<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

(Mark One)
[X]  JOINT QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the quarterly period ended March 31, 1998

                                      OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from __________________ to ______________________

    Commission File Number 1-9319            Commission File Number 1-9320

  PATRIOT AMERICAN HOSPITALITY, INC.          WYNDHAM INTERNATIONAL, INC.
--------------------------------------   ---------------------------------------
(Exact name of registrant as specified   (Exact name of registrant as specified 
           in its charter)                          in its charter)     

    Delaware            94-0358820           Delaware             94-2878485
--------------------------------------   ---------------------------------------
(State or other      (I.R.S. Employer    (State or other       (I.R.S. Employer 
jurisdiction of       Identification     jurisdiction of        Identification 
incorporation or           No.)          incorporation or            No.)       
organization)                            organization)                         

1950 Stemmons Freeway, Suite 6001        1950 Stemmons Freeway, Suite 6001
Dallas, Texas                75207       Dallas, Texas                75207
--------------------------------------   ---------------------------------------
(Address of principal      (Zip Code)    (Address of principal      (Zip Code) 
  executive offices)                       executive offices)                  


            (214) 863-1000                           (214) 863-1000
--------------------------------------   ---------------------------------------
    (Registrant's telephone number,          (Registrant's telephone number,
         including area code)                     including area code)      

                N/A                                      N/A
--------------------------------------   ---------------------------------------
   (Former name, former address and         (Former name, former address and  
 former fiscal year, if changed since     former fiscal year, if changed since
            last report)                             last report)             


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X . No    .
                                       ---     --- 

The number of shares outstanding of each registrant's classes of common stock,
par value $.01 per share, as of the close of business on May 11, 1998, was as
follows:

            Registrant                                Number of Shares
Patriot American Hospitality, Inc.                       114,116,946
    Wyndham International, Inc.                          114,116,946
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

                                     INDEX

                                                                            Page

                        PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
COMBINED PATRIOT AMERICAN HOSPITALITY, INC. AND WYNDHAM INTERNATIONAL, INC.:
   Condensed Combined Balance Sheets as of  March 31, 1998 (unaudited) and 
    December 31, 1997................                                          3
   Condensed Combined Statements of Operations for the three months ended 
    March 31, 1998 and 1997 (unaudited).....................................   4
   Condensed Combined Statements of Cash Flows for the three months ended
    March 31, 1998 and 1997 (unaudited).....................................   5
PATRIOT AMERICAN HOSPITALITY, INC. :
   Condensed Consolidated Balance Sheets as of March 31, 1998 (unaudited)
    and December 31, 1997...................................................   6
   Condensed Consolidated Statements of Operations for the three months
    ended March 31, 1998 and 1997 (unaudited)...............................   7
   Condensed Consolidated Statements of Cash Flows for the three months
    ended March 31, 1998 and 1997 (unaudited)...............................   8
WYNDHAM INTERNATIONAL, INC.:
   Condensed Consolidated Balance Sheets as of March 31, 1998 (unaudited)
    and December 31, 1997...................................................   9
   Condensed Consolidated Statement of Operations for the three months
    ended March 31, 1998 (unaudited)........................................  10
   Condensed Consolidated Statement of Cash Flows for the three months
    ended March 31, 1998  (unaudited).......................................  11
NOTES TO CONDENSED FINANCIAL STATEMENTS AS OF MARCH 31, 1998 (UNAUDITED)....  12

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS......................................................  23

                          PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS...................................................  34

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS...........................  34

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................  34

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
   Exhibits ................................................................  35
   Reports on Form 8-K......................................................  35

SIGNATURES..................................................................  36

                                       2
<PAGE>
 
                         PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

                       CONDENSED COMBINED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                             MARCH 31, 1998    DECEMBER 31,1997
                                             --------------    ----------------
                    ASSETS                    (UNAUDITED)

Investment in real estate and related 
 improvements and land held for
 development, net of accumulated 
 depreciation of $101,921 in 1998 and     
 $68,805 in 1997...........................      $3,150,712         $2,044,649
Cash and cash equivalents..................          85,268             42,431
Restricted cash............................           3,384              5,005
Accounts and lease revenue receivable......         134,504             57,046
Investment in unconsolidated subsidiaries..          15,465             11,802
Mortgage notes and other receivables from  
 unconsolidated subsidiaries...............          73,465             76,419
Other mortgage notes and other receivables.          32,682             12,983
Management contracts, net of accumulated   
 amortization of $3,622 in 1998 and        
 $1,574 in 1997............................          90,879             20,879
Trade names and franchise costs, net of    
 accumulated amortization of $1,510        
 in 1998 and $122 in 1997..................          95,540             11,166
Goodwill, net of accumulated amortization  
 of $5,516 in 1998 and $1,851 in 1997......         471,096            126,007
Deferred expenses, net of accumulated      
 amortization of $6,367 in 1998 and        
 $2,097 in 1997............................          22,529             21,417
Deferred acquisition costs.................          42,013             52,500
Inventories................................          16,059             10,450
Other assets...............................          62,629             15,099
                                                 ----------         ----------
       Total assets........................      $4,296,225         $2,507,853
                                                 ==========         ==========

    LIABILITIES AND SHAREHOLDERS' EQUITY

Borrowings under line of credit facility, 
 term loans, mortgage notes and            
 capital leases............................      $1,842,992         $1,112,709 
Accounts payable and accrued expenses......         160,609             78,468
Dividends and distributions payable........              72             27,636
Deposits...................................          22,656             12,423
Due to unconsolidated subsidiaries.........           7,456              7,304
Deferred income tax liability..............          75,684              9,550

Minority interest in the Operating 
 Partnerships..............................         203,959            220,177
Minority interest in other consolidated 
 subsidiaries..............................          71,462             49,694
Commitment and contingencies

Shareholders' Equity:
   Preferred stock, $0.01 par value, 
    authorized: 100,000,000 shares each;
    shares issued and outstanding: 
    4,860,876 shares in 1998...............              49                 --
   Excess stock (paired shares), $0.01 par 
    value, authorized: 750,000,000 shares  
    each; no shares issued and outstanding.              --                 --
   Common stock (paired shares), $0.01 par 
    value, authorized: 650,000,000 shares 
    each; issued and outstanding: 
    107,648,946 shares in 1998 and
    73,276,716 shares in 1997..............           2,154              1,466
   Additional paid in capital..............       1,991,803          1,070,973
   Receivable from shareholders and 
    affiliates.............................         (15,734)                --
   Unearned stock compensation, net of     
    accumulated amortization of $7,161  
    in 1998 and $5,825 in 1997.............         (16,227)           (13,116)
   Unrealized gain on securities available 
    for sale...............................             106                 --
   Distributions in excess of  retained 
    earnings...............................         (50,816)           (69,431)
                                                 ----------         ----------
       Total shareholders' equity..........       1,911,335            989,892
                                                 ----------         ----------
       Total liabilities and shareholders' 
        equity.............................      $4,296,225         $2,507,853
                                                 ==========         ==========


                 See notes to condensed financial statements.

                                       3
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

                  CONDENSED COMBINED STATEMENTS OF OPERATIONS
                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)

                                                     THREE MONTHS ENDED
                                                          MARCH 31,
                                                    --------------------
                                                      1998        1997
                                                    --------    --------
Revenue:
   Hotel revenue.................................   $290,644    $     --
   Lease revenue ................................     20,565      35,013
   Racecourse facility revenue...................     23,048          --
   Management fee and service fee income.........     13,839          --
   Interest and other income.....................      1,711         375
                                                    --------    --------
      Total revenue..............................    349,807      35,388
                                                    --------    --------

Expenses:
   Hotel expenses................................    200,852       3,546
   Racecourse facility operations................     18,184          --
   General and administrative....................     17,306       2,782
   Interest expense..............................     35,959       7,805
   Depreciation and amortization.................     35,603       8,496
                                                    --------    --------
         Total expenses..........................    307,904      22,629
                                                    --------    --------

Operating income.................................     41,903      12,759
   Equity in earnings of unconsolidated 
    subsidiaries.................................      3,194       1,021
                                                    --------    --------

Income before income tax provision, minority 
 interests and extraordinary item................     45,097      13,780
   Income tax provision..........................     (3,558)         --
                                                    --------    --------

Income before minority interests and 
 extraordinary item..............................     41,539      13,780
   Minority interest in Operating Partnerships...     (3,055)     (2,232)
   Minority interest in other consolidated 
    subsidiaries.................................     (1,356)       (200)
                                                    --------    --------

Income before extraordinary item.................     37,128      11,348
   Extraordinary loss from early extinguishment 
    of debt, net of minority interest............    (18,716)         --
                                                    --------    --------
Net income.......................................   $ 18,412    $ 11,348
                                                    ========    ========
Basic earnings per common Paired Share:
   Income before extraordinary item..............   $   0.37    $   0.26
   Extraordinary loss............................      (0.19)         --
                                                    --------    --------
     Net income per common Paired Share..........   $   0.18    $   0.26
                                                    ========    ========
Diluted earnings per common Paired Share:
   Income before extraordinary item..............   $   0.35    $   0.25
   Extraordinary loss............................      (0.18)   $     --
                                                    --------    --------
     Net income per common Paired Share..........   $   0.17    $   0.25
                                                    ========    ========




                 See notes to condensed financial statements.

                                       4
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

                  CONDENSED COMBINED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)
                                  (UNAUDITED)


                                                             THREE MONTHS ENDED
                                                                  MARCH 31,
                                                             ------------------
                                                               1998      1997
                                                             --------  --------
CASH FLOWS FROM OPERATING ACTIVITIES:                                  
   Net income..............................................  $ 18,412  $ 11,348
   Adjustments to reconcile net income to net cash                     
     provided by operating activities:                                 
     Depreciation..........................................    28,481     8,467
     Amortization of unearned stock compensation...........     1,527       621
     Amortization of deferred loan costs...................     3,503       330
     Amortization of management contracts and trade                    
      names................................................     3,245        --
     Amortization of goodwill and other assets.............     3,877        65
     Net payments collected from unconsolidated                        
      subsidiaries.........................................     4,708       413
     Issuance of stock for directors' fee and bonus........       880        --
     Equity in earnings of unconsolidated subsidiaries.....    (3,194)   (1,021)
     Minority interest in income of Operating                          
      Partnerships.........................................     3,055     2,232
     Minority interest in income of other consolidated                 
      subsidiaries.........................................     1,356       200
      Deferred income taxes................................    (1,068)       --
     Extraordinary item....................................    18,716        --
     Changes in assets and liabilities:                                
       Accounts and lease revenue receivable...............   (27,674)  (11,732)
       Inventories.........................................       424        --
       Deposits............................................    (2,285)       --
       Accounts payable and other accrued expenses.........    10,000       566
                                                             --------  --------
         Net cash provided by operating activities.........    63,963    11,489
                                                             --------  --------
                                                                       
CASH FLOWS FROM INVESTING ACTIVITIES:                                  
   Acquisition of hotel properties and related                         
     working capital assets................................  (281,753) (191,452)
   Improvements and additions to hotel properties..........   (41,205)  (17,634)
   Cash received in acquisition of hotel leases............    28,976        --
   Collections on other notes receivable...................     4,000        --
   Decrease in restricted cash accounts....................     4,588        64
   Deferred acquisition costs..............................   (27,104)   (2,369)
   Investment in unconsolidated subsidiaries...............        --    (1,574)
   Investment in mortgage and other notes receivable.......      (939)   (9,500)
                                                             --------  --------
         Net cash used in investing activities.............  (313,437) (222,465)
                                                             --------  --------
                                                                       
CASH FLOWS FROM FINANCING ACTIVITIES:                                  
    Borrowings under line of credit facility, term loans,              
     mortgage notes and capital lease obligations..........   504,762   237,272
   Repay borrowings under line of credit facility and                  
    other debt.............................................  (311,862)  (13,388)
   Proceeds from issuance of common stock..................   123,782        --
   Collections on notes receivable from shareholders                   
    and affiliates.........................................     2,999        --
   Dividends and distributions paid........................   (27,564)  (13,128)
   Other...................................................       194       (49)
                                                             --------  --------
         Net cash provided by financing activities.........   292,311   210,707
                                                             --------  --------
                                                                       
Net increase (decrease) in cash and cash equivalents.......    42,837      (269)
                                                                       
Cash and cash equivalents at beginning of period...........    42,431     4,146
                                                             --------  --------
                                                                       
Cash and cash equivalents at end of period.................  $ 85,268  $  3,877
                                                             ========  ========
                                                             
                                                             
                                                             
                 See notes to condensed financial statements.

                                                             

                                       5
<PAGE>
 
                      PATRIOT AMERICAN HOSPITALITY, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                                MARCH 31,        DECEMBER 31,
                                                  1998               1997
                                                ---------        ------------
                                               (UNAUDITED)
                    ASSETS

Investment in real estate and related 
 improvements and land held for
 development, net of accumulated 
 depreciation of $67,027 in 1998
 and $67,501 in 1997.........................   $2,595,039       $ 2,016,267
Cash and cash equivalents....................        4,161            15,355
Restricted cash..............................        3,226             5,005
Accounts and lease revenue receivable........       44,976            14,458
Investment in unconsolidated subsidiaries....      321,685            11,802
Mortgage notes and other receivables from 
 unconsolidated subsidiaries.................       73,465            76,419
Subscription notes receivable from 
 Wyndham International.......................      133,669                --
Notes and other receivables from 
 Wyndham International.......................      391,142            42,946
Other notes receivable.......................       15,650                --
Goodwill, net of accumulated amortization 
 of $1,815 in 1998 and $1,257 in 1997........       86,819            87,999
Deferred expenses, net of accumulated 
 amortization of $5,682 in 1998
  and $2,097 in 1997.........................       19,970            21,417
Deferred acquisition costs...................        6,226            21,374
Inventories..................................        1,306             1,306
Other assets.................................       31,182             6,757
                                                ----------        ----------
    Total assets.............................   $3,728,516        $2,321,105
                                                ==========        ==========

      LIABILITIES AND SHAREHOLDERS' EQUITY

Borrowings under line of credit facility, 
 term loans, mortgage notes and capital 
 leases......................................   $1,630,252        $1,112,709
Subscription notes payable to Wyndham 
 International...............................       33,001            12,875
Other notes payable to Wyndham 
 International...............................       23,750                --
Accounts payable and accrued expenses........       24,076            28,151
Dividends and distributions payable..........           72            27,185
Due to unconsolidated subsidiaries...........        7,456             7,304
Minority interest in Patriot Partnership.....      159,502           174,640
Minority interest in other consolidated 
 subsidiaries................................       58,024            49,214
Commitments and contingencies

Shareholders' equity:
Preferred stock, $0.01 par value; 
 authorized: 100,000,000 shares;
 shares issued and outstanding: 
 4,860,876 in 1998...........................           49                --
Excess stock, $0.01 par value; 
 authorized: 750,000,000 shares;
 no shares issued and outstanding............           --                --
Common stock, $0.01 par value; 
 authorized: 650,000,000 shares;
 shares issued and outstanding: 
 107,648,946 shares in 1998
 and 73,276,716 shares in 1997...............        1,077               733
Additional paid-in capital...................    1,871,343           990,821
Receivable from shareholders.................      (14,595)               --
Unearned stock compensation, 
 net of accumulated amortization
 of $7,161 in 1998 and $5,825 
 in 1997.....................................      (11,781)          (13,116)
Distributions in excess of 
 retained earnings...........................      (53,710)          (69,411)
                                                ----------        ----------
    Total shareholders' equity...............    1,792,383           909,027
                                                ----------        ----------
    Total liabilities and 
     shareholders' equity....................   $3,728,516        $2,321,105
                                                ==========        ==========


                 See notes to condensed financial statements.

                                       6
<PAGE>
 
                      PATRIOT AMERICAN HOSPITALITY, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)



                                             THREE MONTHS ENDED
                                                  MARCH 31,
                                             ------------------
                                               1998      1997
                                             --------  --------
Revenue:
   Lease revenue...........................  $109,649  $ 35,013
   Interest and other income...............     3,516       375
                                             --------  --------
         Total revenue.....................   113,165    35,388
                                             --------  --------

Expenses: 
   Real estate and personal property    
    taxes and casualty insurance...........    11,923     3,201
   Ground lease expense....................     6,558       345
   General and administrative..............     5,282     2,782
   Interest expense........................    34,251     7,805
   Depreciation and amortization...........    20,497     8,496
                                             --------  --------
         Total expenses....................    78,511    22,629
                                             --------  --------

Operating income...........................    34,654    12,759
   Equity in earnings of unconsolidated 
    subsidiaries...........................     3,591     1,021
                                             --------  --------

Income before income tax provision, 
 minority interests and extraordinary item.    38,245    13,780
   Income tax provision....................      (371)       --
                                             --------  --------

Income before minority interests and 
 extraordinary item........................    37,874    13,780
   Minority interest in the Patriot 
    Partnership............................    (3,128)   (2,232)
   Minority interest in consolidated 
    subsidiaries...........................      (533)     (200)
                                             --------  --------

Income before extraordinary item...........    34,213    11,348
   Extraordinary loss from early 
    extinguishment of debt, net of 
    minority interest......................   (18,716)       --
                                             --------  --------

Net income.................................  $ 15,497  $ 11,348
                                             ========  ========

Basic earnings per common share:
   Income before extraordinary item........  $   0.35  $   0.26
   Extraordinary loss......................     (0.19)       --
                                             --------  --------
     Net income per common share...........  $   0.16  $   0.26
                                             ========  ========

Diluted earnings per common share:
   Income before extraordinary item........  $   0.32  $   0.25
   Extraordinary loss......................     (0.18)       --
                                             --------  --------
     Net income per common share...........  $   0.14  $   0.25
                                             ========  ========



                 See notes to condensed financial statements.

                                       7
<PAGE>
 
                       PATRIOT AMERICAN HOSPITALITY, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE> 
<CAPTION> 
                                                               THREE MONTHS ENDED
                                                                    MARCH 31,
                                                           -------------------------
                                                             1998             1997
                                                           --------         --------
<S>                                                        <C>              <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:                    
   Net income............................................ $  15,497        $  11,348
   Adjustments to reconcile net income to net cash                         
     provided by operating activities:                                     
     Depreciation........................................    19,856            8,467
     Amortization of unearned stock compensation.........     1,336              621
     Amortization of deferred loan costs.................     3,503              330
     Amortization of goodwill and other assets...........       641               65
     Net payments collected from unconsolidated                            
      subsidiaries.......................................     4,699              413
     Issuance of stock for directors' fee and bonus......       675               --
     Equity in earnings of unconsolidated subsidiaries...    (3,591)          (1,021)
     Minority interest in income of Patriot Partnership..     3,128            2,232
     Minority interest in income of other consolidated                     
      subsidiaries.......................................       533              200
     Extraordinary item..................................    18,716               --
     Changes in assets and liabilities:                                    
       Accounts and lease revenue receivable.............   (25,894)          (9,418)
       Other assets......................................       157           (2,314)
       Accounts payable and other accrued expenses.......    (2,811)             566
                                                          ---------        ---------
         Net cash provided by operating activities.......    36,445           11,489
                                                          ---------        ---------
                                                                           
CASH FLOWS FROM INVESTING ACTIVITIES:                                      
   Acquisition of hotel properties and related                             
     working capital assets..............................  (281,753)        (191,452)
   Improvements and additions to hotel properties........   (38,333)         (17,634)
   Changes in due from Wyndham International.............   (11,892)              --
   Collections on other notes receivable.................     4,000               --
   Decrease in restricted cash accounts..................     4,746               64
   Deferred acquisition costs............................    (2,669)          (2,369)
   Investment in unconsolidated subsidiaries.............        --           (1,574)
   Investment in mortgage and other notes receivable.....        --           (9,500)
                                                          ---------        ---------
         Net cash used in investing activities...........  (325,901)        (222,465)
                                                          ---------        ---------
                                                                           
CASH FLOWS FROM FINANCING ACTIVITIES:                                      
   Borrowings under line of credit facilities,                             
    term loans, mortgage notes and                                         
    capital lease obligations............................   504,762          237,272
   Repay borrowings under line of credit facility........  (307,277)         (13,388)
   Principal payments on subscription notes payable                        
    to Wyndham International.............................   (12,875)              --
   Proceeds from issuance of common stock................   117,572               --
   Collections on notes receivable from shareholders.....     2,999               --
   Dividends and distributions paid......................   (27,113)         (13,128)
   Other.................................................       194              (49)
                                                          ---------        ---------
         Net cash provided by financing activities.......   278,262          210,707
                                                          ---------        ---------
                                                                           
Net decrease in cash and cash equivalents................   (11,194)            (269)
                                                                           
Cash and cash equivalents at beginning of period.........    15,355            4,146
                                                          ---------        ---------
                                                         
Cash and cash equivalents at end of period............... $   4,161        $   3,877
                                                          =========        =========
</TABLE> 



                 See notes to condensed financial statements.

                                       8
<PAGE>
 
                          WYNDHAM INTERNATIONAL, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE> 
<CAPTION> 
                                                                                   MARCH 31,       DECEMBER 31,
                                                                                     1998              1997
                                                                                ----------------  ----------------
<S>                                                                             <C>               <C> 
                                     ASSETS                                       (UNAUDITED)
 Current assets:
    Cash and cash equivalents..................................................  $       81,107    $      27,076
    Restricted cash............................................................             158               --
    Accounts receivable........................................................         122,801           46,340
    Subscription notes receivable from Patriot.................................          30,535           12,875
    Inventories................................................................          14,753            9,144
    Prepaid expenses and other current assets..................................          22,848            5,227
                                                                                ---------------   --------------
          Total current assets.................................................         272,202          100,662
 Investment in real estate and related improvements, net of accumulated
    depreciation of $34,894 in 1998 and $1,304 in 1997.........................         555,939           28,382
 Investments in unconsolidated subsidiaries....................................           4,005               --
 Notes and other receivables from Patriot......................................          26,216               --
 Mortgage notes and other receivables..........................................          15,714           12,983
 Management contracts costs, net of accumulated amortization of $3,622 in 1998
    and  $1,574 in 1997........................................................          90,879           20,879
 Trade names and franchise costs, net of accumulated amortization of $1,510 in
    1998 and  $122 in 1997.....................................................          95,540           11,166
 Deferred acquisition costs....................................................          35,787           31,126
 Goodwill, net of accumulated amortization of $3,701 in 1998 and $594 in 1997..         384,277           38,008
 Deferred expenses, net of accumulated amortization of $129 in 1998............           2,559               --
 Other assets..................................................................           9,920            8,882
                                                                                ---------------   --------------
          Total assets......................................................... $     1,493,038   $      252,088
                                                                                ===============   ==============
                      LIABILITIES AND SHAREHOLDERS' EQUITY
 Current liabilities:
    Accounts payable and accrued expenses...................................... $       138,992   $       50,317
    Dividends and distributions payable........................................              --              451
    Participating lease payments payable to Patriot............................          30,817            9,519
    Deposits...................................................................          22,656           12,423
    Notes and other amounts payable to Patriot.................................         391,142           42,946
    Current portion of mortgage notes and capital lease obligations............          10,977               --
                                                                                ---------------   --------------
          Total current liabilities............................................         594,584          115,656
 Subscription Notes payable to Patriot.........................................         133,669               --
 Mortgage notes payable and capital lease obligations..........................         201,763               --
 Deferred income tax liability.................................................          75,684            9,550

 Minority interest in OpCo Partnership.........................................          44,458           45,537
 Minority interest in other consolidated subsidiaries..........................         323,662              480
 Commitments and contingencies
 Shareholders' equity:
    Preferred stock, $0.01 par value; authorized: 100,000,000 shares; no shares
      issued and outstanding...................................................              --               --
    Excess stock, $0.01 par value; authorized: 750,000,000 shares; no shares
      issued and outstanding...................................................              --               --
    Common stock, $0.01 par value; authorized: 650,000,000 shares; issued and
      outstanding: 107,648,946 shares in 1998 and 73,276,716 shares in 1997....           1,077              733
    Additional paid-in capital.................................................         120,460           80,152
    Receivable from shareholders and affiliates................................          (1,139)              --
    Unearned executive compensation, net of accumulated amortization of $191 ..          (4,446)              --
    Unrealized gain on securities available for sale...........................             106               --
    Retained earnings/(deficit)................................................           3,160              (20)
                                                                                ---------------   --------------
          Total shareholders' equity...........................................         119,218           80,865
                                                                                ---------------   --------------
          Total liabilities and shareholders' equity........................... $     1,493,038   $      252,088
                                                                                ===============   ==============
</TABLE> 


                 See notes to condensed financial statements.

                                       9
<PAGE>
 
                          WYNDHAM INTERNATIONAL, INC.

                CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)

<TABLE> 
<CAPTION> 
                                                                  THREE MONTHS
                                                                      ENDED
                                                                    MARCH 31,
                                                                      1998
                                                                 --------------
<S>                                                              <C> 
Revenue:                                                        
   Hotel revenue................................................ $      290,644
   Racecourse facility revenue..................................         23,048
   Management fee and service fee income........................         14,104
   Interest and other income....................................          2,186
                                                                 --------------
       Total revenue............................................        329,982
                                                                 --------------
Expenses:                                                       
   Hotel expenses...............................................        182,371
   Racecourse facility operations...............................         18,184
   General and administrative...................................         12,023
   Depreciation and amortization................................         15,106
   Lease payments...............................................         89,084
   Interest expense.............................................          5,699
                                                                  -------------
       Total expenses ..........................................        322,467
                                                                 --------------
Operating income................................................          7,515
   Equity in earnings of unconsolidated subsidiaries............          1,720
                                                                 --------------
Income before income tax provision and minority interests.......          9,235
   Income tax provision.........................................         (3,187)
                                                                 --------------
Income before minority interests................................          6,048
   Minority interest in OpCo Partnership........................             73
   Minority interest in other consolidated subsidiaries.........         (2,941)
                                                                 --------------

Net income...................................................... $        3,180
                                                                 ==============
                                                                
Basic earnings per common share................................. $         0.03
                                                                 ==============
                                                                
Diluted earnings per common share............................... $         0.03
                                                                 ==============
</TABLE> 



                 See notes to condensed financial statements.

                                       10
<PAGE>
 
                          WYNDHAM INTERNATIONAL, INC.

                CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE> 
<CAPTION> 
                                                                                                    THREE MONTHS
                                                                                                       ENDED
                                                                                                      MARCH 31,
                                                                                                        1998
                                                                                                    ------------
<S>                                                                                              <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income.................................................................................      $  3,180
     Adjustments to reconcile net income to net cash
         provided by operating activities:
         Depreciation...........................................................................         8,625
         Amortization of unearned stock compensation............................................           191
                                                                                                
         Amortization of deferred loan costs....................................................           129 
         Amortization of management contracts and trade names...................................         3,245
         Amortization of goodwill...............................................................         3,107
         Net payments collected from unconsolidated subsidiaries................................             9
         Issuance of stock for directors' fees and bonus........................................
                                                                                                           205
         Deferred income taxes..................................................................        (1,068)
         Equity in earnings of unconsolidated subsidiaries......................................        (1,720)
         Minority interest in income of OpCo Partnership........................................           (73)
         Minority interest in income of other consolidated subsidiaries.........................         2,941
     Changes in assets and liabilities:
         Accounts receivable, prepaid expenses and other assets.................................        (4,223)
         Inventories............................................................................           424
         Accounts payable and other accrued expenses............................................        12,811
                                                                                                      --------
                  Net cash provided by operating activities.....................................        27,783
                                                                                                      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Improvements and additions to furniture and fixtures.......................................        (3,137)
     Deferred acquisition costs.................................................................       (24,435)
     Cash received upon acquisition of hotel leases.............................................        28,976
     Change in due to Patriot...................................................................        11,892
     Increase in restricted cash accounts.......................................................          (158)
     Investment in mortgage notes and other receivables.........................................          (939)
                                                                                                      --------
                  Net cash provided by investing activities.....................................        12,199
                                                                                                      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Payments received on subscription notes receivable.........................................        12,875
     Borrowings under mortgage notes............................................................        (3,780)
     Capital leases.............................................................................          (805)
     Net proceeds from issuance of common stock.................................................         6,210
     Distributions paid.........................................................................          (451)
                                                                                                      --------
                  Net cash provided by financing activities.....................................        14,049
                                                                                                      --------
Net increase in cash and cash equivalents.......................................................        54,031
Cash and cash equivalents at beginning of period................................................        27,076
                                                                                                      --------
Cash and cash equivalents at end of period......................................................      $ 81,107
                                                                                                      ========
</TABLE> 


                 See notes to condensed financial statements.

                                       11
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                 MARCH 31, 1998
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)

1.   ORGANIZATION AND BASIS OF PRESENTATION:

         The entity formerly known as Patriot American Hospitality, Inc.
(collectively with its subsidiaries, "Old Patriot"), a Virginia corporation, was
formed April 17, 1995 as a self-administered real estate investment trust
("REIT") for the purpose of acquiring equity interests in hotel properties. On
October 2, 1995, Old Patriot completed an initial public offering of shares of
its common stock and commenced operations.

         On July 1, 1997, Old Patriot merged with and into California Jockey
Club ("Cal Jockey"), with Cal Jockey being the surviving legal entity (the "Cal
Jockey Merger"). Cal Jockey's shares of common stock were paired and traded
together with the shares of common stock of Bay Meadows Operating Company ("Bay
Meadows") as a single unit pursuant to a stock pairing arrangement. In
connection with the Cal Jockey Merger, Cal Jockey changed its name to "Patriot
American Hospitality, Inc." ("Patriot") and Bay Meadows changed its name to
"Patriot American Hospitality Operating Company." In January 1998, as a result
of the merger of Wyndham Hotel Corporation with and into Patriot as discussed
below, Patriot American Hospitality Operating Company changed its name to
"Wyndham International, Inc." and is referred to herein, collectively with its
subsidiaries, as "Wyndham International." The term "Companies" as used herein
includes Patriot, Wyndham International and their respective subsidiaries.
Patriot and Wyndham International are both Delaware corporations.

         The Cal Jockey Merger was accounted for as a reverse acquisition
whereby Cal Jockey was considered to be the acquired company for accounting
purposes. Consequently, the historical financial information of Old Patriot
became the historical financial information for Patriot. For accounting
purposes, Wyndham International commenced its operations concurrent with the
closing of the Cal Jockey Merger on July 1, 1997.

         In connection with the Cal Jockey Merger, Bay Meadows formed an
operating partnership, Patriot American Hospitality Operating Partnership, L.P.
(the "OpCo Partnership") into which Bay Meadows contributed its assets in
exchange for units of limited partnership interest ("OP Units") of the OpCo
Partnership, and Cal Jockey contributed certain of its assets to Patriot
American Hospitality Partnership, L.P. (the "Patriot Partnership") in exchange
for OP Units of the Patriot Partnership (collectively, the OpCo Partnership and
the Patriot Partnership are referred to herein as the "Operating Partnerships").
Subsequent to completion of the Cal Jockey Merger and the transactions
contemplated by the Cal Jockey Merger Agreement, substantially all of the
operations of Patriot and Wyndham International have been conducted through the
Operating Partnerships and their subsidiaries.

         Patriot, through its wholly owned subsidiary, PAH GP, Inc., is the sole
general partner and the holder of a 1.0% general partnership interest in the
Patriot Partnership. In addition, Patriot, through its wholly owned subsidiary,
PAH LP, Inc., owns an approximate 90.3% limited partnership interest in the
Patriot Partnership as of March 31, 1998.

         Wyndham International owns a 1.0% general partnership interest and an
approximate 88.9% limited partnership interest in the OpCo Partnership as of
March 31, 1998.

         At March 31, 1998, Patriot, through the Patriot Partnership and other
subsidiaries, owned interests in 120 hotels with an aggregate of over 30,000
guest rooms and leased 14 hotels from third parties with over 2,700 rooms.
Patriot leases each of its hotels, except the six hotels that are separately
owned through special purpose entities and other unconsolidated subsidiaries, to
Wyndham International or to other third party lessees (the "Lessees") who are
responsible for operating the hotels. At March 31, 1998, Patriot leased 17 of
its hotel investments to CHC Lease Partners for staggered terms of ten to twelve
years pursuant to separate participating leases providing for the payment of the
greater of base or participating rent, plus certain additional charges, as
applicable (the "Participating Leases"). Twelve of the hotels were leased to
NorthCoast Hotels, L.L.C. ("NorthCoast Lessee") under similar Participating
Lease agreements. DTR North Canton, Inc. (the "Doubletree Lessee") leased four
hotels; and Metro Hotels Leasing Corporation ("Metro Lease Partners") leased one
hotel under similar Participating Lease agreements. The Lessees, in turn, have
entered into separate agreements with hotel management entities (the
"Operators") to 

                                       12
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

             NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
                                 MARCH 31, 1998
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)


manage the hotels. At March 31, 1998, Wyndham International leased 94 hotels
from Patriot pursuant to Participating Lease agreements which are substantially
similar to the Participating Lease agreements of the Lessees. Wyndham
International manages 81 of these hotels through certain of its hotel management
subsidiaries and has entered into separate management agreements with hotel
Operators to manage 13 of the hotels.

Principles of Consolidation

         The unaudited separate consolidated financial statements include the
accounts of Patriot and Wyndham International, their respective wholly-owned
subsidiaries, and the partnerships, corporations and limited liability companies
in which Patriot or Wyndham International own a controlling interest. The
unaudited separate consolidated financial statements of Patriot and Wyndham
International have also been combined for purposes of financial statement
presentation. All significant intercompany accounts and transactions have been
eliminated.

         These financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. These financial statements have been prepared in accordance
with the accounting policies described in Patriot's and Wyndham International's
Joint Annual Report on Form 10-K for the year ended December 31, 1997. Certain
prior year amounts have been reclassified to conform to current period
presentation.

         In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130 ("Statement 130"),
"Reporting Comprehensive Income" which establishes standards for reporting and
display of comprehensive income and its components. The Companies have adopted
Statement 130 beginning with their interim financial statements for the first
quarter of 1998. Management believes that they do not have material items that
would require presentation in a separate statement of comprehensive income.

         In June 1997, FASB issued Statement of Financial Accounting Standards
No. 131 ("Statement 131"), "Disclosures About Segments of an Enterprise and
Related Information" which specifies revised guidelines for determining an
entity's operating segments and the type and level of financial information to
be disclosed. Statement 131 is effective for fiscal years beginning after
December 15, 1997, but need not be applied to interim financial statements in
the initial year of its application. Management believes this statement will
result in expanded disclosure for the financial statements.

2.   HOTELS AND OTHER BUSINESSES ACQUIRED:

Hotel Investments Purchased

         During the first quarter of 1998, Patriot, through the Patriot
Partnership and its subsidiaries, invested approximately $163,000 in the
acquisition of two hotels with a total of approximately 1,187 guest rooms. These
acquisitions were financed primarily with funds drawn on Patriot's revolving
credit facility, the issuance of 51,290 OP Units valued at approximately $1,421
and the assumption of mortgage debt in the amount of approximately $50,324. In
addition, Patriot acquired an office building that will be converted into a
hotel for approximately $33,900.

Business Combinations

         Wyndham Hotel Corporation - On January 5, 1998, Wyndham Hotel
Corporation ("Old Wyndham") merged with and into Patriot, with Patriot being the
surviving corporation (the "Wyndham Merger").

                                       13
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

             NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
                                 MARCH 31, 1998
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)


         Patriot, as a result of the Wyndham Merger, acquired ownership of ten
Wyndham hotels and 14 ClubHouse hotels and leased such hotels to Wyndham
International. Thirteen of the 14 hotel leases assumed by Patriot were
sub-leased to Wyndham International. Old Wyndham's remaining 52 management and
franchise contracts (excluding 16 hotels that Old Wyndham managed that are owned
by Patriot), the Wyndham and ClubHouse proprietary brand names, and the Wyndham
hotel management company were transferred to corporate subsidiaries of Patriot
(collectively, the "New Non-Controlled Subsidiaries"). Patriot owns a 99%
non-voting interest and Wyndham International owns the 1% controlling voting
interest in each of the New Non-Controlled Subsidiaries. Therefore, the
operating results of the New Non-Controlled Subsidiaries will be combined with
those of Wyndham International for financial reporting purposes. Patriot
accounts for its investment in the New Non-Controlled Subsidiaries using the
equity method of accounting. The total purchase consideration for the Wyndham
Merger of approximately $982,000 consisted of 21,594,137 Paired Shares and
4,860,876 shares of Series A Convertible Preferred Stock of Patriot (which are
convertible on a one-for-one basis into Paired Shares), cash of approximately
$339,000 to repay debt and pay Old Wyndham shareholders who elected to receive
cash (which was financed with funds drawn on the Companies' revolving credit
facility (the "Revolving Credit Facility"), and the assumption of approximately
$59,063 in debt.

         WHG Casinos & Resorts, Inc. and related transactions - On January 16,
1998, a subsidiary of Wyndham International merged with and into WHG Casinos &
Resorts Inc. ("WHG"), with WHG being the surviving corporation (the "WHG
Merger"). As a result of the WHG Merger, Wyndham International acquired the
570-room Condado Plaza Hotel & Casino, a 50% interest in the partnership that
owns the 389-room El San Juan Hotel & Casino and a 23.3% interest in the
partnership that owns the 751-room El Conquistador Resort & Country Club (the
"El Conquistador"), all of which are located in Puerto Rico. In addition,
Wyndham International acquired a 62% interest in Williams Hospitality Group,
Inc., the management company for the three hotels and the Las Casitas Village at
the El Conquistador. A total of 5,004,690 Paired Shares were issued in
connection with the WHG Merger and approximately $21,300 of debt was assumed,
resulting in total purchase consideration of approximately $159,400.

         Effective March 1, 1998, Patriot acquired from unaffiliated third
parties a 40% interest in the El San Juan Hotel & Casino, an aggregate 68.62%
equity interest in the El Conquistador and a 38% interest in Williams
Hospitality Group, Inc. for approximately $31,000 in cash and issuance of
1,818,182 Paired Shares valued at approximately $49,227 (collectively, these
transactions and the WHG Merger are referred to herein as the "WHG
Transactions"). Wyndham International owns the controlling general partner
interest in the partnerships that own the El San Juan Hotel & Casino and the El
Conquistador. Wyndham International also holds voting control of Williams
Hospitality Group, Inc. Therefore, the operating results of these entities have
been consolidated with those of Wyndham International for financial reporting
purposes. As a result, approximately $188,922 of debt related to the
partnerships that own the El San Juan Hotel & Casino and the El Conquistador has
also been reflected in Wyndham International's consolidated balance sheet.
Patriot accounts for its investment in these entities using the equity method of
accounting.

3.   SUBSCRIPTION NOTES:

         In order to effect the issuance of the paired shares of common stock
and OP Units which were issued in the Cal Jockey Merger, the Patriot Partnership
subscribed for shares of Bay Meadows common stock (which became shares of
Wyndham International common stock) in an amount equal to the number of shares
of Patriot common stock that were issued to Old Patriot stockholders in the Cal
Jockey Merger. In addition, the Patriot Partnership similarly subscribed for OP
Units in the OpCo Partnership in an amount equal to the number of OP Units of
the Patriot Partnership that were outstanding subsequent to the Cal Jockey
Merger. These subscriptions were funded through the issuance of promissory notes
(the "Subscription Notes") in the aggregate amount of $58,901 payable to Wyndham
International. The Subscription Notes, as amended, accrued interest at a rate of
8% per annum and were paid in full in the first quarter of 1998.

                                       14
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

             NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
                                 MARCH 31, 1998
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)


         In connection with the issuance of Paired Shares in the Wyndham Merger,
Patriot issued Subscription Notes payable to Wyndham International in the
aggregate amount of $30,535. These Subscription Notes bear interest at a rate of
LIBOR plus 1% per annum and mature January 31, 2001.

         In connection with the issuance of Paired Shares in the WHG Merger,
Wyndham International issued Subscription Notes payable to Patriot in the
aggregate amount of $133,669. These Subscription Notes bear interest at a rate
of 8.7% per annum and mature in January 2001.

4.   INTEREST RATE SWAP:

         The Companies entered into a fourth interest rate swap arrangement
during the first quarter of 1998 to swap floating rate LIBOR-based interest
rates for a fixed rate interest amount as a hedge against $125,000 of the
outstanding balance on the Companies' revolving credit facility. The interest
rate swap fixes the LIBOR portion of the revolving credit facility interest rate
at 5.5575% per annum through November 2002. If the actual LIBOR rate is less
than the specified fixed interest rate, Patriot is obligated to pay the
differential interest amount, such amount being recorded as incremental interest
expense. If the LIBOR is greater than the specified fixed interest rate, the
differential interest amount is refunded to Patriot.

5.    COMPUTATION OF EARNINGS PER SHARE:

         Basic and diluted earnings per share have been computed as follows:

Combined

<TABLE> 
<CAPTION> 
                                                        THREE MONTHS ENDED                 THREE MONTHS ENDED
                                                          MARCH 31, 1998                     MARCH 31, 1997
                                                   ------------------------------     ------------------------------
                                                       BASIC         DILUTED              BASIC         DILUTED
                                                   -------------- ---------------     -------------- ---------------
                                                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                <C>            <C>                 <C>            <C> 
Income before extraordinary item.................. $    37,128    $    37,128         $    11,348    $    11,348
Extraordinary loss................................     (18,716)       (18,716)                 --             --
                                                   -----------    -----------         -----------    -----------
Net income........................................ $    18,412    $    18,412         $    11,348    $    11,348
                                                   ===========    ===========         ===========    ===========

Weighted average number of Paired Shares
   outstanding....................................      99,490         99,490              43,189         43,189
                                                   ===========                        ===========               
Dilutive securities:
   Effect of unvested stock grants................                        872                                555
   Dilutive options to purchase Paired Shares.....                      2,024                                810
   Dilutive convertible preferred shares..........                      4,645                                 --
                                                                  -----------                        -----------
                                                                      107,031                             44,554
                                                                  ===========                        ===========

Earnings per Paired Share:
   Income before extraordinary item............... $      0.37    $      0.35         $      0.26    $      0.25
   Extraordinary loss.............................       (0.19)         (0.18)                 --             --
                                                   -----------    -----------         -----------    -----------
   Net income..................................... $      0.18    $      0.17         $      0.26    $      0.25
                                                   ===========    ===========         ===========    ===========
</TABLE> 

                                       15
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

             NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
                                 MARCH 31, 1998
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)

Patriot
<TABLE> 
<CAPTION> 
                                                        THREE MONTHS ENDED                 THREE MONTHS ENDED
                                                          MARCH 31, 1998                     MARCH 31, 1997
                                                   ------------------------------     ------------------------------
                                                       BASIC         DILUTED              BASIC         DILUTED
                                                   -------------- ---------------     -------------- ---------------
                                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                <C>            <C>                 <C>            <C> 
Income before extraordinary item.................. $    34,213    $    34,213         $    11,348    $    11,348
Extraordinary loss................................     (18,716)       (18,716)                 --             --
                                                   -----------    -----------         -----------    -----------
Net income........................................ $    15,497    $    15,497         $    11,348    $    11,348
                                                   ===========    ===========         ===========    ===========

Weighted average number of common shares
   outstanding....................................      99,490         99,490              43,189         43,189
                                                   ===========                        ===========                 
Dilutive securities:
   Effect of unvested stock grants................                        872                                555
   Dilutive options to purchase common shares.....                      2,024                                810
   Dilutive convertible preferred shares..........                      4,645                                 --
                                                                  -----------                        -----------
                                                                      107,031                             44,554
                                                                  ===========                        ===========

Earnings per share:
   Income before extraordinary item............... $      0.35    $      0.32         $      0.26    $      0.25
   Extraordinary loss.............................       (0.19)         (0.18)                 --             --
                                                   -----------    -----------         -----------    -----------
   Net income..................................... $      0.16    $      0.14         $      0.26    $      0.25
                                                   ===========    ===========         ===========    ===========
</TABLE> 


Wyndham International
<TABLE> 
<CAPTION> 
                                                                                    THREE MONTHS ENDED
                                                                                      MARCH 31, 1998
                                                                                ---------------------------
                                                                                   BASIC         DILUTED
                                                                                -----------   -------------
                                                                                      (IN THOUSANDS,
                                                                                EXCEPT PER SHARE AMOUNTS)
<S>                                                                             <C>              <C> 
         Net income.............................................................  $ 3,180        $  3,180
                                                                                  =======        ========
         Weighted average number of common shares outstanding...................   99,490          99,490
                                                                                  =======
         Dilutive securities:
            Effect of unvested stock grants.....................................                      872
            Dilutive options to purchase common shares..........................                    2,024
            Dilutive convertible preferred shares...............................                    4,645
                                                                                                 --------
                                                                                                  107,031
                                                                                                 ========
         Earnings per common share..............................................  $  0.03        $   0.03
                                                                                  =======        ========
</TABLE> 


6.   COMMITMENTS AND CONTINGENCIES:

CHC International, Inc.

         The Companies and CHC International, Inc. ("CHCI") have entered into an
Agreement and Plan of Merger dated as of September 30, 1997 (the "CHCI Merger
Agreement"), providing, subject to regulatory approvals, for the merger of the
hospitality-related businesses of CHCI with and into Wyndham International with
Wyndham International being the surviving company (the "CHCI Merger"). Subject
to regulatory approvals, CHCI's gaming 

                                       16
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

             NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
                                 MARCH 31, 1998
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)


operations will be transferred to a new legal entity prior to the CHCI Merger
and such operations will not be a part of the transaction. It is anticipated
that the CHCI Merger will be consummated in the second quarter of 1998. As a
result of the CHCI Merger, Wyndham International, through its subsidiaries, will
acquire the remaining 50% investment interest in GAH-II, L.P., the remaining 17
leases and 16 of the associated management contracts related to the Patriot
hotels leased by CHC Lease Partners, 12 third-party management contracts, two
third-party lease contracts, the Grand Bay and Registry Hotels & Resorts
proprietary brand names and certain other hospitality management assets. Wyndham
International has also agreed to provide CHCI with a $7,000 line of credit until
such time as the CHCI Merger is completed. By operation of the CHCI Merger, all
issued and outstanding common stock of CHCI will be exchanged for approximately
4,396,000 shares of Wyndham International preferred stock, subject to certain
adjustments.

Interstate Merger

         On December 2, 1997, Patriot and Wyndham International entered into an
Agreement and Plan of Merger (the "Interstate Merger Agreement") pursuant to
which Interstate Hotels Company ("Interstate") would merge with and into Patriot
with Patriot being the surviving corporation (the "Interstate Merger"). Pursuant
to the Interstate Merger Agreement, stockholders of Interstate could elect to
convert each of their shares of Interstate common stock into the right to
receive either (i) $37.50 in cash, subject to proration in certain circumstances
(the "Interstate Cash Consideration"), or (ii) a number of Paired Shares based
on an exchange ratio of Paired Shares for each share of Interstate common stock
not exchanged for cash (the "Interstate Exchange Ratio"). Such elections by
stockholders of Interstate were to be prorated to ensure that 40% of the
outstanding shares of Interstate common stock was converted into the right to
receive Interstate Cash Consideration and that the remaining 60% of the
outstanding shares of Interstate common stock was converted into the right to
receive Paired Shares at the Interstate Exchange Ratio, subject to adjustment in
certain circumstances for the exercise of dissenters' rights. The special
meetings of the stockholders of Patriot, Wyndham International and Interstate at
which approval of the Interstate Merger was to be sought were originally
scheduled for March 30, 1998. On March 23, 1998, Patriot and Interstate jointly
announced that the Interstate Exchange Ratio had been set at 1.341 Paired Shares
for each Interstate share.

         On March 26, 1998, Marriott International, Inc. ("Marriott") sued
Interstate in the United States District Court for the District of Maryland (the
"Marriott Litigation") seeking an injunction against the Interstate Merger. By
agreement of the parties the complaint was dismissed without prejudice during
settlement discussions until March 30, 1998. On March 30, 1998, Marriott
re-filed its complaint and sought a temporary restraining order and preliminary
injunction. In its complaint Marriott asserted certain rights with respect to 29
hotels owned and/or operated by certain affiliates and subsidiaries of
Interstate under direct franchise agreements with Marriott, as well as certain
rights concerning any transfer of control of those Interstate-related
franchisees. The alleged rights asserted by Marriott included, among others, a
right of first refusal over 19 of the hotels, rights of consent allegedly
prohibiting Interstate from engaging in any transaction that constitutes a
transfer of the franchise agreement or a change in control of the franchisees
without Marriott's prior written consent, rights of non-competition allegedly
prohibiting Interstate from owning, operating, or being connected or associated
with a company that owns the trade name of a chain of hotels which competes with
Marriott without Marriott's consent, as well as a right of first refusal to
acquire all of the equity interests in Interstate. In December 1997, Patriot and
Marriott had entered into a non-binding letter agreement regarding these
matters.

         On March 30, 1998, Patriot, Wyndham International and Interstate each
elected to convene and then adjourn their respective stockholders meetings to
April 2, 1998 at 1:00 p.m. (CST) so as to permit additional time to negotiate
with Marriott.

         Also on March 30, 1998, Patriot and Wyndham International filed a
complaint in the District Court of Dallas County, Texas against Marriott
alleging that Marriott had tortiously interfered with the Interstate Merger and
was tortiously interfering with potential new business relationships and
contractual opportunities.

                                       17
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

             NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
                                 MARCH 31, 1998
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)


         On March 31, 1998, Marriott filed an Amended Verified Complaint which,
among other things, added allegations and sought injunctive relief for alleged
violations of the Lanham Act allegedly to be caused by the transfer by
Interstate, without the consent of Marriott, of the right to use certain marks
registered by Marriott.

         For recent developments regarding the Marriott Litigation, see Note 10.

Financing Transactions

         Patriot has received a commitment from its lenders to increase
Patriot's existing credit facilities by $1,450,000 from the current $1,250,000.
The new credit facility will be comprised of the $900,000 revolving credit
facility and the $350,000 term loan currently in place as well as a series of
term loans totaling $1,450,000 with varying maturities up to five years.
Interest will be based on Patriot's leverage ratio and may vary from 1.50% to
2.50% over LIBOR. The credit facilities will be secured by stock and partnership
interests in the assets of Patriot. The additional financing will be primarily
utilized to fund the Interstate Merger.

7.    PRIVATE PLACEMENT OF PAIRED SHARES:

         In February 1998, the Companies completed a private placement of Paired
Shares coupled with a one-year price adjustment agreement with an affiliate of
NationsBanc Montgomery Securities LLC. Under the terms of the agreement, Patriot
and Wyndham International privately issued 4,900,000 Paired Shares at a price of
$25.50 per Paired Share, resulting in net proceeds of approximately $121,800.
During the term of the price adjustment agreement, Patriot will deliver or
receive Paired Shares or cash, based on the market price of the Paired Shares at
the time of the adjustment. Proceeds from the private placement were used to
reduce outstanding indebtedness under the Companies' revolving credit facility.

8.    INCOME TAXES:

         As a result of the Wyndham Merger and the WHG Merger, Wyndham
International recorded a deferred tax liability totaling $88,047. The deferred
tax liability represents the tax effects of differences between the fair values
and the tax bases of identifiable assets acquired and liabilities assumed in
connection with the transactions.

                                       18
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

             NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
                                MARCH 31, 1998
                 (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)


9.   PRO FORMA RESULTS OF OPERATIONS:

         The following unaudited separate and combined pro forma results of
operations of Patriot and Wyndham International are presented as if (i) the
acquisition of the 120 hotels owned by Patriot as of March 31, 1998; (ii) the
Cal Jockey Merger and the Wyndham Merger and the related transactions; (iii) the
replacement of Patriot's old line of credit facility with its current revolving
credit facility, the funding of the $350,000 term loan and other mortgage debt;
(iv) the acquisition of Grand Heritage Hotels, Inc. and other Grand Heritage
subsidiaries; (v) the acquisition of eight leasehold interests and the
approximate 50% investment interest in GAH; (vi) the WHG Transactions; and (vii)
the private placements of equity securities and public offering of the
Companies' common stock which occurred during the first quarter of 1998 and
during 1997 had occurred on January 1, 1997, and the hotels (except the six
hotels owns by special purpose entities) had been leased to Wyndham
International or the Lessees pursuant to the Participating Leases. The following
unaudited pro forma financial information is not necessarily indicative of what
actual results of operations of Patriot and Wyndham International would have
been assuming such transactions had been completed as of January 1, 1997, nor do
they purport to represent the results of operations for future periods.



                       PATRIOT AND WYNDHAM INTERNATIONAL
                   COMBINED PRO FORMA RESULTS OF OPERATIONS

<TABLE> 
<CAPTION> 
                                                                                  THREE MONTHS ENDED MARCH 31,
                                                                              --------------------------------------
                                                                                     1998               1997
                                                                              -----------------  -------------------
                                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                                           <C>                <C> 
 Total revenue............................................................... $         395,555  $         361,747
 Net income..................................................................            43,202             31,680

 Basic earnings per Paired Share............................................. $            0.40  $            0.30
                                                                              =================  =================
 Diluted earnings per Paired Share........................................... $            0.38  $            0.28
                                                                              =================  =================

 Weighted average number of Paired Shares and Paired Share equivalents
          outstanding:
   Basic.....................................................................           106,993            106,993
                                                                              =================  =================
   Diluted...................................................................           114,538            114,538
                                                                              =================  =================
</TABLE> 

                                       19
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

             NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
                                MARCH 31, 1998
                 (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)

                                     PATRIOT
                  CONSOLIDATED PRO FORMA RESULTS OF OPERATIONS
<TABLE> 
<CAPTION> 
                                                                                  THREE MONTHS ENDED MARCH 31,
                                                                              --------------------------------------
                                                                                     1998               1997
                                                                              -----------------  -------------------
                                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                                           <C>                <C> 

 Total revenue............................................................... $         114,566  $         102,174
 Net income..................................................................            39,924             32,894

 Basic earnings per share.................................................... $            0.37  $            0.31
                                                                              =================  =================
 Diluted earnings per share.................................................. $            0.35  $            0.29
                                                                              =================  =================

 Weighted average number of common shares and common share equivalents
          outstanding:
   Basic.....................................................................           106,993            106,993
                                                                              =================  =================
   Diluted...................................................................           114,538            114,538
                                                                              =================  =================
</TABLE> 

                              WYNDHAM INTERNATIONAL
                  CONSOLIDATED PRO FORMA RESULTS OF OPERATIONS
<TABLE> 
<CAPTION> 
                                                                                  THREE MONTHS ENDED MARCH 31,
                                                                              --------------------------------------
                                                                                     1998               1997
                                                                              --------------------------------------
                                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                                           <C>                <C> 
 Total revenue............................................................... $         375,537  $         344,365
 Net income (loss)...........................................................             3,544             (1,214)

 Basic income (loss) per share............................................... $            0.03  $          (0.01)
                                                                              =================  =================
 Diluted income (loss) per share............................................. $            0.03  $          (0.01)
                                                                              =================  =================

 Weighted average number of common shares and common share equivalents
          outstanding:
   Basic.....................................................................           106,993            106,993
                                                                              =================  =================
   Diluted...................................................................           114,538            106,993
                                                                              =================  =================
</TABLE> 


10.  SUBSEQUENT EVENTS:

Marriott Litigation and the Interstate Merger

         On April 2, 1998, the United States District Court for the District of
Maryland denied Marriott's motion for a temporary restraining order to block the
Interstate Merger and for preliminary injunctive relief. Marriott appealed the
denial and the emergency judge sitting for the United States Court of Appeals
for the Fourth Circuit instructed the parties not to close the Interstate Merger
before noon on Friday, April 3, 1998, to permit the appeals court to consider a
request by Marriott for a temporary injunction pending expedited appeal of the
district court decision denying injunctive relief. Also on April 2, 1998, the
stockholders of both Patriot and Interstate voted to approve the proposed
Interstate Merger.

         On April 8, 1998, the United States Court of Appeals for the Fourth
Circuit issued a preliminary injunction enjoining Interstate from transferring
control, directly or indirectly, in the 29 Marriott-franchised hotels which were

                                       20
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

             NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
                                MARCH 31, 1998
                 (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)


the subject of the Marriott Litigation and remanded the case to the District
Court for reconsideration and expedited resolution. On April 8, 1998, Interstate
also announced that it would permit its stockholders who had previously made
cash elections to request the return of that portion of their shares which would
not be exchanged for cash upon completion of the Interstate Merger.

         The April 2, 1998 order of the District Court had included an order
that Marriott join Patriot to the Marriott Litigation as a necessary party. On
April 14, 1998, Marriott moved for leave to file a second amended complaint
which, among other things, added Patriot and Wyndham International as additional
defendants in the Marriott Litigation. On April 15, 1998, the District Court
entered an order granting Marriott leave to file the Amended Complaint, thereby
joining Patriot and Wyndham International as defendants in the litigation.
Patriot and Wyndham International filed their answer to the Amended Complaint on
April 24, 1998.

         On April 15, 1998, Patriot and Interstate agreed that, upon written
request to the exchange agent, Interstate stockholders will also have the option
to revoke their cash elections and request the return of all of their Interstate
stock. However, to the extent that the Interstate stockholders request the
return of shares that would have been entitled to be exchanged for cash upon
consummation of the Interstate Merger, such shares may not subsequently be
resubmitted for cash and will instead be exchanged for 1.341 Paired Shares upon
consummation of the Interstate Merger. Further, the revocation of the cash
elections will not alter the number of shares to be exchanged for cash by those
shareholders who choose not to revoke their cash elections. By virtue of such
revocations, the total cash consideration in the Interstate Merger will be
reduced pro rata such that stockholders who retain their cash elections will not
have a greater number of shares exchanged for cash.

         On May 4, 1998, Patriot, Wyndham International and Interstate announced
that they have reached an agreement in principle with Marriott to settle the
Marriott Litigation. On May 12, 1998, Patriot and Wyndham International
announced that the United States District Court for the District of Maryland had
agreed to delay the start of trial pending further notice from the parties to
allow the parties to complete and sign a definitive settlement agreement and
related documentation. In the interim, the parties agreed to keep confidential
the terms of the proposed settlement, except that the settlement, if completed,
would allow the Interstate Merger to be consummated.

         The agreement in principle is not a definitive settlement agreement and
is not binding on any party. There can be no assurance that a definitive
settlement agreement will be reached. Neither can any assurances be made
regarding whether, or upon what terms, the Interstate Merger will be
consummated. Additionally, no assurances can be made regarding the timing of any
potential consummation of the Interstate Merger. No assurances can be made
regarding the probable outcome of the Marriott Litigation, or the impact of any
potential definitive settlement agreement or other resolution of the Marriott
Litigation upon the Interstate Merger or the financial condition or results of
operations of Patriot or Wyndham International.

Arcadian Acquisition

         On January 20, 1998, Patriot announced in the United Kingdom its
intention to proceed with a takeover of Arcadian International PLC ("Arcadian"),
a company listed on the London Stock Exchange. Arcadian is an owner, developer
and operator of hotels in the United Kingdom and continental Europe. On April 6,
1998, Patriot announced the completion of its acquisition of all of the issued
and to-be-issued shares of Arcadian for 60 pence per share (the "Arcadian
Acquisition"). Including the exercise of all outstanding options to purchase
shares, the assumption of debt and the acquisition of the remaining shares in
the Malmaison Group, the total transaction cost is approximately (pound)179,000
($296,000 U.S. based on exchange rates in effect at closing). As a result of the
transaction, Patriot acquired ten owned hotels located throughout England; one
owned hotel in Jersey; five owned and managed Malmaison Hotels; two resorts
under development in Tuscany, Italy and Paris, France; and the proprietary
Malmaison brand name. Patriot also acquired Arcadian's 50% partnership interest
in the redevelopment of the luxury Great Eastern Hotel in London, to be branded
as a flagship Wyndham Hotel and operated by Wyndham International once the
development has been completed.

                                       21
<PAGE>
 
                    PATRIOT AMERICAN HOSPITALITY, INC. AND
                          WYNDHAM INTERNATIONAL, INC.

             NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
                                MARCH 31, 1998
                 (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)


         In connection with the Arcadian Acquisition, Patriot entered into a
short-term financing agreement in April 1998 with Paine Webber Real Estate
Securities, Inc. ("Paine Webber Real Estate") whereby Paine Webber Real Estate
loaned Patriot $160,000 through April 15, 1999, at a rate equal to the borrowing
rate on Patriot's revolving credit facility. In addition, Patriot assumed
approximately $112,600 of debt in connection with the transaction.

Private Placement of Paired Shares

         On April 6, 1998, the Companies completed a private placement of Paired
Shares coupled with a one-year price adjustment agreement. Under the terms of
the agreement, Patriot and Wyndham International privately issued 5,150,000
Paired Shares at a price of $27.5625 per Paired Share, resulting in gross
proceeds of approximately $141,900. During the term of the price adjustment
agreement, Patriot will deliver or receive Paired Shares, based on the market
price of the Paired Shares at the time of the adjustment. Proceeds from the
private placement were used to reduce outstanding indebtedness under the
Companies' revolving credit facility.

Extension of Loan Agreement

         In April 1998, the maturity date of Patriot's $103,000 mortgage loan
with Paine Webber Real Estate was extended to December 1998. In connection with
the loan extension, Patriot paid a fee of approximately $515.

Cash Dividends Declared

         On May 4, 1998, Patriot declared a dividend of $0.32 per share for the
first quarter of 1998. The dividend is payable on May 29, 1998 to shareholders
of record on May 20, 1998.

                                       22
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
  RESULTS OF OPERATIONS

         The following discussion and analysis should be read in conjunction
with the Management's Discussion and Analysis of Financial Condition and Results
of Operations included in the Companies' Joint Annual Report on Form 10-K for
the year ended December 31, 1997.

         Certain statements in this Form 10-Q constitute "forward-looking
statements" as that term is defined under the Private Securities Litigation
Reform Act of 1995 (the "Act"). The words "believe", "expect", "anticipate",
"intend", "estimate" and other expressions which are predictions of or indicate
future events and trends and which do not relate to historical matters identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements and to note that they speak only as of the date
hereof. Although forward-looking statements reflect management's good faith
beliefs, reliance should not be placed on forward-looking statements because
they involve known and unknown risks, uncertainties and other factors, which may
cause the actual results, performance or achievement of the Companies to differ
materially from anticipated future results, performance or achievements
expressed or implied by such forward-looking statements. The Companies undertake
no obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise. Certain
factors that might cause a difference include, but are not limited to, risks
associated with the Companies' rapid growth and its ability to integrate its
existing operations, departments and systems with those acquired in the Wyndham
Merger and the WHG Merger and those being acquired in the Interstate Merger and
other transactions; risks associated with the adoption of legislation,
regulations or administrative interpretations which could adversely affect the
Companies' paired share structure; Patriot's dependence upon rental payments
from Wyndham International and the Lessees for substantially all of Patriot's
income and the dependence upon the abilities of Wyndham International, the
Lessees and the Operators (as such terms are defined herein) to manage the
hotels; risks associated with the hotel industry and real estate markets in
general; and risks associated with debt financing.

THE COMPANIES

         As of March 31, 1998, Patriot, directly or through certain of its
subsidiaries, owned interests in 120 hotels with an aggregate of over 30,000
guest rooms and leased 14 hotels with over 2,700 rooms. The hotels are
diversified by franchise or brand affiliation and serve primarily major U.S.
business centers. In addition to hotels catering primarily to business
travelers, Patriot's portfolio includes world-class resort hotels, including The
Boulders, near Scottsdale, Arizona; The Lodge at Ventana Canyon in Tucson,
Arizona; The Peaks Resort & Spa in Telluride, Colorado; and Carmel Valley Ranch
Resort in Carmel, California and prominent hotels in major tourist destinations.
The owned hotels include 106 full service hotels, nine resort hotels, four
limited service hotels and an executive conference center. All but seven of the
hotels are operated under franchise or brand affiliations with nationally
recognized hotel companies.

         Patriot leases each of its hotels, except six hotels that are
separately owned through special purpose entities or other unconsolidated
subsidiaries, to Wyndham International or to third party lessees (the "Lessees")
who are responsible for operating the hotels. As of March 31, 1998, 94 hotels
were leased to Wyndham International and its affiliates and 34 hotels were
leased to the Lessees. Patriot leased 17 of its hotel investments to CHC Lease
Partners for staggered terms of ten to twelve years pursuant to separate
participating leases providing for the payment of the greater of base or
participating rent, plus certain additional charges, as applicable (the
"Participating Leases"). Twelve of the hotels were leased to NorthCoast Hotels,
L.L.C. ("NorthCoast Lessee") under similar Participating Lease agreements. In
addition, DTR North Canton, Inc. (the "Doubletree Lessee") leased four hotels;
and Metro Hotels Leasing Corporation ("Metro Lease Partners") leased one hotel
under similar Participating Lease agreements. The Lessees, in turn, have entered
into separate agreements with hotel management entities (the "Operators") to
manage the hotels. Wyndham International manages 81 of its hotels through
certain of its hotel management subsidiaries and has entered into separate
management agreements with hotel Operators to manage 13 of its hotels.

         In addition to leasing and managing hotels, Wyndham International is
also engaged in the business of conducting and offering pari-mutuel wagering on
thoroughbred horse racing at the Bay Meadows Racecourse (the "Racecourse").

                                       23
<PAGE>
 
HOTELS AND OTHER BUSINESSES ACQUIRED DURING THE QUARTER

         During the quarter ended March 31, 1998, Patriot acquired investments
in two hotels for approximately $163 million. These acquisitions were financed
primarily with funds drawn on the Companies' revolving credit facility, the
issuance of 51,290 OP Units valued at approximately $1.4 million, and the
assumption of other mortgage debt in the amount of approximately $50.3 million.
In addition, Patriot acquired an office building that will be converted into a
hotel for approximately $33.9 million.

Wyndham Hotel Corporation

         On January 5, 1998, pursuant to the Agreement and Plan of Merger dated
as of April 14, 1997, as thereafter amended, (the "Wyndham Merger Agreement")
between Patriot, Wyndham International and Wyndham Hotel Corporation ("Old
Wyndham"), Old Wyndham merged with and into Patriot, with Patriot being the
surviving corporation (the "Wyndham Merger").

         Patriot, as a result of the Wyndham Merger, acquired ownership of ten
Wyndham hotels and 14 Clubhouse hotels and leased such hotels to Wyndham
International. Thirteen of the 14 hotel leases assumed by Patriot were
sub-leased to Wyndham International. Old Wyndham's remaining 52 management and
franchise contracts (excluding 16 hotels that Old Wyndham managed that are owned
by Patriot), the Wyndham and ClubHouse proprietary brand names, and the Wyndham
hotel management company were transferred to corporate subsidiaries of Patriot
(collectively, the "New Non-Controlled Subsidiaries"). Patriot owns a 99%
non-voting interest and Wyndham International owns the 1% controlling voting
interest in each of the New Non-Controlled Subsidiaries. Therefore, the
operating results of the New Non-Controlled Subsidiaries have been combined with
those of Wyndham International for financial reporting purposes. Patriot
accounts for its investment in the New Non-Controlled Subsidiaries using the
equity method of accounting. The total purchase consideration for the Wyndham
Merger of approximately $982 million consisted of 21,594,137 Paired Shares and
4,860,876 shares of Series A Convertible Preferred Stock of Patriot (which are
convertible on a one-for-one basis into Paired Shares), cash of approximately
$339 million to repay debt and pay Old Wyndham shareholders who elected to
receive cash (which was financed with funds drawn on the Companies' revolving
credit facility (the "Revolving Credit Facility"), and the assumption of
approximately $59 million in debt.

WHG Casinos & Resorts, Inc. and Related Transactions

         On January 16, 1998, pursuant to the Agreement and Plan of Merger dated
as of September 30, 1997 (the "WHG Merger Agreement) between Patriot, Wyndham
International and WHG Casinos & Resorts Inc. ("WHG"), a subsidiary of Wyndham
International merged with and into WHG, with WHG being the surviving corporation
(the "WHG Merger"). As a result of the WHG Merger, Wyndham International
acquired the 570-room Condado Plaza Hotel & Casino, a 50% interest in the
partnership that owns the 389-room El San Juan Hotel & Casino and a 23.3%
interest in the partnership that owns the 751-room El Conquistador Resort &
Country Club (the "El Conquistador"), all of which are located in Puerto Rico.
In addition, Wyndham International acquired a 62% interest in Williams
Hospitality Group, Inc., the management company for the three hotels and the Las
Casitas Village at the El Conquistador. A total of 5,004,690 Paired Shares were
issued in connection with the WHG Merger and approximately $21.3 million of debt
was assumed, resulting in total purchase consideration of approximately $159.4
million.

         Effective March 1, 1998, Patriot acquired from unaffiliated third
parties a 40% interest in the El San Juan Hotel & Casino, an aggregate 68.62%
equity interest in the El Conquistador and a 38% interest in Williams
Hospitality Group, Inc. for approximately $31 million in cash and issuance of
1,818,182 Paired Shares valued at approximately $49.2 million (collectively,
these transactions and the WHG Merger are referred to herein as the "WHG
Transactions"). Wyndham International owns the controlling general partner
interest in the partnerships that own the El San Juan Hotel & Casino and the El
Conquistador. Wyndham International also holds voting control of Williams
Hospitality Group, Inc. Therefore, the operating results of these entities have
been combined with those of Wyndham International for financial reporting
purposes. As a result, approximately $188.9 million of debt related to the
partnerships that own the El San Juan Hotel & Casino and the El Conquistador has
also been reflected in Wyndham International's consolidated balance sheet.
Patriot accounts for its investment in these entities using the equity method of
accounting.

                                       24
<PAGE>
 
PATRIOT AMERICAN HOSPITALITY, INC.

Results of Operations: Quarter Ended March 31, 1998
         Compared with Quarter Ended March 31, 1997

         Patriot's lease revenue from the Lessees (including Wyndham
International) for the three months ended March 31, 1998, increased 213% from
$35,013,000 in 1997 to $109,649,000 in 1998. This increase is primarily due to
the acquisition of 66 hotel properties during the past twelve months. Patriot
owns 120 hotel properties as of March 31, 1998 including the hotels that are
separately owned through special purpose entities. Additionally, for the three
months ended March 31, 1998, Patriot reported $1,410,000 of lease revenue
related to the lease of the Racecourse facility and land to Wyndham
International. Interest and other income increased from $375,000 in 1997 to
$3,516,000 in 1998 which is primarily attributable to additional investments in
notes receivable and interest and dividend income earned on cash investments.
Interest and other income for the three months ended March 31, 1998 includes
$2,750,000 of interest income related to notes receivable from Wyndham
International.

         For the three months ended March 31, 1998 as compared to the same
period for 1997, Patriot experienced similar increases in expenses as a result
of the acquisition of hotels discussed above.

         Real estate and personal property taxes and casualty insurance were
$11,923,000 for the three months ended March 31, 1998, compared to $3,201,000
for the three months ended March 31, 1997.

         Ground lease expense increased from $345,000 to $6,558,000 for the
three months ended March 31, 1997 compared to the same period in 1998 as a
result of acquisition of properties subject to existing ground leases, including
$1,170,000 related to the Racecourse land lease with an affiliate of
PaineWebber, Inc.

         General and administrative expenses were $5,282,000 for the three
months ended March 31, 1998, compared to $2,782,000 for 1997. General and
administrative expenses include the amortization of unearned stock compensation
of $1,336,000 for 1998 and $621,000 for 1997. Additionally, Patriot incurred
expenses of $313,000 in 1998 associated with evaluating properties and companies
to be acquired which were ultimately not purchased, compared to $568,000 for
1997.

         Interest expense for the three months ended March 31, 1998 was
$34,251,000 compared to $7,805,000 in 1997. Patriot's outstanding debt
obligations as of March 31, 1998 and 1997 were approximately $1.6 billion and
$466.7 million, respectively. The primary components of interest expense for the
three months ended March 31, 1998 are $22,558,000 of interest related to the
revolving credit facility and term loan, $7,943,000 of interest on mortgage
notes, $3,503,000 of amortization of deferred financing costs and $2,442,000 of
other interest related to other miscellaneous notes, capital lease obligations
and commitments payable. Interest expense for the three months ended March 31,
1997 consists primarily of $7,277,000 of interest on Patriot's old line of
credit facility and mortgage note balances outstanding and $328,000 of
amortization of deferred financing costs. Additionally, Patriot capitalized
interest totaling $2,195,000 and $82,000 for the three months ended March 31,
1998 and 1997, respectively, associated with major renovations of certain hotel
properties.

         Depreciation and amortization expense was $20,497,000 for the three
months ended March 31, 1998 compared to $8,496,000 for the same period in 1997.

         Patriot's share of income from unconsolidated subsidiaries was
$3,591,000 for the first quarter of 1998 compared to $1,021,000 for the first
quarter of 1997.

         Minority interest share of income in the Patriot Partnership was
$3,128,000 and $2,232,000 for the three months ended March 31, 1998 and 1997,
respectively. Minority interest share of income in Patriot's other consolidated
subsidiaries was $533,000 for the first quarter of 1998 and $200,000 for the
first quarter of 1997.

         Patriot repaid certain debt obligations of Old Wyndham in connection
with the Wyndham Merger. As a result, Patriot incurred certain prepayment
penalties and wrote off the remaining balance of unamortized deferred financing
costs associated with such debt in the aggregate amount of $20,892,000. This
amount, net of $2,176,000 of the minority interest share of the loss, has been
reported an extraordinary loss for the first quarter of 1998.

                                       25
<PAGE>
 
         As a result, net income was $15,497,000 for the three months ended
March 31, 1998 and $11,348,000 for the three months ended March 31, 1997.


WYNDHAM INTERNATIONAL, INC.

         As of March 31, 1998, Wyndham International leases 94 hotels from
Patriot, managing 81 of those hotels, and manages 55 hotels for third parties.
In addition, Wyndham International operates the Bay Meadows Racecourse.
Subsequent to the Cal Jockey Merger in July 1997, the major portion of the
revenues of Wyndham International and Patriot have been derived from the leasing
and operation of hotels.

Results of Operations: Three Months Ended March 31, 1998

         For the three months ended March 31, 1998, Wyndham International had
room revenues of $178,030,000 from the 94 hotels it leased during the period.
Food and beverage and telephone and other revenues were $112,614,000 for the
period. In addition, Wyndham International reported management fee and service
fee income of $14,104,000 for the three months ended March 31, 1998. Interest
and other income for the period includes $1,241,000 of interest income related
to the Subscription Notes.

         Lease payments paid to Patriot pursuant to the Participating Leases,
other hotel sub-leases and the Racecourse facility lease were $89,084,000 for
the first quarter of 1998. Hotel operating expenses were $182,371,000 for the
period.

         General and administrative expenses were $12,023,000 for the period and
consist primarily of salaries and wages of personnel brought onto Wyndham
International's payroll in connection with the Wyndham Merger.

         Interest expense of $5,699,000 for the first quarter of 1998 is
primarily attributable to debt obligations related to the three hotels acquired
in the WHG Merger. The amount also includes $2,750,000 of interest expense
related to the Subscription Notes and other notes payable to Patriot.

         Total revenues from the Racecourse facility operations were $23,048,000
for the three months ended March 31, 1998. Expenses associated with the
Racecourse operations were $18,184,000 for the three months ended March 31,
1998.

         Minority interest's share of losses associated with the OpCo
Partnership was $73,000 for the three months ended March 31, 1998. Minority
interest's share of income in Wyndham International's other consolidated
subsidiaries was $2,941,000 in 1998.

         As a result, the net income was $3,180,000 for the three months ended
March 31, 1998.

Statistical Information

         Operating performance across the Companies' owned and leased portfolio
of hotels improved for the first quarter of 1998 over last year, as reflected in
an 8.9% increase in revenue per available room ("RevPAR"), a 6.3% increase in
average daily rate ("ADR"), and an improvement of 1.6 percentage points in
occupancy.

         Similarly, first-quarter operating performance across Old Wyndham's
comparable portfolio of owned and managed hotels (hotels that were in Old
Wyndham's portfolio for one full common fiscal quarter in both periods
presented) improved over the 1997 first quarter, as reflected in an 11.8%
increase in RevPAR, an 8.4% increase in ADR, and improvements of 2.2 percentage
points in occupancy.

         Management attributes this growth to continued marketing efforts
throughout the portfolio on hotels that have been newly renovated, and
repositioned in certain cases, as well as to the current strength of market
conditions in the U.S. lodging industry. The following table sets forth certain
statistical information for the Companies' portfolio of owned and leased hotels
and for Old Wyndham's portfolio of owned, leased and managed hotels that were in
its portfolio for one full common fiscal quarter in both periods presented.

                                       26
<PAGE>
 
<TABLE> 
<CAPTION> 
                                                  Occupancy                   ADR                      REVPAR
                                             --------------------   ------------------------   -----------------------
                                               1998       1997         1998        1997           1998        1997
                                             ---------  ---------   -----------  ----------    ----------- -----------
<S>                                          <C>        <C>         <C>          <C>           <C>         <C> 
The Companies' owned and leased hotels......   70.8%      69.2%      $ 115.86     $ 108.99        $82.06       $75.37

Old Wyndham's comparable portfolio..........   70.9%      68.7%      $ 112.53     $ 103.81        $79.81       $71.36
</TABLE> 


COMBINED LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Provided by Operating Activities

         The Companies' principal source of cash to fund operating expenses and
distributions to its shareholders is cash flow provided by operating activities.
Patriot's principal source of revenue is rent payments from the Lessees and
Wyndham International under the Participating Leases. Wyndham International's
principal source of cash flow is from the operation of the hotels it leases. The
Lessees' and Wyndham International's ability to make the rent payments to
Patriot is dependent upon their ability to efficiently manage the hotels and
generate sufficient cash flow from operation of the hotels.

         Combined cash and cash equivalents as of March 31, 1998 were $88.7
million, including capital improvement reserves of $3.4 million. Combined cash
flows from operating activities of the Companies were $64 million for the first
quarter of 1998, which represent a combination of the collection of rents under
Participating Leases with third party Lessees and cash flows generated by the
hotels operated by Wyndham International.

         Cash and cash equivalents for Patriot as of March 31, 1997 was $6.3
million, including capital improvement reserves of $2.4 million. Cash flows from
operating activities of Patriot were $11.5 million for the first quarter of
1997, which primarily represent the collection of rents under Participating
Leases.

Cash Flows from Investing and Financing Activities

         During the first quarter of 1998, the Companies continued to experience
rapid growth through the merger and acquisition of hotel properties and
management companies. These transactions were funded with a combination of
issuance and or assumption of debt as well as sale of registered and
unregistered securities.

         Combined cash flows used in investing activities of the Companies were
$313.4 million for the three months ended March 31, 1998, resulting primarily
from the merger and acquisition of hotel properties and management companies and
the renovation expenditures at certain hotels. Combined cash flows from
financing activities of $292.3 million for the three months ended March 31, 1998
were primarily related to borrowings on the revolving credit facility and
mortgage notes and net proceeds from private placement of equity securities, net
of payments of dividends and distributions.

         Patriot's cash flows used in investing activities were $222.5 million
for the three months ended March 31, 1997, resulting primarily from the
acquisition of hotel properties. Cash flows from Patriot's financing activities
of $210.7 million for the three ended March 31, 1997 were primarily related to
borrowings on Patriot's old line of credit facility, net of payments of
dividends and distributions.

         As of March 31, 1998, Patriot had approximately $884 million
outstanding under its unsecured revolving credit facility and $350 million
outstanding on a term loan. As of such date, the Companies also had over $579.9
million of mortgage and other debt outstanding that encumbered 24 hotels,
resulting in total indebtedness of approximately $1.8 billion. As of March 31,
1998, the availability of funds under the revolving credit facility is
approximately $6 million.

         Patriot has received a commitment from The Chase Manhattan Bank and
Chase Securities, Inc. and PaineWebber Real Estate Securities, Inc. to increase
Patriot's existing credit facilities by $1.45 billion from the current $1.25
billion. Patriot's existing credit facilities will be amended and restated to
reflect a total credit facility of $2.7 billion. The new credit facility will be
comprised of the $900,000 revolving credit facility and the $350,000 term loan
currently in place as well as a series of term loans totaling $1.45 billion with
varying maturities up to five 

                                       27
<PAGE>
 
years. Interest will be based on Patriot's leverage ratio and may vary from
1.50% to 2.50% over LIBOR. The credit facilities will be secured by stock and
partnership interests in the assets of Patriot. The additional financing will be
primarily utilized to fund the Interstate Merger and is contingent upon the
closing of the Interstate Merger.

         In addition, the Companies are evaluating other permanent sources of
capital, including the issuance of equity and long-term debt. It is expected
that additional common or preferred equity offerings will be used both to
acquire hotel properties and to limit the Companies' overall debt to market
capitalization ratio.

Investing and Financing Activities Subsequent to March 31, 1998

         Arcadian International PLC - On April 6, 1998, Patriot announced the
completion of its acquisition of all of the issued and to-be-issued shares of
Arcadian for 60 pence per share. Including the exercise of all outstanding
options to purchase shares, the assumption of debt and the acquisition of the
remaining shares in the Malmaison Group, the total transaction cost is
approximately (pound)179 million ($296 million U.S. based on current exchange
rates). As a result of the transaction, Patriot will acquire ten owned hotels
located throughout England; one owned hotel in Jersey; five owned and managed
Malmaison Hotels; two resorts under development in Tuscany, Italy and Paris,
France; and the proprietary Malmaison brand name. Patriot also acquired
Arcadian's 50% partnership interest in the redevelopment of the luxury Great
Eastern Hotel in London, to be branded as a flagship Wyndham Hotel and operated
by Wyndham International once the development has been completed.

         In connection with the Arcadian Acquisition, Patriot entered into a
short-term financing agreement on April 15, 1998 with Paine Webber Real Estate
Securities, Inc. ("Paine Webber Real Estate") whereby Paine Webber Real Estate
loaned Patriot $160 million through April 15, 1999, at a rate equal to the
borrowing rate on Patriot's revolving credit facility. In addition, Patriot
assumed approximately $112.6 million of debt in connection with the transaction.

         Private Placement of Equity - On April 6, 1998, the Companies completed
a private placement of Paired Shares coupled with a one-year price adjustment
agreement with PaineWebber Incorporated and a PaineWebber affiliate. Under the
terms of the agreement, Patriot and Wyndham International privately issued
5,150,000 Paired Shares at a price of $27.5625 per Paired Share, resulting in
gross proceeds of approximately $141.9 million. During the term of the price
adjustment agreement, Patriot will deliver or receive Paired Shares, based on
the market price of the Paired Shares at the time of the adjustment. Proceeds
from the private placement were used to reduce outstanding indebtedness under
the Companies' revolving credit facility.

Potential Acquisitions

         CHC International, Inc. - The Companies and CHC International, Inc.
("CHCI") have entered into an Agreement and Plan of Merger dated as of September
30, 1997 (the "CHCI Merger Agreement"), providing, subject to regulatory
approvals, for the merger of the hospitality-related businesses of CHCI with and
into Wyndham International with Wyndham International being the surviving
company (the "CHCI Merger"). Subject to regulatory approvals, CHCI's gaming
operations will be transferred to a new legal entity prior to the CHCI Merger
and such operations will not be a part of the transaction. It is anticipated
that the CHCI Merger will be consummated in the second quarter of 1998. As a
result of the CHCI Merger, Wyndham International, through its subsidiaries, will
acquire the remaining 50% investment interest in GAH-II, L.P., the remaining 17
leases and 16 of the associated management contracts related to the Patriot
hotels leased by CHC Lease Partners, 12 third-party management contracts, two
third-party lease contracts, the Grand Bay and Registry Hotels & Resorts
proprietary brand names and certain other hospitality management assets. Wyndham
has also agreed to provide CHCI with a $7 million line of credit until such time
as the CHCI Merger is completed. By operation of the CHCI Merger, all issued and
outstanding common stock of CHCI will be exchanged for approximately 4,396,000
shares of Wyndham International preferred stock, subject to certain adjustments.

         Interstate Hotels Company - On December 2, 1997, Patriot, Wyndham
International and Interstate Hotels Company ("Interstate") entered into an
Agreement and Plan of Merger (the "Interstate Merger Agreement") providing for
the merger of Interstate with and into Patriot (the "Interstate Merger") with
Patriot being the surviving company. Pursuant to the Interstate Merger
Agreement, stockholders of Interstate will have the right to elect to convert
each of their shares of Interstate common stock into the right to receive either
(i) $37.50 in cash, subject to proration in certain circumstances (the
"Interstate Cash Consideration"), or (ii) a number of Paired Shares of Patriot
and Wyndham common stock not exchanged for cash (the "Interstate Exchange
Ratio"). Such elections by 

                                       28
<PAGE>
 
stockholders of Interstate were to be prorated to ensure that 40% of the
outstanding shares of Interstate common stock will be converted into the right
to receive Interstate Cash Consideration and that the remaining 60% of the
outstanding shares of Interstate common stock will be converted into the right
to receive Paired Shares at the Interstate Exchange Ratio, subject to adjustment
in certain circumstances for the exercise of dissenters' rights. Patriot will
also assume or refinance all of Interstate's existing indebtedness, which
totaled approximately $796 million as of March 31, 1998. In addition, Patriot
will buy out or assume certain options to purchase Interstate common stock held
by certain Interstate employees and directors, and will assume certain severance
obligations in connection with the Interstate Merger. The special meetings of
the stockholders of Patriot, Wyndham International and Interstate at which
approval of the Interstate Merger will be sought were originally scheduled for
March 30, 1998.

         On March 23, 1998, Patriot and Interstate jointly announced that the
Interstate Exchange Ratio had been set at 1.341 Paired Shares for each
Interstate share.

         On March 26, 1998, Marriott International, Inc. ("Marriott") sued
Interstate in the United States District Court for the District of Maryland (the
"Marriott Litigation") seeking an injunction against the Interstate Merger. By
agreement of the parties the complaint was dismissed without prejudice during
settlement discussions until March 30, 1998. On March 30, 1998, Marriott
re-filed its complaint and sought a temporary restraining order and preliminary
injunction. In its complaint Marriott asserted certain rights with respect to 29
hotels owned and/or operated by certain affiliates and subsidiaries of
Interstate under direct franchise agreements with Marriott, as well as certain
rights concerning any transfer of control of those Interstate-related
franchisees. The alleged rights asserted by Marriott included, among others, a
right of first refusal over 19 of the hotels, rights of consent allegedly
prohibiting Interstate from engaging in any transaction that constitutes a
transfer of the franchise agreement or a change in control of the franchisees
without Marriott's prior written consent, rights of non-competition allegedly
prohibiting Interstate from owning, operating, or being connected or associated
with a company that owns the trade name of a chain of hotels which competes with
Marriott without Marriott's consent, as well as a right of first refusal to
acquire all of the equity interests in Interstate. In December 1997, Patriot and
Marriott had entered into a non-binding letter agreement regarding these
matters.

         On March 30, 1998, Patriot, Wyndham International and Interstate each
elected to convene and then adjourn their respective stockholders meetings to
April 2, 1998 at 1:00 p.m. (CST) so as to permit additional time to negotiate
with Marriott.

         Also on March 30, 1998, Patriot and Wyndham International filed a
complaint in the District Court of Dallas County, Texas against Marriott
alleging that Marriott had tortiously interfered with the Interstate Merger and
was tortiously interfering with potential new business relationships and
contractual opportunities.

         On March 31, 1998, Marriott filed an Amended Verified Complaint which,
among other things, added allegations and sought injunctive relief for alleged
violations of the Lanham Act allegedly to be caused by the transfer by
Interstate, without the consent of Marriott, of the right to use certain marks
registered by Marriott.

         On April 2, 1998, the United States District Court for the District of
Maryland denied Marriott's motion for a temporary restraining order to block the
Interstate Merger and for preliminary injunctive relief. Marriott appealed the
denial and the emergency judge sitting for the United States Court of Appeals
for the Fourth Circuit instructed the parties not to close the Interstate Merger
before noon on Friday, April 3, 1998, to permit the appeals court to consider a
request by Marriott for a temporary injunction pending expedited appeal of the
district court decision denying injunctive relief. Also on April 2, 1998, the
stockholders of both Patriot and Interstate voted to approve the proposed
Interstate Merger.

         On April 8, 1998, the United States Court of Appeals for the Fourth
Circuit issued a preliminary injunction enjoining Interstate from transferring
control, directly or indirectly, in the 29 Marriott-franchised hotels which were
the subject of the Marriott Litigation and remanded the case to the District
Court for reconsideration and expedited resolution. On April 8, 1998, Interstate
also announced that it would permit its stockholders who had previously made
cash elections to request the return of that portion of their shares which would
not be exchanged for cash upon completion of the Interstate Merger.

         The April 2, 1998 order of the District Court had included an order
that Marriott join Patriot to the Marriott Litigation as a necessary party. On
April 14, 1998, Marriott moved for leave to file a second amended complaint

                                       29
<PAGE>
 
which, among other things, added Patriot and Wyndham International as additional
defendants in the Marriott Litigation. On April 15, 1998, the District Court
entered an order granting Marriott leave to file the Amended Complaint, thereby
joining Patriot and Wyndham International as defendants in the litigation.
Patriot and Wyndham International filed their answer to the Amended Complaint on
April 24, 1998.

         On April 15, 1998, Patriot and Interstate agreed that, upon written
request to the exchange agent, Interstate stockholders will also have the option
to revoke their cash elections and request the return of all of their Interstate
stock. However, to the extent that the Interstate stockholders request the
return of shares that would have been entitled to be exchanged for cash upon
consummation of the Interstate Merger, such shares may not subsequently be
resubmitted for cash and will instead be exchanged for 1.341 Paired Shares upon
consummation of the Interstate Merger. Further, the revocation of the cash
elections will not alter the number of shares to be exchanged for cash by those
shareholders who choose not to revoke their cash elections. By virtue of such
revocations, the total cash consideration in the Interstate Merger will be
reduced pro rata such that stockholders who retain their cash elections will not
have a greater number of shares exchanged for cash.

         On May 4, 1998, Patriot, Wyndham International and Interstate announced
that they have reached an agreement in principle with Marriott to settle the
Marriott Litigation. On May 12, 1998, Patriot and Wyndham International
announced that the United States District Court for the District of Maryland had
agreed to delay the start of trial pending further notice from the parties to
allow the parties to complete and sign a definitive settlement agreement and
related documentation. In the interim, the parties agreed to keep confidential
the terms of the proposed settlement, except that the settlement, if completed,
would allow the Interstate Merger to be consummated.

         The agreement in principle is not a definitive settlement agreement and
is not binding on any party. There can be no assurance that a definitive
settlement agreement will be reached. Neither can any assurances be made
regarding whether, or upon what terms, the Interstate Merger will be
consummated. Additionally, no assurances can be made regarding the timing of any
potential consummation of the Interstate Merger. No assurances can be made
regarding the probable outcome of the Marriott Litigation, or the impact of any
potential definitive settlement agreement or other resolution of the Marriott
Litigation upon the Interstate Merger or the financial condition or results of
operations of Patriot or Wyndham International.

         Golden Door Spa - In February 1998, the Companies signed a purchase
contract to acquire the Golden Door Spa in Escondido, California for a purchase
price of approximately $28 million. The purchase price is to be paid with a
combination of cash, OP Units of the Operating Partnerships and a short-term
note. The acquisition is expected to be completed in the second quarter of 1998.

         SF Hotel Company, L.P. - In March 1998, the Companies entered into an
agreement to acquire all of the partnership interests in SF Hotel Company, L.P.
("Summerfield") for approximately $170 million. The purchase price is to be paid
with a combination of cash and issuance of a total of approximately 4,590,000 OP
Units of the Operating Partnerships and/or Paired Shares (the "Summerfield
Acquisition"). The final transaction price is subject to adjustment based on (i)
the market price of the Paired Shares through the end of 1998 and (ii)
achievement of certain performance criteria for the Summerfield portfolio
through 2001. As a result of the Summerfield Acquisition, the Companies will
acquire four Summerfield Suites(R) hotels and lease or manage 33 Summerfield
Suites(R) and Sierra Suites hotels(R). The Summerfield Acquisition is expected
to be completed in the second quarter of 1998.

         As part of its ongoing business, the Companies continually engage in
discussions with public and private real estate entities, including, without
limitation, current lessees of Patriot's hotels, regarding possible portfolio or
single asset acquisitions, as well as the acquisition of hotel leasing and
management operations. No assurances can be made that the Companies will acquire
any such acquisition opportunities.

Renovations and Capital Improvements

         During the first quarter of 1998, the Companies invested approximately
$25 million to renovate or re-brand a total of 21 properties. Pursuant to the
Participating Leases, Patriot is obligated to establish a reserve for each hotel
for capital improvements, including the periodic replacement or refurbishment of
furniture, fixtures and equipment ("FF&E"). The aggregate amount of such
reserves average 4.0% of total revenue, with the amount of such reserve with
respect to each hotel based upon projected capital requirements of such hotel.
Management believes such 

                                       30
<PAGE>
 
amounts are sufficient to fund recurring capital expenditures for the hotels.
Capital expenditures, exclusive of renovations, may exceed 4.0% of total
revenues in a single year.

         The Companies attempt to schedule renovations and improvements during
traditionally lower occupancy periods in an effort to minimize disruption to the
hotel's operations. Therefore, management does not believe such renovations and
capital improvements will have a material effect on the results of operations of
the hotels. Capital expenditures will be financed through the capital
expenditure reserves, the revolving credit facility or other financing sources
or with working capital.

Proposed Legislation Affecting the Paired Share Structure

         Patriot's ability to qualify as a REIT is dependent upon its continued
exemption from the anti-pairing rules of Section 269B(a)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"). Section 269B(a)(3) would
ordinarily prevent a corporation from qualifying as a REIT if its stock is
paired with the stock of a corporation whose activities are inconsistent with
REIT status, such as Wyndham International. The "grandfathering" rules governing
section 296B generally provide, however, that Section 296B(a)(3) does not apply
to a paired REIT if the REIT and the paired operating company were paired on
June 30, 1983. Patriot's and Wyndham International's respective predecessors,
Cal Jockey and Bay Meadows, were paired on June 30, 1983. There are, however, no
judicial or administrative authorities interpreting this "grandfathering" rule
in the context of a merger or otherwise.

         Patriot's exemption from the anti-pairing rules could be lost, or its
ability to utilize the paired structure could be revoked or limited, as a result
of future legislation. In this regard, on February 2, 1998, the Department of
Treasury released an explanation of the revenue proposals included in the
Clinton Administration's fiscal 1999 budget (the "Clinton Tax Proposals"). The
Clinton Tax Proposals, among other things, include a freeze on the grandfathered
status of paired share REITs such as Patriot. Under the Clinton Tax Proposals,
Patriot and Wyndham International would be treated as one entity with respect to
properties acquired on or after the date of the first Congressional committee
action with respect to such proposal and with respect to activities or services
relating to such properties that are undertaken or performed by one of the
paired entities on or after such date. The Clinton Tax Proposals would also
prohibit REITs from holding stock of a corporation possessing more than 10% of
the vote or value of all classes of stock of the corporation. This proposal
would be effective with respect to the stock acquired on or after the date of
first Congressional committee action with respect to the proposal; provided that
the proposal would not apply to stock acquired before such effective date if, on
or after such date, the subsidiary corporation engaged in a new trade or
business or acquired substantial new assets.

         On March 26, 1998, William Archer, Chairman of the Ways and Means
Committee of the United States House of Representatives and William V. Roth,
Jr., Chairman of the Finance Committee of the United States Senate, introduced
identical legislation (the "Proposed Legislation") in both the House of
Representatives and the Senate to limit this "grandfathering rule." Under the
Proposed Legislation, the anti-pairing rules provided in the Code generally
would apply for certain of the REIT qualification requirements to real property
interests acquired directly or indirectly after March 26, 1998 by Patriot or
Wyndham International, or a subsidiary or partnership in which a 10% or greater
interest is owned by Patriot or Wyndham International (collectively, the "REIT
Group"), unless (i) the real property interests are acquired pursuant to a
written agreement which is binding on March 26, 1998 and all times thereafter or
(ii) the acquisition of such real property interests were described in a public
announcement or in a filing with the Securities and Exchange Commission on or
before March 26, 1998. In addition, the Proposed Legislation also provides that
a property held by Patriot or Wyndham International that is not subject to the
anti-pairing rules would become subject to such rules in the event of an
improvement placed in service after December 31, 1999 that changes the use of
the property and the cost of which is greater than 200 percent of (x) the
undepreciated cost of the property (prior to the improvement) or (y) in the case
of property acquired where there is a substituted basis, the fair market value
of the property on the day it was acquired by Patriot and Wyndham International.
There is an exception for improvements placed in service before January 1, 2004
pursuant to a binding contract in effect as of December 31, 1999 and at all
times thereafter. On April 23, 1998, the Senate Finance Committee reported
favorably on the Internal Revenue Service Restructuring and Reform Act of 1998,
incorporating language substantially identical to the Proposed Legislation. In
addition, immediately prior to the introduction of the Proposed Legislation,
Representative Mae Collins introduced legislation that would simply terminate
the existing grandfathering rule.

         The above discussion is based solely on the Clinton Tax Proposals and
the Proposed Legislation. However, Patriot believes that its ability to close
pending acquisitions pursuant to binding agreements entered into prior to 

                                       31
<PAGE>
 
March 26, 1998 will be unaffected by the Proposed Legislation. Patriot is
evaluating the impact of the Proposed Legislation (if enacted in its current
form) on Patriot's proposed method of operations and future acquisitions, as
well as Patriot's response to such legislation if enacted, and investors should
be aware that the Proposed Legislation could have an adverse impact on Patriot.
If the Proposed Legislation were modified prior to enactment, it is possible
that action taken by Patriot since March 26, 1998 in reliance on the Proposed
Legislation as currently drafted, could adversely affect Patriot's ability to
qualify as a REIT.

Inflation

         Operators of hotels in general possess the ability to adjust room rates
quickly. However, competitive pressures may limit Wyndham International's and
the Lessees' ability to raise room rates in the face of inflation.

Seasonality

         The hotel industry is seasonal in nature. Revenues for certain of
Patriot's hotels are greater in the first and second quarters of a calendar year
and at other hotels in the second and third quarters of a calendar year.
Seasonal variations in revenue at the hotels may cause quarterly fluctuations in
the Companies' revenues.

FUNDS FROM OPERATIONS

         Combined Funds from Operations of the Companies (as defined and
computed below) was $75.5 million for the three months ended March 31, 1998 and
$22.9 million for the three months ended March 31, 1997.

         Management considers Funds from Operations to be a key measure of REIT
performance. Funds from Operations represents net income (loss) (computed in
accordance with generally accepted accounting principles), excluding gains (or
losses) from debt restructuring or sales of property, plus depreciation of real
property, amortization of goodwill and amortization of management contracts and
trade names, and after adjustments for unconsolidated partnerships, joint
ventures and corporations. Adjustments for Patriot's unconsolidated subsidiaries
are calculated to reflect Funds from Operations on the same basis. The Companies
have also made certain adjustments to Funds from Operations for real estate
related amortization. Funds from Operations should not be considered as an
alternative to net income or other measurements under generally accepted
accounting principles as an indicator of operating performance or to cash flows
from operating, investing or financing activities as a measure of liquidity.
Funds from Operations does not reflect working capital changes, cash
expenditures for capital improvements or principal payments on indebtedness.

         The following reconciliation of net income to Funds from Operations
illustrates the difference between the two measures of operating performance for
the three months ended March 31, 1998 and 1997:

                                       32
<PAGE>
 
<TABLE> 
<CAPTION> 

                                                                                 Three Months Ended
                                                                                      March 31,
                                                                         ------------------------------------
                                                                               1998               1997
                                                                         ---------------     ----------------
                                                                                   (in thousands)
<S>                                                                      <C>                 <C> 
         Net income....................................................  $      18,412       $      11,348
         Add:
              Extraordinary loss from extinguishment of debt...........         18,716                  --
              Minority interest in the Operating Partnerships..........          3,055               2,232
              Depreciation of buildings and improvements and
                  furniture, fixtures and equipment....................         27,188               8,467
              Amortization of goodwill.................................          3,665                  --
              Amortization of management contracts and trade names.....          3,245                  --
              Amortization of franchise fees and other assets..........            204                  22
              Amortization of capitalized lease costs..................             --                  36
         Adjustment for Funds from Operations of 
              unconsolidated subsidiaries:
              Equity in earnings of unconsolidated subsidiaries........         (3,194)             (1,021)
              Funds from Operations of unconsolidated subsidiaries.....          4,225               1,839
                                                                         -------------       -------------
         Funds from Operations.........................................  $      75,516       $      22,923
                                                                         =============       =============

         Weighted average shares and OP Units outstanding:
              Basic....................................................        112,293              51,680
                                                                         =============       =============
              Diluted..................................................        119,834              53,043
                                                                         =============       =============
</TABLE> 

                                       33
<PAGE>
 
                          PART II: OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS

         The Joint Current Report on Form 8-K of Patriot American Hospitality,
Inc. and Wyndham International, Inc. dated April 2, 1998 (Nos. 001-09319 and
001-09320 filed April 8, 1998) reports under Item 5 information regarding the
Marriott Litigation. On May 4, 1998, Patriot, Wyndham International and
Interstate announced that they have reached an agreement in principle with
Marriott to settle the Marriott Litigation. On May 12, 1998, Patriot and Wyndham
International announced that the United States District Court for the District
of Maryland had agreed to delay the start of trial pending further notice from
the parties to allow the parties to complete and sign a definitive settlement
agreement and related documentation. In the interim, the parties agreed to keep
confidential the terms of the proposed settlement, except that the settlement,
if completed, would allow the Interstate Merger to be consummated.

ITEM 2.     CHANGES IN SECURITIES

Recent Sales of Unregistered Securities

         Since December 31, 1997, the Companies have issued equity securities in
private placements in reliance on an exemption from registration under Section
4(2) of the Securities Act of 1933, as amended, in the amounts and for the
consideration set forth below.

         In January 1998, in connection with the acquisition of an aggregate 95%
investment interest in the Buena Vista Palace Hotel in Orlando, Florida, Patriot
American Hospitality Partnership, L.P., a subsidiary of Patriot, and Patriot
American Operating Company Partnership, L.P., a subsidiary of Wyndham
International, each issued 51,290 units of limited partnership interest valued
at approximately $1.4 million to one of the sellers of such investment interest.

         In February 1998, the Companies issued 4,900,000 Paired Shares to a
financial institution for net purchase consideration of approximately $121.8
million in cash. The sale of the Paired Shares is subject to a price adjustment
agreement which matures in February 1999.

         In March 1998, in connection with Patriot's acquisition of a 40%
interest in the El San Juan Hotel & Casino, an aggregate 68.62% equity interest
in the El Conquistador Resort & Country Club and a 38% interest in Williams
Hospitality Group, Inc., the Companies issued 1,818,182 Paired Shares valued at
approximately $49.2 million.

         In April 1998, the Companies issued 5,150,000 Paired Shares to a
financial institution for aggregate consideration of approximately $141.9
million in cash. The sale of the Paired Shares is subject to a price adjustment
agreement which matures in April 1999.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

            None

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Patriot and Wyndham International each convened special meetings of
their stockholders on March 30, 1998, which meetings were subsequently adjourned
to April 2, 1998 (the "Special Stockholders Meetings"), to consider and vote
upon a proposal to approve the Agreement and Plan of Merger, dated December 2,
1997, by and among Interstate Hotels Company, Patriot and Wyndham International
(the "Interstate Merger Agreement"). On April 2, 1998, the votes of stockholders
were submitted at the Patriot and Wyndham International Special Stockholders
Meetings. For each of Patriot and Wyndham International, 63,483,644 shares were
voted in favor of the Interstate Merger Agreement; 112,606 shares were voted
against the Interstate Merger Agreement; and abstentions were recorded with
respect to 269,293 shares.

                                       34
<PAGE>
 
ITEM 5.     OTHER INFORMATION

            None

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            (a)   Exhibits:

                  Item No.          Description
                  --------          -----------
                  10.1              Executive Employment Agreement, dated as of
                                    March 9, 1998, between Patriot, Wyndham
                                    International and Lawrence S. Jones (filed
                                    herewith).

                  10.2              Indemnification Agreement, dated as of March
                                    9, 1998, between Patriot and Lawrence S.
                                    Jones (filed herewith).

                  10.3              Indemnification Agreement, dated as of March
                                    9, 1998, between Wyndham International and
                                    Lawrence S. Jones (filed herewith).

                  27.1              Financial Data Schedule


            (b)   Reports on Form 8-K:

                  (i)    Joint Current Report on Form 8-K of Patriot American
                         Hospitality, Inc. and Wyndham International, Inc. dated
                         January 5, 1998 (Nos. 001-09319 and 001-09320 filed
                         January 13, 1998) reporting under Item 2 the
                         consummation of the Wyndham Merger and other
                         acquisitions under Item 5.

                  (ii)   Joint Current Report on Form 8-K of Patriot American
                         Hospitality, Inc. and Wyndham International, Inc. dated
                         February 9, 1998 (Nos. 001-09319 and 001-09320 filed
                         February 12, 1998) reporting under Item 5 the
                         Companies' fourth quarter and year end operating
                         results and including financial information for CHC
                         International, Inc. Hospitality Division.

                  (iii)  Joint Current Report on Form 8-K of Patriot American
                         Hospitality, Inc. and Wyndham International, Inc. dated
                         March 23, 1998 (Nos. 001-09319 and 001-09320 filed
                         March 30, 1998) reporting under Item 5 the
                         determination of the exchange ratio for the merger of
                         Interstate Hotels Company with and into Patriot.

                                       35
<PAGE>
 
                                  SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed on their
behalf by the undersigned, thereunto duly authorized.

DATED:  May 14, 1998





                           PATRIOT AMERICAN HOSPITALITY, INC.



                           /s/  Anne L. Raymond
                           --------------------
                           Anne L. Raymond
                           Executive Vice President and Chief Financial Officer
                           (Authorized Officer and Principal Financial Officer)



                           /s/  Lawrence S. Jones
                           ----------------------
                           Lawrence S. Jones
                           Executive Vice President and Treasurer
                           (Authorized Officer and Principal Accounting Officer)



                           WYNDHAM INTERNATIONAL, INC.



                           /s/ Lawrence S. Jones
                           ---------------------
                           Lawrence S. Jones
                           Executive Vice President and Treasurer
                           (Authorized Officer and Principal Accounting and 
                           Financial Officer)

                                       36