 |   |
|                                                              |   | $                  | 12,663 |   |                   | $      | 12,428 |   |

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| - Hampton Inn, Danville, PA                      |   | - Holiday Inn Express, New Columbia, PA              |
|--------------------------------------------------|--------|------------------------------------------------------|
| - Hampton Inn, Philadelphia, PA                  |   | - Mainstay Suites and Sleep Inn, King of Prussia, PA |
| - Holiday Inn, Norwich, CT                       |   | - Residence Inn, Langhorne, PA                       |
| - Holiday Inn Express, Camp Springs, PA          |   | - Residence Inn, Norwood, MA                         |
| - Holiday Inn Express and Suites, Harrisburg, PA |   | - Sheraton Hotel, JFK Airport, New York, NY          |

| - | a debt service coverage ratio of not less than 1.20 to 1.00; |
|---|--------------------------------------------------------------|

| - | a total funded liabilities to gross asset value ratio of not more than 0.67 to 1.00; |
|---|--------------------------------------------------------------------------------------|

| - | a EBITDA to debt service ratio of not less than 1.25 to 1.00; and |
|---|-------------------------------------------------------------------|

| - | The sum of the aggregate amount of outstanding loans and letter of credit obligations may not exceed the lesser of the committed amount of $135,000 or 67% of the appraised value of the hotel properties pledged as collateral.  In the event the aggregate amount of outstanding loans and letter of credit obligations exceeds this amount, we will be required to repay a portion of the outstanding loans and letter of credit obligations or provide additional collateral to the lenders. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                |   |                                                   |   |   |   |             |   | Estimated Fair Value |   |
|---------------------|--------|--------------------------------------------------------|--------|--------|--------|------------------|--------|----------------------|--------|
| Date of Transaction |   | Hedged Debt                                            |   | Type   |   | Maturity Date    |   | March 31, 2010       |   |   | December 31, 2009 |   |
| July 1, 2007        |   | Variable Rate Mortgage - Hotel 373, New York, NY       |   | Cap    |   | May 9, 2010      |   |                 | -      |   |   |   | - |   |
| December 31, 2008   |   | Variable Rate Mortgage - Hilton Garden Inn, Edison, NJ |   | Swap   |   | January 1, 2011  |   |                 | (53    | ) |   |   | (53 | ) |
| January 9, 2009     |   | Variable Rate Mortgage - Nu Hotel, Brooklyn, NY        |   | Swap   |   | January 10, 2011 |   |                 | (112   | ) |   |   | (103 | ) |
|                |   |                                                   |   |   |   |             |   | $                    | (165   | ) |   | $ | (156 | ) |

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|                   |   |          |      |   |                         |   |           |   |             |   | Shares Vested       |   |   | Unearned Compensation  |   |
|------------------------|--------|---------------|-----------|--------|------------------------------|--------|----------------|--------|------------------|--------|---------------------|--------|--------|------------------------|--------|
| Original Issuance Date |   | Shares Issued |      |   | Share Price on date of grant |   | Vesting Period |   | Vesting Schedule |   | March 31, 2010 |   |   | December 31, 2009 |   |   | March 31, 2010 |   |   | December 31, 2009 |   |
| June 1, 2006           |   |          | 89,500    |   |                         | $      | 9.40           |   | 4 years          |   | 25%/year            |   |   | 67,125                 |   |   |   | 67,125 |   |   | $ | 34 |   |   | $ | 87 |   |
| June 1, 2007           |   |          | 214,582   |   |                         | $      | 12.32          |   | 4 years          |   | 25%/year            |   |   | 107,291                |   |   |   | 107,291 |   |   |   | 770 |   |   |   | 935 |   |
| June 2, 2008           |   |          | 278,059   |   |                         | $      | 8.97           |   | 4 years          |   | 25%/year            |   |   | 69,515                 |   |   |   | 69,515 |   |   |   | 1,350 |   |   |   | 1,506 |   |
| September 30, 2008     |   |          | 3,616     |   |                         | $      | 7.44           |   | 1-4 years        |   | 25-100%/year        |   |   | 654                    |   |   |   | 654 |   |   |   | 5 |   |   |   | 6 |   |
| June 1, 2009           |   |          | 744,128   |   |                         | $      | 2.80           |   | 4 years          |   | 25%/year            |   |   | -                      |   |   |   | - |   |   |   | 1,650 |   |   |   | 1,780 |   |
| September 25, 2009     |   |          | 10,000    |   |                         | $      | 3.06           |   | 1 year           |   | 100%/year           |   |   | -                      |   |   |   | - |   |   |   | 9 |   |   |   | 20 |   |
| March 25, 2010         |   |          | 6,000     |   |                         | $      | 5.02           |   | 2 years          |   | 50%/year            |   |   | -                      |   |   |   | - |   |   |   | 30 |   |   |   | - |   |
| Total                  |   |          | 1,345,885 |   |                         |   |           |   |             |   |                |   |   | 244,585                |   |   |   | 244,585 |   |   | $ | 3,848 |   |   | $ | 4,334 |   |

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|                                                                    |   | Three Months Ended  |       |
|-------------------------------------------------------------------------|--------|---------------------|------------|
|                                                                    |   | March 31, 2010 |       |   | March 31, 2009 |   |
| Numerator:                                                              |   |                |       |   |   |   |
| BASIC AND DILUTED*                                                      |   |                |       |   |   |   |
| Loss from Continuing Operations                                         |   | $                   | (15,816    | ) |   | $ | (10,507 | ) |
| Loss from Continuing Operations allocated to Noncontrolling Interests   |   |                | 1,669      |   |   |   | 1,939 |   |
| Distributions to 8.0% Series A Preferred Shareholders                   |   |                | (1,200     | ) |   |   | (1,200 | ) |
| Dividends Paid on Unvested Restricted Shares                            |   |                | (55        | ) |   |   | (91 | ) |
| Loss from Continuing Operations applicable to Common Shareholders       |   |                | (15,402    | ) |   |   | (9,859 | ) |
|                                                                    |   |                |       |   |   |   |   |   |
| Discontinued Operations                                                 |   |                |       |   |   |   |   |   |
| Loss from Discontinued Operations                                       |   |                | (521       | ) |   |   | (176 | ) |
| Loss from Discontinued Operations allocated to Noncontrolling Interests |   |                | 46         |   |   |   | 114 |   |
| Loss from Discontinued Operations applicable to Common Shareholders     |   |                | (475       | ) |   |   | (62 | ) |
|                                                                    |   |                |       |   |   |   |   |   |
| Net Loss applicable to Common Shareholders                              |   | $                   | (15,877    | ) |   | $ | (9,921 | ) |
|                                                                    |   |                |       |   |   |   |   |   |
| Denominator:                                                            |   |                |       |   |   |   |   |   |
| Weighted average number of common shares - basic                        |   |                | 99,311,523 |   |   |   | 47,786,503 |   |
| Effect of dilutive securities:                                          |   |                |       |   |   |   |   |   |
| Stock Awards                                                            |   |                | -          | ** |   |   | - | ** |
| Option to acquire common shares                                         |   |                | -          | ** |   |   | - | ** |
| Partnership Units                                                       |   |                | -          |   |   |   | - |   |
| Weighted average number of common shares - diluted*                     |   |                | 99,311,523 |   |   |   | 47,786,503 |   |

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|                                                                |   | Three Months Ended  |   |
|---------------------------------------------------------------------|--------|---------------------|--------|
|                                                                |   | March 31, 2010 |   |   | March 31, 2009 |   |
| Earnings Per Share:                                                 |   |                |   |   |   |   |
| BASIC                                                               |   |                |   |   |   |   |
| Loss from Continuing Operations applicable to Common Shareholders   |   | $                   | (0.16  | ) |   | $ | (0.21 | ) |
| Loss from Discontinued Operations applicable to Common Shareholders |   |                | -      |   |   |   | - |   |
| Net Loss applicable to Common Shareholders                          |   | $                   | (0.16  | ) |   | $ | (0.21 | ) |
|                                                                |   |                |   |   |   |   |   |   |
| DILUTED*                                                            |   |                |   |   |   |   |   |   |
| Loss from Continuing Operations applicable to Common Shareholders   |   | $                   | (0.16  | ) |   | $ | (0.21 | ) |
| Loss from Discontinued Operations applicable to Common Shareholders |   |                | -      |   |   |   | - |   |
| Net Loss applicable to Common Shareholders                          |   | $                   | (0.16  | ) |   | $ | (0.21 | ) |

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|                                                                                                              |   | Three Months Ended, |   |
|-------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|
|                                                                                                              |   | March 31, 2010 |   |   | March 31, 2009 |   |
| Common Shares issued as part of the Dividend Reinvestment Plan                                                    |   | $                   | 3      |   |   | $ | 9 |   |
| Issuance of Common Shares to the Board of Trustees                                                                |   |                | -      |   |   |   | 37 |   |
| Acquisitions of hotel properties                                                                                  |   |                |   |   |   |   |   |   |
| Issuance of Common Units                                                                                          |   |                | 5,299  |   |   |   | - |   |
| Debt assumed, net of discount                                                                                     |   |                | 11,937 |   |   |   | - |   |
| Settlement of notes receivable and accrued interest receivable                                                    |   |                | 1,408  |   |   |   | - |   |
| Interests in unconsolidated joint ventures used as consideration                                                  |   |                | 4,133  |   |   |   | - |   |
| Development loan accrued interest revenue receivable paid in-kind by adding balance to development loan principal |   |                | 606    |   |   |   | - |   |
| Conversion of Common Units to Common Shares                                                                       |   |                | 602    |   |   |   | - |   |
| Reallocation to noncontrolling interest                                                                           |   |                | 1,745  |   |   |   | 155 |   |

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|                                             |   | March 31, 2010 |   |   | December 31, 2009 |   |
|--------------------------------------------------|--------|---------------------|--------|--------|------------------------|--------|
|                                             |   |                |   |   |                   |   |
| Land                                             |   | $                   | 18,389 |   |                   | $      | 18,389 |   |
| Buildings and Improvements                       |   |                | 2,912  |   |                   |   | 2,912 |   |
| Furniture, Fixtures and Equipment                |   |                | 531    |   |                   |   | 531 |   |
| Intangible Assets                                |   |                | 50     |   |                   |   | 50 |   |
|                                             |   |                | 21,882 |   |                   |   | 21,882 |   |
|                                             |   |                |   |   |                   |   |   |   |
| Less Accumulated Depreciation & Amortization |   |                | (809   | )      |                   |   | (809 | ) |
|                                             |   |                |   |   |                   |   |   |   |
| Assets Held for Sale                             |   | $                   | 21,073 |   |                   | $      | 21,073 |   |

|                                                           |   | Three Months Ended  |   |
|----------------------------------------------------------------|--------|---------------------|--------|
|                                                           |   | March 31, 2010 |   |   | March 31, 2009 |   |
| Revenue:                                                       |   |                |   |   |   |   |
| Hotel Operating Revenues                                       |   | $                   | 123    |   |   | $ | 2,672 |   |
| Land Lease Revenue                                             |   |                | -      |   |   |   | 1,308 |   |
| Total Revenues                                                 |   |                | 123    |   |   |   | 3,980 |   |
|                                                           |   |                |   |   |   |   |   |   |
| Expenses:                                                      |   |                |   |   |   |   |   |   |
| Hotel Operating Expenses                                       |   |                | 182    |   |   |   | 2,394 |   |
| Land Lease Expense                                             |   |                | -      |   |   |   | 724 |   |
| Real Estate and Personal Property Taxes and Property Insurance |   |                | 62     |   |   |   | 150 |   |
| Depreciation and Amortization                                  |   |                | -      |   |   |   | 499 |   |
| General and Administrative                                     |   |                | 3      |   |   |   | - |   |
| Loss from Impairment of Assets                                 |   |                | 13     |   |   |   | - |   |
| Interest Expense                                               |   |                | 384    |   |   |   | 389 |   |
| Total Expenses                                                 |   |                | 644    |   |   |   | 4,156 |   |
|                                                           |   |                |   |   |   |   |   |   |
| Loss from Discontinued Operations                              |   | $                   | (521   | ) |   | $ | (176 | ) |

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

| · | our business or investment strategy; |
|--------|--------------------------------------|

| · | our projected operating results; |
|--------|----------------------------------|

| · | our distribution policy; |
|--------|--------------------------|

| · | our liquidity; |
|--------|----------------|

| · | completion of any pending transactions; |
|--------|-----------------------------------------|

| · | our ability to obtain future financing arrangements; |
|--------|------------------------------------------------------|

| · | our understanding of our competition; |
|--------|---------------------------------------|

| · | market trends; and |
|--------|--------------------|

| · | projected capital expenditures. |
|--------|---------------------------------|

| · | general volatility of the capital markets and the market price of our common shares; |
|--------|--------------------------------------------------------------------------------------|

| · | changes in our business or investment strategy; |
|--------|-------------------------------------------------|

| · | availability, terms and deployment of capital; |
|--------|------------------------------------------------|

| · | availability of qualified personnel; |
|--------|--------------------------------------|

| · | changes in our industry and the market in which we operate, interest rates, or the general economy; |
|--------|-----------------------------------------------------------------------------------------------------|

| · | the degree and nature of our competition; |
|--------|-------------------------------------------|

| · | financing risks, including the risk of leverage and the corresponding risk of default on our mortgage loans and other debt and potential inability to refinance or extend the maturity of existing indebtedness; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | the depth and duration of the current economic downturn; |
|--------|----------------------------------------------------------|

| · | levels of spending in the business, travel and leisure industries, as well as consumer confidence; |
|--------|----------------------------------------------------------------------------------------------------|

| · | declines in occupancy, average daily rate and RevPAR and other hotel operating metrics; |
|--------|-----------------------------------------------------------------------------------------|

| · | hostilities, including future terrorist attacks, or fear of hostilities that affect travel; |
|--------|---------------------------------------------------------------------------------------------|

| · | financial condition of, and our relationships with, our joint venture partners, third-party property managers, franchisors and hospitality joint venture partners; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | the degree and nature of our competition; |
|--------|-------------------------------------------|

| · | increased interest rates and operating costs; |
|--------|-----------------------------------------------|

| · | risks associated with potential acquisitions, including the ability to ramp up and stabilize newly acquired hotels with limited or no operating history, and dispositions of hotel properties; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | risks associated with our development loan portfolio, including the ability of borrowers to repay outstanding principal and accrued interest at maturity; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | availability of and our ability to retain qualified personnel; |
|--------|----------------------------------------------------------------|

| · | our failure to maintain our qualification as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

| · | environmental uncertainties and risks related to natural disasters; |
|--------|---------------------------------------------------------------------|

| · | changes in real estate and zoning laws and increases in real property tax rates; and |
|--------|--------------------------------------------------------------------------------------|

| · | the factors discussed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009 under the heading “Risk Factors” and in other reports we file with the SEC from time to time. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| CONSOLIDATED HOTELS:                |   |                |       |   |                |   |
|-------------------------------------|--------|---------------------|------------|--------|---------------------|--------|
|                                |   | Three Months Ended, |       |   |                |   |
|                                |   | March 31, 2010 |       |   | March 31, 2009 |   |   | % Variance |   |
|                                |   |                |       |   |                |   |   |   |   |
| Rooms Available                     |   |                | 641,412    |   |                |   | 575,820 |   |   |   | 11.4 | % |
| Rooms Occupied                      |   |                | 393,464    |   |                |   | 328,954 |   |   |   | 19.6 | % |
| Occupancy                           |   |                | 61.34      | %      |                |   | 57.13 | % |   |   | 4.2 | % |
| Average Daily Rate (ADR)            |   | $                   | 119.02     |   |                | $      | 122.88 |   |   |   | -3.1 | % |
| Revenue Per Available Room (RevPAR) |   | $                   | 73.01      |   |                | $      | 70.20 |   |   |   | 4.0 | % |
|                                |   |                |       |   |                |   |   |   |   |   |   |   |
| Room Revenues                       |   | $                   | 46,829,227 |   |                | $      | 40,420,352 |   |   |   | 15.9 | % |
| Hotel Operating Revenues            |   | $                   | 49,388,245 |   |                | $      | 42,396,963 |   |   |   | 16.5 | % |

| UNCONSOLIDATED JOINT VENTURES:      |   |                |       |   |                |   |       |       |   |
|-------------------------------------|--------|---------------------|------------|--------|---------------------|--------|------------|------------|--------|
|                                |   | Three Months Ended, |       |   |                |   |
|                                |   | March 31, 2010 |       |   | March 31, 2009 |   |       | % Variance |   |
|                                |   |                |       |   |                |   |       |       |   |
| Rooms Available                     |   |                | 211,320    |   |                |   | 211,320    |       |   |   | 0.0 | % |
| Rooms Occupied                      |   |                | 125,392    |   |                |   | 120,042    |       |   |   | 4.5 | % |
| Occupancy                           |   |                | 59.34      | %      |                |   | 56.81      | %          |   |   | 2.5 | % |
| Average Daily Rate (ADR)            |   | $                   | 124.28     |   |                | $      | 128.03     |       |   |   | -2.9 | % |
| Revenue Per Available Room (RevPAR) |   | $                   | 73.74      |   |                | $      | 72.73      |       |   |   | 1.4 | % |
|                                |   |                |       |   |                |   |       |       |   |   |   |   |
| Room Revenues                       |   | $                   | 15,583,660 |   |                | $      | 15,368,701 |       |   |   | 1.4 | % |
| Total Revenues                      |   | $                   | 20,340,575 |   |                | $      | 20,482,994 |       |   |   | -0.7 | % |

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| Brand                    |   | Location              |   | Acquisition Date |   | Rooms  |   |   | Hotel Operating Revenues |   |
|--------------------------|--------|-----------------------|--------|------------------|--------|--------|--------|--------|--------------------------|--------|
|                     |   |                  |   |             |   |   |   |   |                     |   |
| Hilton Garden Inn        |   | TriBeCa, New York, NY |   | May 1, 2009      |   |   | 151    |   |                     | $      | 2,091 |   |
| Hampton Inn & Suites |   | West Haven, CT        |   | November 4, 2009 |   |   | 98     |   |                     |   | 585 |   |
| Hilton Garden Inn        |   | Glastonbury, CT       |   | January 1, 2010  |   |   | 150    |   |                     |   | 1,090 |   |
| Hampton Inn              |   | Times Square, NY      |   | February 9, 2010 |   |   | 184    |   |                     |   | 1,136 |   |
| Candlewood Suites        |   | Times Square, NY      |   | February 9, 2010 |   |   | 188    |   |                     |   | 852 |   |
| Holiday Inn Express      |   | Times Square, NY      |   | February 9, 2010 |   |   | 210    |   |                     |   | 1,115 |   |
|                     |   |                  |   |             |   |   | 981    |   |                     | $      | 6,869 |   |

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|                                                                                                  |   | Three Months Ended  |        |
|-------------------------------------------------------------------------------------------------------|--------|---------------------|-------------|
|                                                                                                  |   | March 31, 2010 |        |   | March 31, 2009 |   |
|                                                                                                  |   |                |        |   |   |   |
| Net loss applicable to common shares                                                                  |   | $                   | (15,822     | ) |   | $ | (9,830 | ) |
| Loss allocated to noncontrolling interest                                                             |   |                | (1,715      | ) |   |   | (2,053 | ) |
| (Income) loss from unconsolidated joint ventures                                                      |   |                | (778        | ) |   |   | 1,329 |   |
| Depreciation and amortization                                                                         |   |                | 12,056      |   |   |   | 10,439 |   |
| Depreciation and amortization from discontinued operations                                            |   |                | -           |   |   |   | 499 |   |
| FFO allocated to noncontrolling interests in consolidated joint ventures (1)                          |   |                | 124         |   |   |   | 212 |   |
| Funds from consolidated hotel operations applicable to common shares and Partnership units            |   |                | (6,135      | ) |   |   | 596 |   |
|                                                                                                  |   |                |        |   |   |   |   |   |
| Income (loss) from Unconsolidated Joint Ventures                                                      |   |                | 778         |   |   |   | (1,329 | ) |
| Add:                                                                                                  |   |                |        |   |   |   |   |   |
| Depreciation and amortization of purchase price in excess of historical cost (2)                      |   |                | 508         |   |   |   | 521 |   |
| Interest in depreciation and amortization of unconsolidated joint ventures (3)                        |   |                | 229         |   |   |   | 541 |   |
| Funds from unconsolidated joint ventures operations applicable to common shares and Partnership units |   |                | 1,515       |   |   |   | (267 | ) |
|                                                                                                  |   |                |        |   |   |   |   |   |
| Funds from Operations applicable to common shares and Partnership units                               |   | $                   | (4,620      | ) |   | $ | 329 |   |
|                                                                                                  |   |                |        |   |   |   |   |   |
| Weighted Average Common Shares and Units Outstanding                                                  |   |                |        |   |   |   |   |   |
| Basic                                                                                                 |   |                | 99,311,523  |   |   |   | 47,786,503 |   |
| Diluted                                                                                               |   |                | 108,826,751 |   |   |   | 56,532,803 |   |

| (1) | Adjustment made to deduct FFO related to the noncontrolling interest in our consolidated joint ventures. Represents the portion of net income and depreciation allocated to our joint venture partners. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Adjustment made to add depreciation of purchase price in excess of historical cost of the assets in the unconsolidated joint venture at the time of our investment. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Adjustment made to add our interest in real estate related depreciation and amortization of our unconsolidated joint ventures. Allocation of depreciation and amortization is consistent with allocation of income and loss. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| · | a significant decrease in the market price of a long-lived asset; |
|--------|-------------------------------------------------------------------|

| · | a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition; |
|--------|------------------------------------------------------------------------------------------------------------------------------|

| · | a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator; |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| · | a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset; and |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | a current expectation that, it is more likely than not that, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Identifying loans for individual review. In general, these consist of development loans that are not performing in accordance with the contractual terms of the loan. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Assessing whether the loans identified for review are impaired. That is, whether it is probable that all amounts will not be collected according to the contractual terms of the loan agreement.  We determine the amount of impairment by calculating the estimated fair value, discounted cash flows or the value of the underlying collateral. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

| Mortgages & Notes Payable  |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | 2013   |   |   | 2014   |   |   | Thereafter |   |   | Total  |   |
|--------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|--------|--------|
|                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |   |   |
| Fixed Rate Debt                |   |   | $      | 13,648 |   |   | $      | 31,023 |   |   | $      | 15,675 |   |   | $      | 32,416 |   |       | $      | 42,512 |   |   | $ | 492,985 |   |   | $ | 628,259 |   |
| Weighted Average Interest Rate |   |   |   | 6.14   | %      |   |   | 6.25   | %      |   |   | 6.25   | %      |   |   | 6.25   | %      |       |   | 6.24   | %      |   |   | 6.24 | % |   |   | 6.23 | % |
|                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Floating Rate Debt             |   |   | $      | 22,137 |   |   | $      | 27,232 |   |   | $      | 182    |   |   | $      | 182    |   |       | $      | 2,082  |   |   | $ | - |   |   | $ | 51,815 |   |
| Weighted Average Interest Rate |   |   |   | 5.25   | %      |   |   | 3.00   | %      |   |   | 3.00   | %      |   |   | 3.00   | %      |       |   | 3.00   | %      |   |   | N/A |   |   |   | 2.88 | % |
|                           |   |   | $      | 35,785 |   |   | $      | 58,255 |   |   | $      | 15,857 |   |   | $      | 32,598 |   |       | $      | 44,594 |   |   | $ | 492,985 |   |   | $ | 680,074 |   |
|                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Credit Facility                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
|                           |   |   |   |   |   |   | $      | -      |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   | $ | - |   |
| Weighted Average Interest Rate |   |   |   |   |   |   |   | 4.25   | %      |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   | 4.25 | % |
|                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
|                           | TOTAL  |   | $      | 35,785 |   |   | $      | 58,255 |   |   | $      | 15,857 |   |   | $      | 32,598 |   |       | $      | 44,594 |   |   | $ | 492,985 |   |   | $ | 680,074 |   |

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|   | · | the Company’s exercise of each of the extension options within its discretion, and |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | the lender’s extension of the maturity of the revolving line of credit extension options. |
|--------|--------|-------------------------------------------------------------------------------------------------|

|                                                                                              |   | 2010   |    |   | 2011   |   |    | 2012   |   |   | 2013   |   |   | 2014   |   |   | Thereafter |   |   | Total  |   |
|---------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|--------|--------|
|                                                                                              |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |
| Principal repayments due as of March 31, 2010, as noted above                                     |   | $      | 35,785  |   |   | $      | 58,255  |   |   | $      | 15,857 |   |   | $      | 32,598 |   |       | $      | 44,594 |   |   | $ | 492,985 |   |   | $ | 680,074 |   |
|                                                                                              |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Adjustments:                                                                                      |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                              |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Extension Options (1)                                                                             |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Hotel 373 - 5th Avenue, New York, NY (2)                                                          |   |   | (22,000 | )      |   |   | -       |   |   |   | 22,000 |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   |   | - |   |
| nu Hotel Brooklyn - New York, NY (3)                                                              |   |   | -       |   |   |   | (18,000 | )      |   |   | -      |   |   |   | 18,000 |   |       |   | -      |   |   |   | - |   |   |   | - |   |
| Hilton Garden Inn - Edison, NJ (4)                                                                |   |   | -       |   |   |   | (5,212  | )      |   |   | 5,212  |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   |   | - |   |
| TownePlace Suites - Harrisburg, PA (5)                                                            |   |   | -       |   |   |   | (9,188  | )      |   |   | 9,188  |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   |   | - |   |
| Hampton Inn - West Haven, CT (6)                                                                  |   |   | -       |   |   |   | -       |   |   |   | (7,653 | )      |   |   | -      |   |       |   | -      |   |   |   | 7,653 |   |   |   | - |   |
| Residence Inn - Carlisle (7)                                                                      |   |   | -       |   |   |   | -       |   |   |   | -      |   |   |   | (6,826 | )      |       |   | -      |   |   |   | 6,826 |   |   |   | - |   |
| Line of Credit Facility (8)                                                                       |   |   | -       |   |   |   | -       |   |   |   | -      |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                              |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Principal Repayments                                                                              |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Hampton Inn - Carlisle, PA; Hampton Inn - Selinsgrove, PA; and Comfort Inn - West Hanover, PA (9) |   |   | (8,201  | )      |   |   | -       |   |   |   | -      |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   |   | (8,201 | ) |
|                                                                                              |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Pro Forma Principal Repayments (10)                                                               |   | $      | 5,584   |   |   | $      | 25,855  |   |   | $      | 44,604 |   |   | $      | 43,772 |   |       | $      | 44,594 |   |   | $ | 507,464 |   |   | $ | 671,873 |   |

Item 4. Controls and Procedures.

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Table of Contents

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Item 3. Defaults Upon Senior Securities.

Item 4. Submission of Matters to a Vote of Security Holders.

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Table of Contents

Item 5. Other Information.

|   | · | Hasu P. Shah, Chairman of the Board; |
|--------|--------|--------------------------------------|

|   | · | Jay H. Shah, Chief Executive Officer; |
|--------|--------|---------------------------------------|

|   | · | Neil H. Shah, President and Chief Operating Officer; |
|--------|--------|------------------------------------------------------|

|   | · | Ashish R. Parikh, Chief Financial Officer; and |
|--------|--------|------------------------------------------------|

|   | · | Michael R. Gillespie, Chief Accounting Officer. |
|--------|--------|-------------------------------------------------|

| NEO                  | Range of PossibleCash Bonus |
|----------------------|-----------------------------|
| Jay H. Shah          | $262,500 to $656,250        |
| Neil H. Shah         | $250,000 to $625,000        |
| Ashish R. Parikh     | $81,251 to $325,000         |
| Michael R. Gillespie | $34,125 to $113,750         |

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| NEO                  | Dollar Value of PossibleEquity Awards |
|----------------------|---------------------------------------|
| Hasu P. Shah         | $225,000 to $375,000                  |
| Jay H. Shah          | $600,000 to $1,000,000                |
| Neil H. Shah         | $600,000 to $1,000,000                |
| Ashish R. Parikh     | $225,000 to $375,000                  |
| Michael R. Gillespie | $71,250 to $118,750                   |

|                 | Dollar Value of Estimated Future Equity AwardsUnder Multi-Year Long-Term Equity Incentive Plan |
|----------------------|------------------------------------------------------------------------------------------------|
| NEO                  | Threshold                                                                                      | Target | Maximum |
| Hasu P. Shah         | $675,000                                                                                       | $900,000 | $1,125,000 |
| Jay H. Shah          | $1,800,000                                                                                     | $2,400,000 | $3,000,000 |
| Neil H. Shah         | $1,800,000                                                                                     | $2,400,000 | $3,000,000 |
| Ashish R. Parikh     | $675,000                                                                                       | $900,000 | $1,125,000 |
| Michael R. Gillespie | $213,750                                                                                       | $285,000 | $356,250 |

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|   | · | increase the annual cash retainer from $24,000 to $25,000; |
|--------|--------|------------------------------------------------------------|

|   | · | increase the equity award grant from $20,000 to $45,000 of common shares (paid/awarded semi-annually to non-employee trustees who are "independent" in accordance with applicable New York Stock Exchange listing standards); |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increase the Lead Independent Trustee retainer from $5,000 to $10,000; |
|--------|--------|------------------------------------------------------------------------|

|   | · | increase each of the committee chairperson retainer fees by $2,500; and |
|--------|--------|-------------------------------------------------------------------------|

|   | · | provide a $1,500 meeting fee for both in-person and telephonic meetings of the Board of Trustees. |
|--------|--------|---------------------------------------------------------------------------------------------------|

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Item 6. Exhibits.

| Exhibit Number |   | Exhibit Description                                                                                                         |
|----------------|--------|-----------------------------------------------------------------------------------------------------------------------------|
|           |   |                                                                                                                        |
| 3.1            |   | Articles of Amendment and Restatement of the Declaration of Trust of Hersha Hospitality Trust, as amended and supplemented. |
|           |   |                                                                                                                        |
| 31.1           |   | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                         |
|           |   |                                                                                                                        |
| 31.2           |   | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                         |
|           |   |                                                                                                                        |
| 32.1           |   | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                         |
|           |   |                                                                                                                        |
| 32.2           |   | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                         |

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SIGNATURES

|         | HERSHA HOSPITALITY TRUST |
|--------------|--------------------------|
|         |                     |
|         |                     |
| May 10, 2010 | /s/ Ashish R. Parikh     |
|         | Ashish R. Parikh         |
|         | Chief Financial Officer  |

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