<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

(Mark One)

[ X ]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 1996

                                       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 1-9563

                          AIRCOA HOTEL PARTNERS, L.P.

             (Exact name of registrant as specified in its charter)

Delaware                                                             84-1042607

(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                             identification No.)

                               5775 DTC Boulevard
                                   Suite 300
                           Englewood, Colorado  80111

              (Address of principal executive offices) (Zip Code)


Registrant's telephone number, including area code:  (303) 220-2000


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 twelve 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
        -----    -----     

There were 5,340,214 Units outstanding of the Registrant's Class A Units as of
November 1, 1996.
 
<PAGE>
 
                          AIRCOA HOTEL PARTNERS, L.P.

                                     INDEX


<TABLE>
<CAPTION>
                                                                                         Page
                                                                                        Number
                                                                                        ------

PART I. FINANCIAL INFORMATION:
        Item 1.   Financial Statements
        <C>       <S>                                                                  <C>
 
                   Consolidated Balance Sheets
                     September 30, 1996 (Unaudited)
                     and December 31, 1995                                               2 - 3
 
                   Consolidated Statements of Operations
                     Three Months and Nine Months ended September 30, 1996
                     and 1995 (Unaudited)                                                    4
 
                   Consolidated Statement of Partners' Capital
                     Nine Months Ended September 30, 1996
                     (Unaudited)                                                             5
 
                   Consolidated Statements of Cash Flows
                     Nine Months Ended September 30, 1996 and 1995
                     (Unaudited)                                                             6
 
                   Notes to Consolidated Financial
                     Statements (Unaudited)                                             7 - 10
 
        Item 2.    Management's Discussion and Analysis of                             11 - 14
                     Financial Condition and Results of Operations

PART II.  OTHER INFORMATION:

        Item 6.    Exhibits and Reports on Form 8-K                                         14

        SIGNATURES                                                                          15
</TABLE> 
                                       1
<PAGE>
 
PART I. FINANCIAL INFORMATION
------- ---------------------

Item 1. Financial  Statements
------- ---------------------

                          AIRCOA HOTEL PARTNERS, L.P.

                          CONSOLIDATED BALANCE SHEETS

                                  (Unaudited)

                                 (In Thousands)
<TABLE>
<CAPTION>
 
 
Assets                                            September 30, 1996   December 31, 1995
------                                            -------------------  ------------------
<S>                                               <C>                  <C>
 
Current assets:
 Cash and cash equivalents                                  $  3,032            $  2,116
 Accounts receivable:
  Trade                                                        2,883               2,479
  Affiliates                                                     107                 143
 Inventory                                                       376                 339
 Prepaid expenses                                                391                 482
                                                            --------            --------
 
    Total current assets                                       6,789               5,559
                                                            --------            --------
 
 
Property and equipment, at cost:
 Land and leasehold improvements                               8,927               8,914
 Buildings and leasehold improvements                         67,430              66,838
 Furniture, fixtures and equipment                            19,667              18,332
                                                            --------            --------
                                                              96,024              94,084
Less accumulated depreciation and amortization               (34,489)            (31,329)
                                                            --------            --------
 
    Net property and equipment                                61,535              62,755
                                                            --------            --------
 
Other assets, including debt issue costs, net of
 accumulated amortization of $301 in 1996 and
 $237 in 1995                                                  1,011               1,092
                                                               -----               -----

                                                             $69,335             $69,406
                                                             =======             =======

</TABLE>

                                  (continued)

                                       2
<PAGE>
 
                          AIRCOA HOTEL PARTNERS, L.P.

                    CONSOLIDATED BALANCE SHEETS (Continued)

                                  (Unaudited)

                                 (In Thousands)
<TABLE>
<CAPTION>
 
 
Liabilities and Partners' Capital                            September 30, 1996   December 31, 1995
---------------------------------                           -------------------  ------------------
<S>                                                         <C>                  <C>
 
Current liabilities:
 Current installments of long-term debt                             $ 1,080             $ 1,080
 Accounts payable:                                         
   Trade                                                              1,322               1,683
   Affiliates                                                           659                 715
 Accrued liabilities:                                      
  Payroll                                                               179                 217
  Taxes, other than income taxes                                      1,013                 473
  Other                                                               1,938               1,848
 Deferred revenue and advance deposits                                  827               1,995
                                                                    -------             -------
                                                           
     Total current liabilities                                        7,018               8,011
                                                           
Long-term debt, excluding current installments                       42,480              43,290
                                                           
Notes payable to affiliate                                            8,100               8,100
                                                           
Accrued administration fees, management fees and interest  
 payable to affiliate                                                   442                 253
                                                                    -------             -------
                                                           
     Total liabilities                                               58,040              59,654
                                                                    -------             -------
                                                           
Partners' capital:                                         
 General Partner                                                        259                 236
 Limited partners:                                         
  Class A Unitholders                                                14,270              13,603
  Class B Unitholders (deficit)                                      (3,234)             (4,087)
                                                                    -------             -------
                                                           
     Total partners' capital                                         11,295               9,752
                                                                    -------             -------
                                                           
                                                                    $69,335             $69,406
                                                                    =======             =======
 
</TABLE>



          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
 
                          AIRCOA HOTEL PARTNERS, L.P.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

                                  (Unaudited)

                        (In Thousands, Except Unit Data)


                                                            
                                                            
<TABLE>
<CAPTION>                                                              
                                                            

                                                    Three Months Ended        Nine Months Ended
                                                      September 30,             September 30,
                                                 -----------------------   -----------------------
                                                    1996         1995          1996         1995
                                                 ----------   ----------   ----------   ----------
<S>                                              <C>          <C>          <C>          <C>
 Revenue:
 Rooms                                           $    7,467   $    7,345   $   22,523   $   21,037
 Food and beverage                                    2,687        2,857        9,140        8,742
 Other property operations                            1,743        1,743        5,655        5,402
                                                 ----------   ----------   ----------   ----------
                                                     11,897       11,945       37,318       35,181
                                                 ----------   ----------   ----------   ----------
Costs and operating expenses:
 Rooms                                                1,954        1,967        5,896        5,638
 Food and beverage                                    2,055        2,115        6,615        6,454
 Other property operations                              625          629        2,346        2,415
 Administrative and general                           1,272        1,306        3,830        3,657
 Marketing                                              978          970        3,162        3,039
 Energy                                                 621          651        1,837        1,802
 Property maintenance                                   615          529        1,821        1,718
 Rent, taxes and insurance                              713          706        2,050        2,059
 Management fees                                        471          473        1,481        1,398
 Depreciation and amortization                        1,054        1,006        3,160        3,022
                                                 ----------   ----------   ----------   ----------
                                                     10,358       10,352       32,198       31,202
                                                 ----------   ----------   ----------   ----------
 
Operating income                                      1,539        1,593        5,120        3,979
 
Interest expense, including
 amortization of debt costs                          (1,218)      (1,238)      (3,577)      (3,640)
                                                 ----------   ----------   ----------   ----------
 
Net income                                       $      321   $      355   $    1,543   $      339
                                                 ==========   ==========   ==========   ==========
 
Net income (loss) per limited
 partnership unit:
 
 Class A Unitholders:
   Net income (loss)                                   $.01        $(.01)        $.13        $(.10)
                                                 ==========   ==========   ==========   ==========
 
 Class B Unitholders:
   Net income                                          $.29         $.32         $.90         $.92
                                                 ==========   ==========   ==========   ==========
 
Weighted average number of units outstanding:
 Class A                                          5,340,214    5,340,214    5,340,214    5,340,214
 Class B                                            950,000      950,000      950,000      950,000
 
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
 
                          AIRCOA HOTEL PARTNERS, L.P.

                  CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL

                      NINE MONTHS ENDED SEPTEMBER 30, 1996

                                  (Unaudited)

                        (In Thousands, Except Unit Data)



<TABLE>
<CAPTION>                                     
                              
                               Limited Partners' Capital (Deficit)             Total
                             ----------------------------------------  
                    General  Class A Unitholders  Class B Unitholders        Partners'
                             -------------------  -------------------            
                    Partner    Units      Capital      Units      Deficit     Capital
                    -------  ---------  -----------  ---------  -----------   -------
<S>                 <C>      <C>        <C>          <C>        <C>           <C> 
Balances at
 December 31, 1995     $236  5,340,214   $13,603      950,000   $(4,087)      $ 9,752
 
Net income               23         --       667           --       853         1,543
                       ----  ---------   -------      -------   -------       -------
Balances at
 September 30, 1996    $259  5,340,214   $14,270      950,000   $(3,234)      $11,295
                       ====  =========   =======      =======   =======       =======
 
</TABLE>




          See accompanying notes to consolidated financial statements.

                                       5
<PAGE>
 
                          AIRCOA HOTEL PARTNERS, L.P.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                 NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

                                  (Unaudited)

                                 (In Thousands)

<TABLE>
<CAPTION>
                                                          1996       1995
                                                        --------   --------
<S>                                                     <C>        <C> 
Cash flows from operating activities:

 Cash received from customers                           $ 34,375   $ 32,342
 Cash paid to suppliers and vendors                      (19,242)   (19,466)
 Cash paid to employees                                  (10,146)    (9,808)
 Interest paid                                            (2,508)    (2,035)
 Other cash receipts, net                                  1,411      1,661
                                                        --------   --------
 
      Net cash provided by operating activities            3,890      2,694
                                                        --------   --------
 
Cash flows from investing activities -
 capital expenditures                                     (1,940)    (1,592)
                                                        --------   --------
 
Cash flows from financing activities:
 Principal payments on long-term debt                       (810)   (42,725)
 Proceeds from refinancing                                    --     45,000
 Payments for debt issuance cost                            (224)      (977)
                                                        --------   --------
 
      Net cash provided (used) by financing activity      (1,034)     1,298
                                                        --------   --------
 
    Increase in cash and cash equivalents                    916      2,400
 
Cash and cash equivalents at beginning of period           2,116      1,261
                                                        --------   --------
 
Cash and cash equivalents at end of period              $  3,032   $  3,661
                                                        ========   ========
 
</TABLE>







          See accompanying notes to consolidated financial statements.

                                       6
<PAGE>
 
                          AIRCOA HOTEL PARTNERS, L.P.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1996

                                  (Unaudited)
(1)  BASIS OF PRESENTATION

     AIRCOA Hotel Partners, L.P., a Delaware limited partnership (the
     "Partnership" ) was organized in December 1986 to acquire, own and operate
     hotel and resort properties. The Partnership owns and operates six hotel
     and resort properties (the " Properties" ) through operating partnerships
     (the "Operating Partnerships" ) which were acquired in 1986.

     The Partnership holds a 99% limited partner interest in each of the six
     Operating Partnerships, which hold title to the Properties and through
     which the Partnership conducts all of its operations. AIRCOA Hospitality
     Services, Inc. (" AHS "), a wholly owned subsidiary of Richfield
     Hospitality Services, Inc. (" Richfield "), is the 1% General Partner of
     each of the Operating Partnerships. Richfield operates the Properties for
     the Partnership under certain management agreements.

     The accompanying unaudited consolidated financial statements have been
     prepared in accordance with the instructions to Form 10-Q and, therefore,
     do not include all information and disclosures necessary for a fair
     presentation of financial position, results of operations and cash flows in
     conformity with generally accepted accounting principles. In the opinion of
     management, these financial statements reflect all adjustments (which
     include only normal recurring adjustments) necessary for a fair
     presentation of the results of operations and financial position for the
     interim periods presented. These interim financial statements should be
     read in conjunction with the Annual Report on Form 10-K for the period
     ended December 31, 1995. Operating results for the nine months ended
     September 30, 1996 are not necessarily indicative of the results that may
     be expected for the year ended December 31, 1996.

     Certain amounts reported in the 1995 financial statements have been
     reclassified to conform to the 1996 presentation.

(2)  LONG-TERM DEBT

     On June 8, 1995, the Partnership signed a credit agreement with a new
     lender which provided a $45,000,000 first mortgage loan and a $1,000,000
     revolving credit line. The proceeds of the $45,000,000 first mortgage loan
     were used principally to refinance, on a long-term basis, the Partnership's
     existing mortgage loan in the amount of $38,950,000 and the note payable to
     bank of $1,790,000 which were due July 31, 1995 and October 31, 1995,
     respectively, and to provide approximately $3,000,000 to fund hotel
     property renovations. The balance of the funds was used for the payment of
     a facility fee and closing costs.

     The first mortgage loan interest rate at September 30, 1996 of 7.6875% was
     based on the current Eurodollar rate plus 2%, and has been fixed through
     November 1, 1996. Repayment of the first mortgage loan is based on a
     twenty-year amortization with a final maturity date in June 2000. Payments
     under this loan consist of monthly installments of $90,000 plus interest
     on the unpaid balance. The revolving credit line is renewable annually at
     the option of the lender. No amounts have been drawn on the line at
     September 30, 1996.

     Long term debt is summarized as follows (in thousands):
 
                                         September 30, 1996   December 31, 1995
                                         -------------------  ------------------
 
       Mortgage loan                         $43,560               $44,370
       Less current installments              (1,080)               (1,080)
                                             -------               -------
 
       Long-term debt, excluding 
         current installments                $42,480               $43,290
                                            ========              ========

                                       7
<PAGE>
 
                          AIRCOA HOTEL PARTNERS, L.P.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1996

                                  (Unaudited)

     The first mortgage loan and revolving credit line contain various covenants
     including: minimum debt service ratios, restrictions on additional
     indebtedness, limitations on annual cash distributions to Class A
     Unitholders, limitations on the payment of principal on the affiliate notes
     payable, prepayment premium during the first three years, deferral of
     management fees payable to Richfield if minimum debt service ratios are not
     achieved, maintenance of a capital expenditure reserve account equal to 5%
     of gross revenue and a maximum loan-to-value ratio of 65% based on the
     aggregate appraised values of the Properties. The first mortgage loan and
     revolving credit line are subject to certain limited guarantees of an
     affiliate of the General Partner. The first mortgage loan also requires the
     lender's approval of any dilution in the present ownership interests of
     affiliates of the General Partner in the Partnership.

     In accordance with the Partnership Agreement, the General Partner received
     a 1% financing fee, reduced by the amount of the financing fee paid to the
     lender, for arranging the refinancing of the Partnership's indebtedness. In
     addition, the Partnership pays an annual guarantee fee to an affiliate of
     the General Partner for the limited guarantee of the first mortgage loan
     and the revolving credit line. The guarantee fee is calculated at .5% of
     the total of the outstanding mortgage loan balance at June 8th of each year
     plus the revolving credit line amount.

(3)  NOTES PAYABLE TO AFFILIATE

     A condition of the credit agreement signed by the Partnership for the first
     mortgage loan and revolving credit line required the subordination of
     $6,000,000 in notes payable to AHS (the "Notes" ). AHS agreed to this
     subordination, and as a result, on September 26, 1995 the Board of
     Directors of AHS, in its capacity as General Partner, and the Advisory
     Committee of AHP authorized the extension of the term and deferral of
     certain past-due interest on the Notes.

     Pursuant to this extension, the Notes, which originally matured in January
     1995 are due on June 8, 2000 which is coterminous with the new mortgage
     loan. The unpaid interest on the Notes accrued prior to January 1, 1995 in
     the amount of $2,100,000 was converted into a new promissory note ( "New
     Note" ), which also matures on June 8, 2000. The New Note accrues interest
     at the rate of 12% per annum and is payable at maturity. Interest accrued
     on the Notes after December 31, 1994 was paid at closing. Interest incurred
     on the Notes subsequent to closing continues to be accrued at 12% per annum
     and is paid monthly. These notes are convertible into Class A Units of the
     Partnership at $16.60 per unit. In addition, the Notes and New Note
     stipulate that 25% of any excess cash flow, as defined in the new mortgage
     loan, will be applied against the principal of the notes outstanding.

(4)  PARTNERSHIP UNITS AND ALLOCATIONS

     LIMITED PARTNERSHIP UNITS

     The Class A Units entitle each Unitholder to a limited partnership interest
     in a percentage of the profits and losses, tax allocations and
     distributions of the Partnership, as described below.

     The Class B Units entitle each Unitholder to a limited partnership interest
     which is subordinate to the Class A Units, in certain circumstances. The
     Class B Units are redeemable by the Partnership or convertible into Class A
     Units, in certain circumstances. The Class B Units do not receive
     distributions until the Class A Unitholders receive defined Minimum Annual
     Distributions. Through 1996, the Class B Units are convertible into Class A
     Units to the extent that distributable cash flow of the Partnership in the
     previous year would have been sufficient to pay Minimum Annual
     Distributions for the Class A Units, including the Class B Units to be
     converted. Beginning in 1997,

                                       8
<PAGE>
 
                          AIRCOA HOTEL PARTNERS, L.P.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1996

                                  (Unaudited)
                                        
     during the 30-day period following the release of the Partnership's annual
     audited financial statements, and each year thereafter through 2001, a
     minimum of 250,000 Class B Units are required to be converted into Class A
     Units annually at a redemption value of $20.00 per Class B Unit, by issuing
     Class A Units valued at the then current market price of the Class A Units.
     Therefore, the number of Class A Units to be issued upon conversion of a
     Class B Unit will be determined at the time of conversion by dividing
     $20.00 by the then current market price of a Class A Unit.

     CASH DISTRIBUTIONS

     The Partnership Agreement provides for periodic distribution of
     distributable cash flow, as defined, to the partners at the discretion of
     the General Partner. Distributable cash flow is generally defined as cash
     flow from operations of the hotel properties. Such cash is allocated and
     distributed (net of AHS' 1% general partnership interest in the Operating
     Partnerships) 99% to the Class A Unitholders and 1% to the General Partner
     until the Class A Unitholders have received defined Minimum Annual
     Distributions. At September 30, 1996, the cumulative unpaid Minimum Annual
     Distribution per Class A Unit significantly exceeds the Partnerships' net
     asset value per unit based on the December 31, 1995 appraised values of the
     hotel properties.

     According to the first mortgage loan, the maximum annual amount that the
     Partnership may distribute to the Class A Unitholders is equal to 50% of
     the excess cash flow, as defined. However, if the debt service coverage
     ratio, as defined, is greater than 1.50, then the Partnership may
     distribute up to 75% of the excess cash flow.

     In addition, the Partnership may not make any distributions to the Class A
     Unitholders if there are any amounts which are due and payable under the
     mortgage loan agreement which are unpaid.

(5)  RELATED PARTY TRANSACTIONS

     The following amounts resulting from transactions with affiliates are
     included in the accompanying consolidated statements of operations (in
     thousands):
                                                  For the nine
                                           months ended September 30,
                                           --------------------------
                                              1996            1995
                                              ----            ----
 
   Partnership administration fees         $  146            $  155
                                           =========         =========
   Management fees                         $1,481            $1,398
                                           =========         =========
   Allocated insurance expenses            $1,021            $1,085
                                           =========         =========
   Allocated data processing cost          $   55            $   34
                                           =========         =========
   Interest expense                        $  729            $  540
                                           =========         =========
   Lease income                            $  215            $  187
                                           =========         =========
   License fees                            $  198            $  129
                                           =========         =========
   Guarantee and financing fees
      (included in interest expense)       $  171            $   66
                                           =========         =========

   The Properties are obligated to reimburse an affiliate for payroll,
   professional fees, and certain out-of-pocket expenses incurred by the
   affiliate on their behalf.  Affiliates are also paid purchasing and design
   fees in connection with renovations of the hotels and purchases of
   furnishings, equipment and supplies.

                                       9
<PAGE>
 
                          AIRCOA HOTEL PARTNERS, L.P.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1996

                                  (Unaudited)


     Effective August 1, 1996, Sheraton University Center was converted to Regal
     University Hotel. Accordingly, Regal University Hotel has a license
     agreement with an affiliate to operate as a Regal hotel.

(6)  INCOME TAXES

     No current provision or benefit for income taxes is included in the
     accompanying consolidated financial statements since the taxable income or
     loss of the Partnership is included in the tax returns of the individual
     partners of the Partnership.

     The Partnership's only significant temporary difference is an excess of the
     tax basis over the book basis of the Partnership's hotels of approximately
     $6,500,000 which gives rise to a net deferred tax asset of approximately
     $2,600,000.  The Partnership has established a 100% valuation allowance on
     these net deferred tax assets.  Current federal income tax regulations will
     subject the Partnership to corporate taxation beginning in 1998.

                                       10
<PAGE>
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
------   -----------------------------------------------------------------------
         of Operations
         -------------


   RESULTS OF OPERATIONS

   Partnership revenue for the three months ended September 30, 1996 decreased
   $48,000 or .4% compared to the three months ended September 30, 1995.
   Revenue for the first nine months of 1996 increased $2,137,000 or 6.1%
   compared to the first nine months of 1995.  Average occupancy and daily room
   rates for the portfolio of 1,586 rooms are summarized as follows:
<TABLE>
<CAPTION>
 
                                       Three months             Nine months
                                    ended September 30,     ended September 30,
                                 -------------------------  --------------------
                                    1996          1995       1996         1995
                                 ---------       ---------  ---------  ---------
<S>                              <C>              <C>        <C>        <C>
 
     Average occupancy             82.6%          83.8%       80.8%      80.9%
 
     Average daily room rates     $62.06         $60.09      $64.19     $60.07
</TABLE>

   The decrease in revenue for the three months ended September 30, 1996 when
   compared to the three months ended September 30, 1995 resulted from increased
   rooms revenue offset by decreased food and beverage revenue.  Rooms revenue
   is primarily a function of the Properties' average daily room rates and
   occupancy levels.  For the three months ended September 30, 1996 compared to
   the three months ended September 30, 1995, rooms revenue increased as a
   result of increased average daily room rates offset by a decrease in
   occupancy levels.  Food and beverage revenue for the three months ended
   September 30, 1996 decreased primarily due to decreased occupancy levels.

   The increase in revenue for the nine months ended September 30, 1996 when
   compared to the nine months ended September 30, 1995 was a result of
   increased rooms revenue and food and beverage revenue.  Increased rooms
   revenue was primarily a result of increased average daily room rates, while
   increased food and beverage revenue was primarily a result of increased
   banquet services, primarily in the first half of 1996.

   Net rooms margin (rooms revenue less rooms expenses) increased $135,000 or
   2.5% for the three months ended September 30, 1996 as compared to the three
   months ended September 30, 1995, as revenue increased by $122,000 or 1.7%
   while expenses decreased $13,000 or .7%.  This improvement was primarily a
   result of increased average daily room rates at Sheraton Lakeside and Regal
   University Hotel offset by decreased occupancy at Regal McCormick Ranch.
   Average daily room rates increased at Sheraton Lakeside in the wholesale
   segment and at Regal University Hotel in the leisure and group segments.
   Decreased occupancy at Regal McCormick Ranch occurred in the group and
   leisure segments.

   Net rooms margin increased $1,228,000 or 8.0% for the first nine months of
   1996 as compared to the first nine months of 1995, as revenue increased by
   $1,486,000 or 7.1%, while expenses only increased by $258,000 or 4.6%.  The
   largest increases in net rooms margin occurred at Sheraton Lakeside, Regal
   University Hotel and Sheraton Buffalo.  The increase at Sheraton Lakeside was
   generated through increased room rates, primarily in the leisure market
   segment, and increased occupancy, primarily in the wholesale segment.  The
   increase at Regal University Hotel was generated through increased room
   rates, primarily in the leisure and commercial market segments, offset with
   slight decreased occupancy, primarily in the commercial market segment.  The
   increase at Sheraton Buffalo was achieved through slight improvements in room
   rates and occupancy, in addition to improved control over rooms expenses.

   Net food and beverage margin (food and beverage revenue less food and
   beverage expenses) decreased $110,000 or 14.8% for the three months ended
   September 30, 1996 as compared to the three months ended September 30, 1995,
   as revenue decreased $170,000 or 6.0% while expenses decreased $60,000 or
   2.8%.  This was primarily the result of decreased food and beverage margins
   at Regal University Hotel and Sheraton Lakeside.

                                       11
<PAGE>
 
   For the nine months ended September 30, 1996, net food and beverage margin
   increased $237,000 or 10.4%, as revenue increased $398,000 or 4.6% while
   expenses increased $161,000 or 2.5%.  This increase was a result of increased
   margins at Regal McCormick Ranch and Sheraton Buffalo, offset by a decrease
   at Sheraton Lakeside.  These changes resulted from fluctuations in food and
   beverage margins.

   Revenue from other property operations was unchanged for the three months
   ended September 30, 1996 as compared to the three months ended September 30,
   1995 and increased $253,000 or 4.7% for the nine months ended September 30,
   1996 as compared to the same period in the prior year.  This is primarily due
   to increased activities at Regal McCormick Ranch during the first quarter of
   1996 in the Scottsdale region, which benefited from Phoenix, Arizona hosting
   the Super Bowl and Fiesta Bowl at the beginning of the year.

   Operating income for the three months ended September 30, 1996 decreased
   $54,000 or 3.4% as compared to the three months ended September 30, 1995, as
   revenue decreased .4% while operating costs increased slightly.  Operating
   income increased $1,141,000 or 28.7% for the nine months ended September 30,
   1996 as compared to the first nine months of 1995, as revenue increased 6.1%
   while operating costs only increased 3.2%.

   Interest expense decreased slightly for the three months ended September 30,
   1996 as compared to the three months ended September 30, 1995.  For the nine
   months ended September 30, 1996, interest expense decreased $63,000 or 1.7%
   as compared to the nine months ended September 30, 1995, as the result of a
   decrease in the average interest rate (inclusive of amortization of debt
   issue cost) from 9.60% to 9.16%, offset in part by higher average debt
   levels.

   Cash flow from operations differs from net income of the Partnership due to
   the effects of depreciation, amortization and accruals as reflected in the
   consolidated statements of cash flows. Net income/(loss) per Class A Unit and
   the net income per Class B Unit reflect allocations of the net income as
   required by the Partnership Agreement.

   LIQUIDITY AND CAPITAL RESOURCES

   Net cash provided by operating activities for the first nine months of 1996
   was $3,890,000, an increase of $1,196,000 as compared with the same period in
   1995.  The increase is primarily attributable to increased cash received from
   customers of $2,033,000, offset by increased interest paid of $473,000 and
   increased cash paid to employees of $338,000.  Cash used in investing
   activities increased $348,000 in the first nine months of 1996 compared to
   the first nine months of 1995 due to increased capital expenditures. Cash
   used in financing activities decreased $2,332,000 in the first nine months of
   1996 as compared to the first nine months of 1995.  The decrease is
   attributable to the Partnership refinancing its long term debt in June 1995.
   This refinancing resulted in a new $45,000,000 first mortgage loan and a
   $1,000,000 revolving line of credit.

   The Partnership had indebtedness at September 30, 1996 of $51,660,000 as
   compared to $52,470,000 at December 31, 1995.  At September 30, 1996, the
   Partnership had a working capital deficit of $229,000 compared to a working
   capital deficit of $2,452,000 at December 31, 1995. The Partnership's working
   capital requirements, debt service obligations and capital expenditures are
   expected to be satisfied through a combination of operating cash flows and
   draws on its revolving line of credit. During the first nine months of 1996
   the Partnership spent $1,940,000 on capital improvements and has
   approximately $1,975,000 planned for the remainder of 1996.  These
   improvements will be primarily funded from hotel operations.  In accordance
   with the provisions of the mortgage loan agreement, which requires certain
   minimum levels of capital expenditures, any required amounts not expended
   will be placed in a capital reserve account at December 31, 1996.

   In 1997, the Partnership has significant capital refurbishments and repairs
   planned at Fourwinds, one of the Partnership's properties, as well as routine
   capital improvements at other properties. The Partnership anticipates that
   expenditures required for these refurbishments and repairs will be 

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<PAGE>
 
   primarily funded from 1997 hotel operating cash flows. The Partnership
   presently believes that the expenditure of funds necessary to complete the
   repair and refurbishment of Fourwinds and the routine capital improvements at
   other properties may preclude the Partnership from making cash distributions
   to unitholders in the first half of 1997.

   The market value of the Partnership's properties differs significantly from
   the historical cost of the properties as reflected in the Partnership's
   balance sheet at September 30, 1996.  As indicated under Item 2 in the
   Partnership's 1995 Form 10-K, the aggregate appraised value of the hotel
   properties at December 31, 1995 was $82,875,000.  This does not reflect an
   interim appraised value for Regal University Hotel of $15,780,000 obtained in
   September 1996. At December 31, 1995 Regal University was appraised at
   $12,000,000. The December 1995 appraised value may not be representative of
   the appraised value which will be obtained as of December 31, 1996 and is not
   necessarily indicative of the ability of the Partnership to consummate a sale
   of the Properties or the actual sale price to be realized from the sale of
   the Properties. However, the appraised value does represent the appraiser's
   opinion of the most probable price as of the appraisal date for which the
   hotel properties should sell in a competitive market.

   PARTNERSHIP DISTRIBUTIONS AND UNIT CONVERSIONS

   The Partnership Agreement provides for periodic distribution of distributable
   cash flow, as defined, to the partners subject to any applicable restrictions
   and the discretion of the General Partner. The Partnership has not made any
   distributions since 1990. Prior to making future distributions, the
   Partnership will comply with its capital expenditure and debt service reserve
   requirements as specified in its mortgage loan agreement and maintain
   sufficient working capital balances. The Partnership currently has a Minimum
   Annual Distribution requirement of $2.16 per Class A Unit. At September 30,
   1996, the cumulative unpaid Minimum Annual Distribution per Class A Unit
   significantly exceeds the Partnership's net asset value per unit based on the
   December 31, 1995 appraised values of the hotel properties. The Partnership
   does not believe that there will be funds available for distribution to the
   Class A Unitholders in 1996.

   Beginning in 1997, during the 30-day period following the release of the
   Partnership's annual audited financial statements, and each year thereafter
   through 2001, a minimum of 250,000 Class B Units are required to be converted
   at a redemption value of $20.00 per Class B Unit, by issuing Class A Units
   valued at the then current market price of a Class A Unit.  Therefore, the
   number of Class A Units to be issued upon the conversion of a Class B Unit
   will be determined at the time of conversion by dividing $20.00 by the then
   current market price of a Class A Unit. Current market price for this
   calculation is the average market price for a Class A Unit during the last
   five days prior to conversion.  Pursuant to the Partnership Agreement, the
   Class A Units to be issued upon conversion of the Class B Units will be
   identical to the Class A Units existing prior to the conversion date.  The
   General Partner has, on the advice of counsel, determined that the Class B
   Units convert into identical Class A Units because there are elective
   procedures, which are standard practice for publicly-traded partnerships,
   that make the Class A Units received upon conversion fungible for tax
   purposes with all pre-existing Class A Units.

   Based on current market prices of the Class A Units, such required conversion
   is expected to result in substantial dilution to the preconversion Class A
   Unitholders. For example, based on the average monthly market price of Class
   A Units during the first nine months of 1996 of approximately $1.83, the
   conversion of 250,000 Class B Units in the first year of the required
   conversion period would result in an approximate 34% dilution to the Class A
   Unitholders upon conversion. This conversion will result in the issuance of
   approximately 2,730,000 new Class A Units in 1997. The conversion of all
   950,000 Class B Units would result in an approximate 66% dilution to the
   preconversion Class A Unitholders at the $1.83 per unit market price. In
   addition, using the same per unit market price for a Class A Unit of $1.83,
   affiliate ownership of Class A Units would increase to approximately 81% and
   90% upon conversion of the first 250,000 Class B Units and conversion of all
   950,000 Class B Units, respectively. Changes in the market price of Class A
   Units will not result in proportional changes in dilution. The market price
   of the Partnership's Class A Units is subject to fluctuations and there is no
   assurance that the prices upon
                                       13
<PAGE>
 
   which the conversions will be determined will approximate the average per
   unit market price for the first nine months of 1996.

 
   OTHER MATTERS

   Management of the Partnership, the Board of Directors of the General Partner
   and the Advisory Committee are seeking to increase the value of the
   Partnership for all of its Unitholders. Management has been evaluating and
   will continue to evaluate different strategies for maximizing Unitholder
   value including;  (i) continued ownership and operation of the properties
   (ii) sale of one or more of the Partnership's properties in response to
   exceptional offers, (iii) liquidation, sale or other similar transactions,
   and (iv) combining the Partnership or its assets with other hotel-owning
   entities.

   Unless and until such time as management identifies one or more preferable
   strategic alternatives, the Partnership intends to pursue its current
   strategy of owning and operating its existing portfolio of properties.


PART II.  OTHER INFORMATION
--------  -----------------                 

Item 6.   Exhibits and Reports on Form 8-K
-------   --------------------------------
          a)  Exhibits
              (10.36) Indemnification Agreement

          b)  Reports on Form 8-K
              None

                                       14
<PAGE>
 
                                   SIGNATURES
                                   ----------



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                              AIRCOA HOTEL PARTNERS, L.P.


                              By:  AIRCOA Hospitality Services, Inc.,
                                   General Partner



Date: November 12,  1996           By: /s/ Douglas M. Pasquale
      ---------------------           -----------------------
                                       Douglas M. Pasquale
                                         President and Director
                                         (Principal Executive and 
                                         Financial Officer)
                                         of AIRCOA Hospitality Services, Inc.



                                   By:  /s/ David C. Ridgley
                                        --------------------
                                        David C. Ridgley
                                         Vice President
                                         and Chief Accounting Officer     
                                         (Duly Authorized Officer)

                                       15