----

----

**FORM      10-Q**

**SECURITIES      AND EXCHANGE COMMISSION**

| x      | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE |   |
|--------|-------------------------------------------------------------------------|--------|
|   | SECURITIES                EXCHANGE ACT OF 1934                          |   |
|   | For                the Quarterly period ended September 30, 2005        |   |
|   |                                                                    |   |
|   | OR                                                                      |   |

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

| For                the transition period from |   | to |   |
|-----------------------------------------------|--------|----|--------|

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

| NEW                YORK                                                       |   | 13-5648107                                          |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction or incorporation or organization) |   | (I.R.S.                Employer Identification No.) |

|                                                                      |
|---------------------------------------------------------------------------|
| (Registrant’s                telephone number, including area code) |
|                                                                      |
|                                                                      |
| (Former                name, former address and former fiscal year,       |
| if                changed since last report)                              |

| Yes                x | No                o |
|----------------------|---------------------|

| Yes                o | No                x |
|----------------------|---------------------|

----

**INDEX**

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

| Part                I. Financial                Information | **Page**                                                                                                                                                                      |
|-------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        |                                                                                                                                                                          |   |
| Item                1.                                      | Financial                Statements                (unaudited)                                                                                                                |   |
|                                                        |                                                                                                                                                                          |   |
|                                                        | Condensed                consolidated balance sheets—                September 30, 2005 (unaudited) and December 31, 2004                                               | 1 |
|                                                        |                                                                                                                                                                          |   |
|                                                        | Condensed                consolidated statements of                operations—Three and nine-month periods ended September 30, 2005 and 2004                (unaudited) | 3 |
|                                                        |                                                                                                                                                                          |   |
|                                                        | Condensed                consolidated statements of cash                flows—Nine-month periods ended September 30, 2005 and 2004                (unaudited)           | 4 |
|                                                        |                                                                                                                                                                          |   |
|                                                        | Notes                to condensed consolidated financial                statements—September 30, 2005 and 2004                                                          | 6 |
|                                                        |                                                                                                                                                                          |   |
| Item                2.                                      | Management’s                Discussion and Analysis of                Results of Operations and Financial Condition—September 30,                2005             |   14 |
|                                                        |                                                                                                                                                                          |   |
| Item                3.                                      | Quantitative                and Qualitative Disclosure of Market                Risk                                                                                          | 20 |
|                                                        |                                                                                                                                                                          |   |
| Item                4.                                      | Internal                Controls and                Procedures                                                                                                                | 21 |
|                                                        |                                                                                                                                                                          |   |
| Part                II. Other Information                   |                                                                                                                                                                          |
|                                                        |                                                                                                                                                                          |   |
|                                                        | Signature                page                                                                                                                                                 | 23 |
|                                                        |                                                                                                                                                                          |   |
| Exhibits                31A, 31.B, 31.C                     | Certifications                by the Company’s Chief Executive Officers and Vice President and                Treasurer                                                 |    |
|                                                        |                                                                                                                                                                          |   |
| Exhibit                32                                   | 18                U.S.C. Section 1350 Certification by Company                Officers                                                                                        |    |

----

**Part      I - Item 1. Financial      Information**

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                                                                          |   | (in                thousands)   |    |
|---------------------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|
|                                                                                                          |   | September                302005 |    | December                312004 |   |
|                                                                                                          |   |                            |    |   |   |
| ASSETS                                                                                                        |   |                            |    |   |   |   |   |
| Current                assets:                                                                                |   |                            |    |   |   |   |   |
| Cash                and cash equivalents                                                                      |   | $                               | 26,419  |   | $ | 7,950 |   |
| Restricted                cash                                                                                |   |                            | 914     |   |   | 927 |   |
| Accounts                and notes receivable:                                                                 |   |                            |    |   |   |   |   |
| Trade,                less allowance of $127 ($212 at December 31, 2004) for doubtful                accounts |   |                            | 7,643   |   |   | 6,960 |   |
| Other,                including current portion of long-term receivables and                advances          |   |                            | 1,695   |   |   | 1,601 |   |
| Total                accounts and notes receivable                                                            |   |                            | 9,338   |   |   | 8,561 |   |
| Inventories                                                                                                   |   |                            | 1,025   |   |   | 1,215 |   |
| Current                deferred tax assets                                                                    |   |                            | 409     |   |   | -- |   |
| Prepaid                expenses and other                                                                     |   |                            | 1,455   |   |   | 2,455 |   |
|                                                                                                          |   |                            |    |   |   |   |   |
| Total                current assets                                                                           |   |                            | 39,560  |   |   | 21,108 |   |
|                                                                                                          |   |                            |    |   |   |   |   |
| Long-term                receivables and advances                                                             |   |                            | 8,830   |   |   | 9,066 |   |
|                                                                                                          |   |                            |    |   |   |   |   |
| Deferred                tax assets                                                                            |   |                            | 6,122   |   |   | -- |   |
|                                                                                                          |   |                            |    |   |   |   |   |
| Property                and equipment, at cost:                                                               |   |                            |    |   |   |   |   |
| Land                and land improvements                                                                     |   |                            | 9,102   |   |   | 9,102 |   |
| Buildings                                                                                                     |   |                            | 57,483  |   |   | 57,861 |   |
| Furniture                and equipment                                                                        |   |                            | 43,738  |   |   | 41,050 |   |
| Leasehold                improvements                                                                         |   |                            | 7,559   |   |   | 7,527 |   |
| Projects                in progress                                                                           |   |                            | --      |   |   | 148 |   |
|                                                                                                          |   |                            | 117,882 |   |   | 115,688 |   |
|                                                                                                          |   |                            |    |   |   |   |   |
| Less:                accumulated depreciation and amortization                                                |   |                            | 44,596  |   |   | 39,050 |   |
| Net                property and equipment                                                                     |   |                            | 73,286  |   |   | 76,638 |   |
|                                                                                                          |   |                            |    |   |   |   |   |
| Other                long-term assets                                                                         |   |                            | 2,272   |   |   | 2,725 |   |
|                                                                                                          |   | $                               | 130,070 |   | $ | 109,537 |   |

*See      accompanying notes to condensed consolidated financial      statements.*

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                             |   | (in                thousands)   |    |
|------------------------------------------------------------------|--------|---------------------------------|---------|
|                                                             |   | September                302005 |    | December                312004 |   |
|                                                             |   |                            |    |   |   |
|                                                             |   |                            |    |   |   |
| LIABILITIES                AND COMMON STOCKHOLDERS’ EQUITY |   |                            |    |   |   |   |   |
| Current                liabilities:                              |   |                            |    |   |   |   |   |
| Accounts                payable                                  |   | $                               | 2,997   |   | $ | 3,383 |   |
| Advance                deposits                                  |   |                            | 2,260   |   |   | 2,861 |   |
| Federal,                foreign and state income taxes           |   |                            | 1,403   |   |   | 740 |   |
| Accrued                liabilities:                              |   |                            |    |   |   |   |   |
| Salaries                and wages                                |   |                            | 1,673   |   |   | 2,111 |   |
| Rentals                                                          |   |                            | 3,538   |   |   | 6,417 |   |
| Interest                                                         |   |                            | 1,255   |   |   | 305 |   |
| Pension                and other employee benefits               |   |                            | 282     |   |   | 751 |   |
| Other                                                            |   |                            | 2,412   |   |   | 1,056 |   |
|                                                             |   |                            |    |   |   |   |   |
| Total                accrued liabilities                         |   |                            | 9,160   |   |   | 10,640 |   |
|                                                             |   |                            |    |   |   |   |   |
| Total                current liabilities                         |   |                            | 15,820  |   |   | 17,624 |   |
|                                                             |   |                            |    |   |   |   |   |
| Long-term                debt                                    |   |                            | 34,061  |   |   | 69,816 |   |
|                                                             |   |                            |    |   |   |   |   |
| Finance                obligation                                |   |                            | 59,728  |   |   | -- |   |
|                                                             |   |                            |    |   |   |   |   |
| Deferred                tax liabilities                          |   |                            | --      |   |   | 5,131 |   |
|                                                             |   |                            |    |   |   |   |   |
| Other                non-current liabilities                     |   |                            | 6,329   |   |   | 5,702 |   |
|                                                             |   |                            |    |   |   |   |   |
|                                                             |   |                            |    |   |   |   |   |
| Commitments                and contingencies                     |   |                            |    |   |   |   |   |
|                                                             |   |                            |    |   |   |   |   |
| Stockholders’                equity:                       |   |                            |    |   |   |   |   |
| Common                stock:                                     |   |                            |    |   |   |   |   |
| Class                A, $ 0.80 par value:                        |   |                            |    |   |   |   |   |
| Authorized                - 10,000 shares                        |   |                            |    |   |   |   |   |
| Issued—6,102                shares at stated value         |   |                            | 4,882   |   |   | 4,882 |   |
| Retained                earnings                                 |   |                            | 21,303  |   |   | 18,435 |   |
| Treasury                shares—2,404, at cost              |   |                            | (12,053 | ) |   | (12,053 | ) |
| Total stockholders’                equity             |   |                            | 14,132  |   |   | 11,264 |   |
|                                                             |   | $                               | 130,070 |   | $ | 109,537 |   |

*See      accompanying notes to condensed consolidated financial      statements.*

----

**SONESTA INTERNATIONAL      HOTELS      CORPORATION**

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)**

|                                                                              |   | Three                Months Ended September                30 |   | Nine                Months Ended September                30 |   |
|-----------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                                              |   | 2005                                                               |   | 2004                                                              |   | 2005 |   | 2004 |   |
| Revenues:                                                                         |   |                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |
| Rooms                                                                             |   | $                                                                  | 9,975  |                                                              | $      | 10,172 |   | $ | 38,656 |   | $ | 38,321 |   |
| Food                and beverage                                                  |   |                                                               | 4,316  |                                                              |   | 5,327 |   |   | 18,752 |   |   | 18,845 |   |
| Management,                license and service fees                               |   |                                                               | 293    |                                                              |   | 830 |   |   | 3,380 |   |   | 3,036 |   |
| Parking,                telephone and other                                       |   |                                                               | 1,641  |                                                              |   | 1,909 |   |   | 6,465 |   |   | 6,489 |   |
|                                                                              |   |                                                               | 16,225 |                                                              |   | 18,238 |   |   | 67,253 |   |   | 66,691 |   |
| Costs                and expenses:                                                |   |                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |
| Costs                and operating expenses                                       |   |                                                               | 9,987  |                                                              |   | 9,740 |   |   | 31,996 |   |   | 30,522 |   |
| Advertising                and promotion                                          |   |                                                               | 1,823  |                                                              |   | 1,895 |   |   | 5,726 |   |   | 5,576 |   |
| Administrative                and general                                         |   |                                                               | 3,664  |                                                              |   | 3,594 |   |   | 11,847 |   |   | 11,426 |   |
| Human                resources                                                    |   |                                                               | 416    |                                                              |   | 412 |   |   | 1,190 |   |   | 1,145 |   |
| Maintenance                                                                       |   |                                                               | 1,324  |                                                              |   | 1,432 |   |   | 4,178 |   |   | 4,204 |   |
| Rentals                                                                           |   |                                                               | (495   | )                                                                 |   | 92 |   |   | 4,159 |   |   | 4,983 |   |
| Property                taxes                                                     |   |                                                               | 728    |                                                              |   | 871 |   |   | 2,080 |   |   | 2,089 |   |
| Depreciation                and amortization                                      |   |                                                               | 2,098  |                                                              |   | 2,091 |   |   | 5,999 |   |   | 6,327 |   |
|                                                                              |   |                                                               | 19,545 |                                                              |   | 20,127 |   |   | 67,175 |   |   | 66,272 |   |
| Operating                income (loss)                                            |   |                                                               | (3,320 | )                                                                 |   | (1,889 | ) |   | 78 |   |   | 419 |   |
|                                                                              |   |                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |
| Other                income (deductions):                                         |   |                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |
| Interest                expense                                                   |   |                                                               | (759   | )                                                                 |   | (1,547 | ) |   | (3,206 | ) |   | (4,699 | ) |
| Interest                income                                                    |   |                                                               | 342    |                                                              |   | 100 |   |   | 753 |   |   | 264 |   |
| Foreign                exchange gain (loss)                                       |   |                                                               | --     |                                                              |   | 3 |   |   | (10 | ) |   | 1 |   |
| Gain                on sales of assets                                            |   |                                                               | 3,954  |                                                              |   | -- |   |   | 4,079 |   |   | 18 |   |
|                                                                              |   |                                                               | 3,537  |                                                              |   | (1,444 | ) |   | 1,616 |   |   | (4,416 | ) |
|                                                                              |   |                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income tax provision                (benefit) |   |                                                               | 217    |                                                              |   | (3,333 | ) |   | 1,694 |   |   | (3,997 | ) |
| Income                tax provision (benefit)                                     |   |                                                               | (1,353 | )                                                                 |   | 38 |   |   | (4,872 | ) |   | 217 |   |
| Net                income (loss)                                                  |   |                                                               | 1,570  |                                                              |   | (3,371 | ) |   | 6,566 |   |   | (4,214 | ) |
|                                                                              |   |                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |
| Retained                earnings at beginning of period                           |   |                                                               | 19,733 |                                                              |   | 22,194 |   |   | 18,435 |   |   | 23,037 |   |
| Cash                dividends                                                     |   |                                                               | --     |                                                              |   | -- |   |   | (3,698 | ) |   | -- |   |
| Retained                earnings at end of period                                 |   | $                                                                  | 21,303 |                                                              | $      | 18,823 |   | $ | 21,303 |   | $ | 18,823 |   |
|                                                                              |   |                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |
|                                                                              |   |                                                               |   |                                                              |   |   |   |   |   |   |   |   |   |
| Basic                and diluted income (loss) per share                |   | $                                                                  | 0.42   |                                                              | $      | (0.91 | ) | $ | 1.77 |   | $ | (1.14 | ) |
| Weighted                average number of shares outstanding                      |   |                                                               | 3,698  |                                                              |   | 3,698 |   |   | 3,698 |   |   | 3,698 |   |

*See      accompanying notes to condensed consolidated financial      statements.*

----

**SONESTA      INTERNATIONAL HOTELS      CORPORATION**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)**

|                                                                                                                            |   | (in                thousands)                 |    |
|---------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                                                                                            |   | Nine                Months Ended September 30 |    |
|                                                                                                                            |   | 2005                                          |    | 2004 |   |
| Cash                provided (used) by operating activities                                                                     |   |                                          |    |   |   |   |   |
| Net                income (loss)                                                                                                |   | $                                             | 6,566   |   | $ | (4,214 | ) |
| Adjustments                to reconcile net income (loss) to net cash provided by (used in)                operating activities |   |                                          |    |   |   |   |   |
| Depreciation                and amortization of property and equipment                                                          |   |                                          | 5,999   |   |   | 6,327 |   |
| Other                amortization                                                                                               |   |                                          | 43      |   |   | 68 |   |
| Income                tax benefit                                                                                               |   |                                          | (4,519  | ) |   | -- |   |
| Gain                on sales of assets                                                                                          |   |                                          | (4,079  | ) |   | (18 | ) |
| Deferred                interest income                                                                                         |   |                                          | (235    | ) |   | (167 | ) |
| Deferred                interest expense                                                                                        |   |                                          | --      |   |   | 1,893 |   |
| Changes                in assets and liabilities                                                                                |   |                                          |    |   |   |   |   |
| Restricted                cash                                                                                                  |   |                                          | 13      |   |   | (2,037 | ) |
| Accounts                and notes receivable                                                                                    |   |                                          | (1,065  | ) |   | 1,560 |   |
| Inventories                                                                                                                     |   |                                          | 190     |   |   | 35 |   |
| Prepaid                expenses and other                                                                                       |   |                                          | 912     |   |   | 256 |   |
| Accounts                payable                                                                                                 |   |                                          | (386    | ) |   | (516 | ) |
| Advance                deposits                                                                                                 |   |                                          | (601    | ) |   | (228 | ) |
| Federal,                foreign and state income taxes                                                                          |   |                                          | (6,440  | ) |   | 34 |   |
| Accrued                liabilities                                                                                              |   |                                          | (1,068  | ) |   | 663 |   |
| Cash                provided (used) by operating activities                                                                     |   |                                          | (4,670  | ) |   | 3,656 |   |
|                                                                                                                            |   |                                          |    |   |   |   |   |
|                                                                                                                            |   |                                          |    |   |   |   |   |
| Cash                provided (used) by investing activities                                                                     |   |                                          |    |   |   |   |   |
| Proceeds                from sales of assets                                                                                    |   |                                          | 4,945   |   |   | 18 |   |
| Proceeds                from finance obligation                                                                                 |   |                                          | 59,978  |   |   | -- |   |
| Expenditures                for property and equipment                                                                          |   |                                          | (2,888  | ) |   | (3,199 | ) |
| Other                investments                                                                                                |   |                                          | --      |   |   | (27 | ) |
| Payments                received on long-term receivables and advances                                                          |   |                                          | 1,178   |   |   | 1,094 |   |
| New                loans and advances                                                                                           |   |                                          | (837    | ) |   | (548 | ) |
| Cash                provided (used) by investing activities                                                                     |   |                                          | 62,376  |   |   | (2,662 | ) |
|                                                                                                                            |   |                                          |    |   |   |   |   |
| Cash                used by financing activities                                                                                |   |                                          |    |   |   |   |   |
| Repayment                of long-term debt                                                                                      |   |                                          | (35,539 | ) |   | -- |   |
| Cash                dividends paid                                                                                              |   |                                          | (3,698  | ) |   | -- |   |
| Cash                used by financing activities                                                                                |   |                                          | (39,237 | ) |   | -- |   |
|                                                                                                                            |   |                                          |    |   |   |   |   |
| Net                increase in cash                                                                                             |   |                                          | 18,469  |   |   | 994 |   |
| Cash                and cash equivalents at beginning of period                                                                 |   |                                          | 7,950   |   |   | 4,327 |   |
| Cash                and cash equivalents at end of period                                                                       |   | $                                             | 26,419  |   | $ | 5,321 |   |

*See      accompanying notes to condensed consolidated financial      statements.*

----

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)      (continued)**

*See      accompanying notes to condensed consolidated financial      statements.*

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

| **1.** | **Basis                of Presentation** |
|--------|------------------------------------------|

| **2.** | **Long-Term                Receivables and                Advances** |
|--------|----------------------------------------------------------------------|

|                                                        |   | (in                thousands)     |   |
|-------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                        |   | September                30, 2005 |   | December                31, 2004 |   |
| Sharm                El Sheikh, Egypt (a)                   |   | $                                 | 454    |   | $ | 646 |   |
| Sonesta                Hotel & Suites Coconut Grove (b) |   |                              | 5,009  |   |   | 5,201 |   |
| Trump                International Sonesta Beach Resort (c) |   |                              | 3,715  |   |   | 3,788 |   |
| Other                                                       |   |                              | 1,009  |   |   | 741 |   |
| Total                long-term receivables                  |   |                              | 10,187 |   |   | 10,376 |   |
| Less:                current portion                        |   |                              | 1,357  |   |   | 1,310 |   |
| Net                long-term receivables                    |   | $                                 | 8,830  |   | $ | 9,066 |   |

| (a) | This                loan, in the original amount of $1,000,000, was made in 1996 and                1997 to                the owner of the Sonesta Beach Resort, Sharm El Sheikh. The loan                bears                interest at the prime rate (6.75% at September 30, 2005) and is adjusted                semi-annually. Currently, the loan is being repaid with monthly payments                of $23,800. The loan matures in                2007. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | This                loan was made to the owner of the Sonesta Hotel & Suites Coconut                Grove, Miami, which opened in April 2002. The Company has loaned                $4,000,000 to fund construction and furniture, fixtures and equipment                (“FF&E”) costs, and, in addition, has loaned $1,000,000 for                pre-opening costs and working capital. The loan for construction                and                FF&E costs bears interest at the prime rate plus 0.75% (7.50% at                September 30, 2005). No interest is being charged on the loan for                pre-opening costs. These loans are secured by a mortgage on the hotel                property. These loans are being repaid, the loan for pre-opening                costs                first, out of hotel profits that would otherwise be available for                distribution to the owner, and, to the extent the hotel’s earnings are                insufficient to pay the owner a certain minimum annual owner’s return, out                of the minimum returns funded by the                Company. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

| (c) | This                amount represents advances made to the owner of Trump International                Sonesta Beach Resort Sunny Isles for pre-opening costs ($2,296,000),                and                advances for the Company’s share of the losses of the resort from the                opening on April 1, 2003 through October 31, 2004 ($1,419,000). No                interest will be charged on these advances, which will be repaid                out of                future available profits generated by the hotel, or will be settled                when                the Company closes on the purchase option it has for the hotel (see                Note 9                - Legal Proceedings). |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.** | **Borrowing                Arrangements** |
|--------|-------------------------------------------|

*Credit      Line*

*Long-Term      Debt*

|                                                                              |   | (in                thousands)     |   |
|-----------------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                              |   | September                30, 2005 |   | December                31, 2004 |   |
| Charterhouse                of Cambridge Trust and Sonesta of Massachusetts Inc.: |   |                              |   |   |   |   |   |
| First                mortgage note                                                |   | $                                 | 34,061 |   | $ | 39,633 |   |
| Sonesta                Beach Resort Limited Partnership:                          |   |                              |   |   |   |   |   |
| First                mortgage note                                                |   |                              | --     |   |   | 29,967 |   |
| Accrued                interest                                                   |   |                              | 1,255  |   |   | 216 |   |
|                                                                              |   |                              | 35,316 |   |   | 69,816 |   |
| Less                current portion of accrued interest                           |   |                              | (1,255 | ) |   | -- |   |
| Total                long-term debt                                               |   | $                                 | 34,061 |   | $ | 69,816 |   |
|                                                                              |   |                              |   |   |   |   |   |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

| **4.** | **Hotel                Costs and Operating                Expenses** |
|--------|----------------------------------------------------------------------|

|                                     |   | (in                thousands)                                 |   |
|------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                     |   | Three                Months Ended September                30 |   | Nine                Months Ended September                30 |   |
|                                     |   | 2005                                                          |   | 2004 |   | 2005 |   | 2004 |   |
| Direct                departmental costs |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Rooms                                    |   | $                                                             | 3,334  |   | $ | 3,147 |   | $ | 10,384 |   | $ | 9,727 |   |
| Food                and beverage         |   |                                                          | 4,731  |   |   | 4,692 |   |   | 15,633 |   |   | 14,969 |   |
| Heat,                light and power     |   |                                                          | 900    |   |   | 907 |   |   | 2,605 |   |   | 2,544 |   |
| Other                                    |   |                                                          | 1,022  |   |   | 994 |   |   | 3,374 |   |   | 3,282 |   |
|                                     |   | $                                                             | 9,987  |   | $ | 9,740 |   | $ | 31,996 |   | $ | 30,522 |   |

| **5.** | **Federal,                Foreign and State Income                Tax** |
|--------|-------------------------------------------------------------------------|

|                                                |   | (in                thousands)                                |   |
|-----------------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                                |   | Nine                Months Ended September                30 |   |
|                                                |   | 2005                                                         |   | 2004 |   |
|                                                |   |                                                         |   |   |   |
| Current                federal income tax benefit   |   | $                                                            | (706   | ) | $ | -- |   |
| Current                foreign income tax provision |   |                                                         | 271    |   |   | 159 |   |
| Current                state income tax provision   |   |                                                         | 82     |   |   | 58 |   |
| Deferred                state income tax benefit    |   |                                                         | (296   | ) |   | -- |   |
| Deferred                federal income tax benefit  |   |                                                         | (4,223 | ) |   | -- |   |
|                                                |   | $                                                            | (4,872 | ) | $ | 217 |   |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

| **6.** | **Segment                Information** |
|--------|----------------------------------------|

|                                                                                |   | (in                thousands)                          |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                                                                |   | Owned                &Leased                Hotels |   | ManagementActivities |   |  Consolidated |   |
|                                                                                |   |                                                   |   |   |   |   |   |
| Revenues                                                                            |   | $                                                      | 16,059 |   | $ | 166 |   | $ | 16,225 |   |
| Operating                income (loss) before depreciation and amortization expense |   |                                                   | 543    |   |   | (1,765 | ) |   | (1,222 | ) |
| Depreciation                and amortization                                        |   |                                                   | (1,953 | ) |   | (145 | ) |   | (2,098 | ) |
| Interest                income (expense), net                                       |   |                                                   | (748   | ) |   | 331 |   |   | (417 | ) |
| Gain                on sales of assets                                              |   |                                                   | --     |   |   | 3,954 |   |   | 3,954 |   |
| Segment                pre-tax income (loss)                                        |   |                                                   | (2,158 | ) |   | 2,375 |   |   | 217 |   |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |
| Segment                assets                                                       |   |                                                   | 80,310 |   |   | 49,760 |   |   | 130,070 |   |
| Segment                capital additions                                            |   |                                                   | 741    |   |   | 35 |   |   | 776 |   |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |

|                                                                                |   | (in                thousands)                          |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                                                                |   | Owned                &Leased                Hotels |   | ManagementActivities |   |  Consolidated |   |
|                                                                                |   |                                                   |   |   |   |   |   |
| Revenues                                                                            |   | $                                                      | 63,846 |   | $ | 3,407 |   | $ | 67,253 |   |
| Operating                income (loss) before depreciation and amortization expense |   |                                                   | 8,097  |   |   | (2,020 | ) |   | 6,077 |   |
| Depreciation                and amortization                                        |   |                                                   | (5,546 | ) |   | (453 | ) |   | (5,999 | ) |
| Interest                income (expense), net                                       |   |                                                   | (3,171 | ) |   | 718 |   |   | (2,453 | ) |
| Other                deductions                                                     |   |                                                   | --     |   |   | (10 | ) |   | (10 | ) |
| Gain                on sales of assets                                              |   |                                                   | --     |   |   | 4,079 |   |   | 4,079 |   |
| Segment                pre-tax income (loss)                                        |   |                                                   | (620   | ) |   | 2,314 |   |   | 1,694 |   |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |
| Segment                assets                                                       |   |                                                   | 80,310 |   |   | 49,760 |   |   | 130,070 |   |
| Segment                capital additions                                            |   |                                                   | 2,691  |   |   | 197 |   |   | 2,888 |   |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

|                                                                                |   | (in                thousands)                          |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                                                                |   | Owned                &Leased                Hotels |   | ManagementActivities |   |  Consolidated |   |
|                                                                                |   |                                                   |   |   |   |   |   |
| Revenues                                                                            |   | $                                                      | 17,399 |   | $ | 839 |   | $ | 18,238 |   |
| Operating                income (loss) before depreciation and amortization expense |   |                                                   | 1,116  |   |   | (914 | ) |   | 202 |   |
| Depreciation                and amortization                                        |   |                                                   | (1,926 | ) |   | (165 | ) |   | (2,091 | ) |
| Interest                income (expense), net                                       |   |                                                   | (1,537 | ) |   | 90 |   |   | (1,447 | ) |
| Other                income                                                         |   |                                                   | --     |   |   | 3 |   |   | 3 |   |
| Segment                pre-tax loss                                                 |   |                                                   | (2,347 | ) |   | (986 | ) |   | (3,333 | ) |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |
| Segment                assets                                                       |   |                                                   | 84,460 |   |   | 23,263 |   |   | 107,723 |   |
| Segment                capital additions                                            |   |                                                   | 1,268  |   |   | 32 |   |   | 1,300 |   |

|                                                                                |   | (in                thousands)                          |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                                                                |   | Owned                &Leased                Hotels |   | ManagementActivities |   |  Consolidated |   |
|                                                                                |   |                                                   |   |   |   |   |   |
| Revenues                                                                            |   | $                                                      | 63,629 |   | $ | 3,062 |   | $ | 66,691 |   |
| Operating                income (loss) before depreciation and amortization expense |   |                                                   | 8,640  |   |   | (1,894 | ) |   | 6,746 |   |
| Depreciation                and amortization                                        |   |                                                   | (5,832 | ) |   | (495 | ) |   | (6,327 | ) |
| Interest                income (expense), net                                       |   |                                                   | (4,670 | ) |   | 235 |   |   | (4,435 | ) |
| Other                income                                                         |   |                                                   | 7      |   |   | 12 |   |   | 19 |   |
| Segment                pre-tax loss                                                 |   |                                                   | (1,855 | ) |   | (2,142 | ) |   | (3,997 | ) |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |
| Segment                assets                                                       |   |                                                   | 84,460 |   |   | 23,263 |   |   | 107,723 |   |
| Segment                capital additions                                            |   |                                                   | 2,960  |   |   | 239 |   |   | 3,199 |   |

| **7.** | **Earnings                per Share** |
|--------|---------------------------------------|

|                                                         |   | Three                months ended September                30 |   | Nine                months ended September                30 |   |
|--------------------------------------------------------------|--------|---------------------------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                                         |   | 2005                                                          |   | 2004                                                         |   | 2005 |   | 2004 |   |
| Numerator:                                                   |   |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |
| Income                (loss) from operations                 |   | $                                                             | 1,570  |                                                         | $      | (3,371 | ) | $ | 6,566 |   | $ | (4,214 | ) |
|                                                         |   |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |
| Denominator:                                                 |   |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |
| Weighted                average number of shares outstanding |   |                                                          | 3,698  |                                                         |   | 3,698 |   |   | 3,698 |   |   | 3,698 |   |
|                                                         |   |                                                          |   |                                                         |   |   |   |   |   |   |   |   |   |
| Net                income (loss) per share of common stock   |   | $                                                             | 0.42   |                                                         | $      | (0.91 | ) | $ | 1.77 |   | $ | (1.14 | ) |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

| **8.** | **Pension                Plan** |
|--------|---------------------------------|

|                                                                                                         |   | (in                thousands)                                |   |
|--------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                                                                                         |   | Nine                Months ended September                30 |   |
|                                                                                                         |   | 2005                                                         |   | 2004 |   |
|                                                                                                         |   |                                                         |   |   |   |
| Service                cost                                                                                  |   | $                                                            | 1,399  |   | $ | 1,214 |   |
| Interest                cost                                                                                 |   |                                                         | 1,508  |   |   | 1,399 |   |
| Expected                return on assets                                                                     |   |                                                         | (1,304 | ) |   | (1,194 | ) |
| Amortization                of prior service cost                                                            |   |                                                         | 67     |   |   | 67 |   |
| Amortization                of transition asset                                                              |   |                                                         | (66    | ) |   | (66 | ) |
| Recognized                actuarial loss                                                                     |   |                                                         | 506    |   |   | 361 |   |
| Total                plan benefit cost                                                                       |   |                                                         | 2,110  |   |   | 1,781 |   |
| Less:                amounts charged to hotels operated under management                agreements           |   |                                                         | (270   | ) |   | (99 | ) |
| Net                periodic benefit cost included in the consolidatedstatements                of operations |   | $                                                            | 1,840  |   | $ | 1,682 |   |

| **9.** | **Legal                Proceedings** |
|--------|--------------------------------------|

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

| **10.** | **Sale                and Transfer of Assets** |
|---------|------------------------------------------------|

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

| 1. | In                accordance with Statement of Financial Accounting Standards (SFAS)                No. 66                “Accounting for Sales of Real Estate”, the Company has deferred gain                recognition on the property transfer due to its continuing involvement,                and has recognized the cash received and the debt which was repaid                as a                financing obligation. The timing of the future gain recognition on                this                transaction is currently uncertain, and dependent on the exact nature                of                the Company’s continuing involvement in the operations of the new                resort. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | Since                the Company continues to operate the existing Hotel, all the Hotel’s                assets remain included in fixed assets (with a net book value at                September                30, 2005 of $37,227,000) and continue to be depreciated. All revenues                and                continuing expenses of the hotel operations are included in the statement                of operations. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3. | For                federal and state income tax purposes, the Company will report a                taxable                gain in 2005 of approximately $29.7 million on this transaction,                but will                have the benefit of loss carryforwards from 2003 and 2004 of approximately                $10.6 million. Federal and state taxes paid on the taxable gain are                recorded as deferred tax                assets. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Part      I - Item 2**

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

**OF      RESULTS OF OPERATIONS AND FINANCIAL CONDITION**

**FIRST      NINE MONTHS 2005 COMPARED TO 2004**

**REVENUES**

|                                                          |   | TOTAL                REVENUES(in                thousands) |   |
|---------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                                          |   | NO.                OFROOMS                                 |   |  2005 |   |  2004 |   |
| Sonesta                Beach Resort Key Biscayne              |   |                                                       | 300    |   | $ | 21,506 |   | $ | 21,380 |   |
| Royal                Sonesta Hotel Boston (Cambridge)         |   |                                                       | 400    |   |   | 17,532 |   |   | 17,269 |   |
| Royal                Sonesta Hotel New Orleans                |   |                                                       | 500    |   |   | 24,809 |   |   | 24,981 |   |
| Management                and service fees and other revenues |   |                                                       |   |   |   | 3,406 |   |   | 3,061 |   |
| Total                revenues                                 |   |                                                       |   |   | $ | 67,253 |   | $ | 66,691 |   |

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

**OF      RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)**

**OPERATING      INCOME**

|                                                                          |   | OPERATING                INCOME (LOSS)(in                thousands) |   |
|-------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|
|                                                                          |   | 2005                                                                |   | 2004 |   |
| Sonesta                Beach Resort Key Biscayne                              |   | $                                                                   | 1,194  |   | $ | 968 |   |
| Royal                Sonesta Hotel Boston (Cambridge)                         |   |                                                                | 637    |   |   | 974 |   |
| Royal                Sonesta Hotel New Orleans                                |   |                                                                | 720    |   |   | 866 |   |
| Operating                income from hotels after management and service fees |   |                                                                | 2,551  |   |   | 2,808 |   |
| Management                activities and other                                |   |                                                                | (2,473 | ) |   | (2,389 | ) |
| Operating                income                                               |   | $                                                                   | 78     |   | $ | 419 |   |

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

**OF      RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)**

**OTHER      INCOME (DEDUCTIONS)**

**THIRD      QUARTER 2005 COMPARED TO 2004**

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

**OF      RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)**

**REVENUES**

|                                                          |   | TOTAL                REVENUES(in                thousands) |   |
|---------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                                          |   | NO.                OFROOMS                                 |   |  2005 |   |  2004 |   |
| Sonesta                Beach Resort Key Biscayne              |   |                                                       | 300    |   | $ | 4,440 |   | $ | 4,569 |   |
| Royal                Sonesta Hotel Boston (Cambridge)         |   |                                                       | 400    |   |   | 6,536 |   |   | 7,050 |   |
| Royal                Sonesta Hotel New Orleans                |   |                                                       | 500    |   |   | 5,083 |   |   | 5,781 |   |
| Management                and service fees and other revenues |   |                                                       |   |   |   | 166 |   |   | 838 |   |
| Total                revenues                                 |   |                                                       |   |   | $ | 16,225 |   | $ | 18,238 |   |

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

**OF      RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)**

**OPERATING      INCOME**

|                                                                                      |   | OPERATING                INCOME (LOSS) (in                thousands) |   |
|-------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|
|                                                                                      |   | 2005                                                                      |   | 2004 |   |
| Sonesta                Beach Resort Key Biscayne                                          |   | $                                                                         | (1,533 | ) | $ | (1,791 | ) |
| Royal                Sonesta Hotel Boston (Cambridge)                                     |   |                                                                      | 649    |   |   | 1,210 |   |
| Royal                Sonesta Hotel New Orleans                                            |   |                                                                      | (525   | ) |   | (229 | ) |
| Operating                loss from hotels after managementand                service fees |   |                                                                      | (1,409 | ) |   | (810 | ) |
| Management                activities and other                                            |   |                                                                      | (1,911 | ) |   | (1,079 | ) |
| Operating                loss                                                             |   | $                                                                         | (3,320 | ) | $ | (1,889 | ) |

**OTHER      INCOME (DEDUCTIONS)**

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

**OF      RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)**

**FEDERAL,      FOREIGN AND STATE INCOME TAXES**

**LIQUIDITY      AND CAPITAL RESOURCES**

----

**PART      I - Item 3**

**QUANTITATIVE      AND QUALITATIVE DISCLOSURE OF MARKET RISK**

|                                 |   | YEAR   |   |   |   |   |   |   |   |
|--------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                 |   | 2005   |   | 2006   |   | 2007   |   | 2008   |   | 2009 |   | Thereafter |   | Total |   | Fair                Value |   |
| Fixed                rate            |   | $      | --     |   | $      | --     |   | $      | --     |   | $ | 602 |   | $ | 665 |   | $ | 32,794 |   | $ | 34,061 |   | $ | 35,976 |   |
| Average                interest rate |   |   | 8.6    | %      |   | 8.6    | %      |   | 8.6    | % |   | 8.6 | % |   | 8.6 | % |   | 8.6 | % |   |   |   |   |   |   |

----

**PART      I - Item 4**

**INTERNAL      CONTROLS AND PROCEDURES**

----

**PART      II - Other Information**

**Item      Numbers 1, 2, 3, 5 and 6 **

----

**SIGNATURE**

|   | **SONESTA                INTERNATIONAL HOTELS CORPORATION** |
|--------|-------------------------------------------------------------|
|   |                                                        |   |
|   |                                                        |   |
|   | By:                                                         | /S/                Boy                van Riel |
|   |                                                        | Boy                van Riel |
|   |                                                        | Vice                President and Treasurer |
|   |                                                        |   |
|   |                                                        | (Authorized                to sign on behalf of the Registrant as Principal Financial                Officer) |
|   |                                                        |   |
|   | Date:                November 14, 2005                      |

----