----

----

| S      | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE |   |
|--------|----------------------------------------------------------|--------|
|   | SECURITIES EXCHANGE ACT OF 1934                          |   |
|   | For the Quarterly period ended June 30, 2010             |   |
|   |                                                     |   |
|   | OR                                                       |   |

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

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

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

|  617-421-5400                                         |
|------------------------------------------------------------|
| (Registrant’s telephone number, including area code) |
|                                                       |
| (Former name, former address and former fiscal year,       |
| if changed since last report)                              |

| Yes S | No  |
|-------|-------------|

| Yes  | No S |
|--------------|------|

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Table of Contents

INDEX

| Part I.  Financial Information | Page                                                                                                                                                                                                               |
|------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                     |                                                                                                                                                                                                               |   |
| Item 1.                                  | Financial Statements (unaudited)                                                                                                                                                                                   |   |
|                                     |                                                                                                                                                                                                               |   |
|                                     | Condensed consolidated balance sheets — June 30, 2010 (unaudited) and December 31, 2009                                                                                                                      | 1 |
|                                     |                                                                                                                                                                                                               |   |
|                                     | Condensed consolidated statements of operations — Three and six-month periods ended June 30, 2010 and 2009 (unaudited)                                                                                       | 3 |
|                                     |                                                                                                                                                                                                               |   |
|                                     | Condensed consolidated statements of cash flows —Six-month periods ended June 30, 2010 and 2009 (unaudited)                                                                                                  | 4 |
|                                     |                                                                                                                                                                                                               |   |
|                                     | Notes to condensed consolidated financial statements — June 30, 2010 and 2009                                                                                                                                | 5 |
|                                     |                                                                                                                                                                                                               |   |
| Item 2.                                  | Management’s Discussion and Analysis of Results of Operations and Financial Condition — June 30, 2010                                                                                                  | 13 |
|                                     |                                                                                                                                                                                                               |   |
| Item  3.                       | Quantitative and Qualitative Disclosure of Market Risk                                                                                                                                                             | 19 |
|                                     |                                                                                                                                                                                                               |   |
| Item  4.                       | Internal Controls and Procedures                                                                                                                                                                                   | 20 |
|                                     |                                                                                                                                                                                                               |   |
| Part II.  Other Information    |                                                                                                                                                                                                               |
|                                     |                                                                                                                                                                                                               |   |
|                                     | Signature page                                                                                                                                                                                                     | 22 |
|                                     |                                                                                                                                                                                                               |   |
| Exhibit 10.36                            | Agreement of Purchase and Sale between Sonesta Coconut Grove, Inc., and Mutiny on the Park, Ltd., dated July 1, 2010.                                                                                              |   |
|                                     |                                                                                                                                                                                                               |   |
| Exhibit 10.37                            | Amended and restated promissory note from Sonesta Coconut Grove, Inc., in favor of Ocean Bank, dated July 1, 2010 in the amount of $6,500,000.                                                                     |   |
|                                     |                                                                                                                                                                                                               |   |
| Exhibit 10.38                            | Assignment and assumption agreement and modification of mortgage and other loan documents, dated July 1, 2010, by and between Ocean Bank, Sonesta Coconut Grove, Inc., Mutiny on the Park, Ltd. and Ricardo Dunin. |   |
|                                     |                                                                                                                                                                                                               |   |
| Exhibits 31.(a), 31.(b), 31.(c)          | Certifications by the Company’s Chief Executive Officers and Vice President and Treasurer, as required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.                       |   |
|                                     |                                                                                                                                                                                                               |   |
| Exhibit 32                               | Certification by Company Officers required by 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).                                                                                              |   |

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Table of Contents

Part I 

|                                                                         |   | (in thousands) |   |
|------------------------------------------------------------------------------|--------|----------------|--------|
|                                                                         |   | June 30, 2010  |   |   | December 31, 2009 |   |
|                                                                         |   |           |   |   |   |   |
| ASSETS                                                                       |   |           |   |   |   |   |
| Current assets:                                                              |   |           |   |   |   |   |
| Cash and cash equivalents                                                    |   | $              | 27,419 |   |   | $ | 35,557 |   |
| Restricted cash                                                              |   |           | 2,500  |   |   |   | -- |   |
| Accounts and notes receivable:                                               |   |           |   |   |   |   |   |   |
| Trade, less allowance of $78 ($70 at December 31, 2009) fordoubtful accounts |   |           | 5,689  |   |   |   | 5,092 |   |
| Other, including current portion of long-term receivables andadvances        |   |           | 1,735  |   |   |   | 1,242 |   |
| Total accounts and notes receivable                                          |   |           | 7,424  |   |   |   | 6,334 |   |
| Inventories                                                                  |   |           | 616    |   |   |   | 623 |   |
| Current deferred tax assets                                                  |   |           | 606    |   |   |   | 476 |   |
| Prepaid expenses and other current assets                                    |   |           | 1,264  |   |   |   | 1,242 |   |
| Total current assets                                                         |   |           | 39,829 |   |   |   | 44,232 |   |
|                                                                         |   |           |   |   |   |   |   |   |
| Restricted cash                                                              |   |           | 2,500  |   |   |   | -- |   |
|                                                                         |   |           |   |   |   |   |   |   |
| Long-term receivables and advances                                           |   |           | 1,724  |   |   |   | 1,354 |   |
|                                                                         |   |           |   |   |   |   |   |   |
| Property and equipment, at cost:                                             |   |           |   |   |   |   |   |   |
| Land and land improvements                                                   |   |           | 2,102  |   |   |   | 2,102 |   |
| Buildings                                                                    |   |           | 26,110 |   |   |   | 25,721 |   |
| Furniture and equipment                                                      |   |           | 30,816 |   |   |   | 30,859 |   |
| Leasehold improvements                                                       |   |           | 9,141  |   |   |   | 9,109 |   |
| Projects in progress                                                         |   |           | 13     |   |   |   | 64 |   |
|                                                                         |   |           | 68,182 |   |   |   | 67,855 |   |
| Less accumulated depreciation and amortization                               |   |           | 35,244 |   |   |   | 33,585 |   |
| Net property and equipment                                                   |   |           | 32,938 |   |   |   | 34,270 |   |
|                                                                         |   |           |   |   |   |   |   |   |
| Other long-term assets                                                       |   |           | 1,322  |   |   |   | 875 |   |
|                                                                         |   | $              | 78,313 |   |   | $ | 80,731 |   |

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Table of Contents

|                                        |   | (in thousands) |    |
|---------------------------------------------|--------|----------------|---------|
|                                        |   | June 30, 2010  |    |   | December 31, 2009 |   |
|                                        |   |           |    |   |   |   |
|                                        |   |           |    |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY  |   |           |    |   |   |   |
| Current liabilities:                        |   |           |    |   |   |   |
| Current portion of long-term debt           |   | $              | 545     |   |   | $ | 594 |   |
| Accounts payable                            |   |           | 3,049   |   |   |   | 2,887 |   |
| Advance deposits                            |   |           | 1,046   |   |   |   | 1,103 |   |
| Accrued income taxes                        |   |           | 349     |   |   |   | 327 |   |
| Accrued liabilities:                        |   |           |    |   |   |   |   |   |
| Salaries and wages                          |   |           | 1,727   |   |   |   | 1,278 |   |
| Rentals                                     |   |           | 2,680   |   |   |   | 3,741 |   |
| Interest                                    |   |           | 170     |   |   |   | 236 |   |
| Pension and other employee benefits         |   |           | 1,670   |   |   |   | 2,064 |   |
| Interest rate swap                          |   |           | 1,688   |   |   |   | -- |   |
| Other                                       |   |           | 1,162   |   |   |   | 1,028 |   |
|                                        |   |           | 9,097   |   |   |   | 8,347 |   |
| Total current liabilities                   |   |           | 14,086  |   |   |   | 13,258 |   |
|                                        |   |           |    |   |   |   |   |   |
| Long-term debt                              |   |           | 31,321  |   |   |   | 31,245 |   |
|                                        |   |           |    |   |   |   |   |   |
| Pension liability, non-current              |   |           | 6,018   |   |   |   | 6,554 |   |
|                                        |   |           |    |   |   |   |   |   |
|                                        |   |           |    |   |   |   |   |   |
| Other non-current liabilities               |   |           | 895     |   |   |   | 1,082 |   |
|                                        |   |           |    |   |   |   |   |   |
| Deferred tax liabilities                    |   |           | 942     |   |   |   | 1,939 |   |
|                                        |   |           |    |   |   |   |   |   |
| Commitments and contingencies               |   |           |    |   |   |   |   |   |
|                                        |   |           |    |   |   |   |   |   |
|                                        |   |           |    |   |   |   |   |   |
| Stockholders’ equity:                 |   |           |    |   |   |   |   |   |
| Common stock:                               |   |           |    |   |   |   |   |   |
| Class A,  $.80 par value          |   |           |    |   |   |   |   |   |
| Authorized--10,000 shares                   |   |           |    |   |   |   |   |   |
| Issued – 6,102 shares at stated value |   |           | 4,882   |   |   |   | 4,882 |   |
| Retained earnings                           |   |           | 35,199  |   |   |   | 35,734 |   |
| Treasury shares – 2,404, at cost      |   |           | (12,053 | ) |   |   | (12,053 | ) |
| Accumulated other comprehensive loss        |   |           | (2,977  | ) |   |   | (1,910 | ) |
| Total stockholders’ equity            |   |           | 25,051  |   |   |   | 26,653 |   |
|                                        |   | $              | 78,313  |   |   | $ | 80,731 |   |

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Table of Contents

SONESTA

|                                                  |   |                      |   |   |                    |   |
|-------------------------------------------------------|--------|---------------------------|--------|--------|-------------------------|--------|
|                                                  |   |                      |   |   |                    |   |
|                                                  |   | Three Months EndedJune 30 |   |   | Six Months EndedJune 30 |   |
|                                                  |   |                      |   |   |                    |   |   |   |   |   |   |   |
|                                                  |   | 2010                      |   |   | 2009                    |   |   | 2010 |   |   | 2009 |   |
| Revenues:                                             |   |                      |   |   |                    |   |   |   |   |   |   |   |
| Rooms                                                 |   | $                         | 11,545 |   |                    | $      | 9,718 |   |   | $ | 19,735 |   |   | $ | 17,137 |   |
| Food and beverage                                     |   |                      | 5,018  |   |                    |   | 4,455 |   |   |   | 9,132 |   |   |   | 7,932 |   |
| Management, license and service fees                  |   |                      | 1,413  |   |                    |   | 1,007 |   |   |   | 2,812 |   |   |   | 2,133 |   |
| Parking, telephone and other                          |   |                      | 1,163  |   |                    |   | 1,317 |   |   |   | 2,222 |   |   |   | 2,398 |   |
|                                                  |   |                      | 19,139 |   |                    |   | 16,497 |   |   |   | 33,901 |   |   |   | 29,600 |   |
| Other revenues from managed and affiliated properties |   |                      | 1,319  |   |                    |   | 1,082 |   |   |   | 2,689 |   |   |   | 2,303 |   |
| Total revenues                                        |   |                      | 20,458 |   |                    |   | 17,579 |   |   |   | 36,590 |   |   |   | 31,903 |   |
|                                                  |   |                      |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Costs and expenses:                                   |   |                      |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Costs and operating expenses                          |   |                      | 8,142  |   |                    |   | 7,119 |   |   |   | 15,455 |   |   |   | 13,704 |   |
| Advertising and promotion                             |   |                      | 1,717  |   |                    |   | 1,448 |   |   |   | 3,279 |   |   |   | 2,824 |   |
| Administrative and general                            |   |                      | 3,147  |   |                    |   | 3,368 |   |   |   | 6,222 |   |   |   | 6,579 |   |
| Human resources                                       |   |                      | 285    |   |                    |   | 209 |   |   |   | 565 |   |   |   | 460 |   |
| Maintenance                                           |   |                      | 867    |   |                    |   | 777 |   |   |   | 1,745 |   |   |   | 1,623 |   |
| Rentals                                               |   |                      | 1,831  |   |                    |   | 1,510 |   |   |   | 2,976 |   |   |   | 3,035 |   |
| Property taxes                                        |   |                      | 343    |   |                    |   | 349 |   |   |   | 623 |   |   |   | 703 |   |
| Depreciation and amortization                         |   |                      | 1,222  |   |                    |   | 1,354 |   |   |   | 2,602 |   |   |   | 2,709 |   |
|                                                  |   |                      | 17,554 |   |                    |   | 16,134 |   |   |   | 33,467 |   |   |   | 31,637 |   |
| Other expenses from managed and affiliated properties |   |                      | 1,319  |   |                    |   | 1,082 |   |   |   | 2,689 |   |   |   | 2,303 |   |
| Total costs and expenses                              |   |                      | 18,873 |   |                    |   | 17,216 |   |   |   | 36,156 |   |   |   | 33,940 |   |
|                                                  |   |                      |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Operating income (loss)                               |   |                      | 1,585  |   |                    |   | 363 |   |   |   | 434 |   |   |   | (2,037 | ) |
|                                                  |   |                      |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Other income (deductions):                            |   |                      |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                      |   |                      | (538   | )      |                    |   | (718 | ) |   |   | (1,105 | ) |   |   | (1,434 | ) |
| Interest income                                       |   |                      | 65     |   |                    |   | 85 |   |   |   | 125 |   |   |   | 208 |   |
| Foreign exchange loss                                 |   |                      | (7     | )      |                    |   | (7 | ) |   |   | (12 | ) |   |   | (18 | ) |
| Loss on sales of assets                               |   |                      | (56    | )      |                    |   | (4 | ) |   |   | (60 | ) |   |   | (2 | ) |
|                                                  |   |                      | (536   | )      |                    |   | (644 | ) |   |   | (1,052 | ) |   |   | (1,246 | ) |
|                                                  |   |                      |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income tax provision (benefit)   |   |                      | 1,049  |   |                    |   | (281 | ) |   |   | (618 | ) |   |   | (3,283 | ) |
| Income tax provision (benefit)                        |   |                      | 392    |   |                    |   | (172 | ) |   |   | (83 | ) |   |   | (962 | ) |
| Net income (loss)                                     |   |                      | 657    |   |                    |   | (109 | ) |   |   | (535 | ) |   |   | (2,321 | ) |
|                                                  |   |                      |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Retained earnings at beginning of period              |   |                      | 34,542 |   |                    |   | 11,943 |   |   |   | 35,734 |   |   |   | 14,155 |   |
| Retained earnings at end of period                    |   | $                         | 35,199 |   |                    | $      | 11,834 |   |   | $ | 35,199 |   |   | $ | 11,834 |   |
|                                                  |   |                      |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per share of common stock           |   | $                         | 0.18   |   |                    | $      | (0.03 | ) |   | $ | (0.14 | ) |   | $ | (0.63 | ) |
| Weighted average number of shares outstanding         |   |                      | 3,698  |   |                    |   | 3,698 |   |   |   | 3,698 |   |   |   | 3,698 |   |

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SONESTA 

|                                                    |   |  (in thousands)     |    |
|---------------------------------------------------------|--------|--------------------------|---------|
|                                                    |   | Six Months Ended June 30 |    |
|                                                    |   | 2010                     |    |   | 2009 |   |
| Cash used for operating activities                      |   |                     |    |   |   |   |
| Net loss                                                |   | $                        | (535    | ) |   | $ | (2,321 | ) |
| Adjustments to reconcile net loss to net cash used      |   |                     |    |   |   |   |   |   |
|     for operating activities        |   |                     |    |   |   |   |   |   |
| Depreciation and amortization of property and equipment |   |                     | 2,602   |   |   |   | 2,709 |   |
| Other amortization                                      |   |                     | 70      |   |   |   | 46 |   |
| Deferred federal and state income tax provision benefit |   |                     | (506    | ) |   |   | (1,137 | ) |
| Loss on sales of assets                                 |   |                     | 60      |   |   |   | 2 |   |
| Changes in assets and liabilities                       |   |                     |    |   |   |   |   |   |
| Restricted cash                                         |   |                     | --      |   |   |   | 51 |   |
| Accounts and notes receivable                           |   |                     | (672    | ) |   |   | 646 |   |
| Inventories                                             |   |                     | 7       |   |   |   | 41 |   |
| Prepaid expenses and other                              |   |                     | 43      |   |   |   | (211 | ) |
| Accounts payable                                        |   |                     | 162     |   |   |   | (307 | ) |
| Advance deposits                                        |   |                     | (57     | ) |   |   | -- |   |
| Accrued income taxes                                    |   |                     | (15     | ) |   |   | (285 | ) |
| Accrued liabilities                                     |   |                     | (1,661  | ) |   |   | (2,690 | ) |
| Cash used for operating activities                      |   |                     | (502    | ) |   |   | (3,456 | ) |
|                                                    |   |                     |    |   |   |   |   |   |
|                                                    |   |                     |    |   |   |   |   |   |
| Cash used for investing activities                      |   |                     |    |   |   |   |   |   |
| Proceeds from sales of assets, net                      |   |                     | 383     |   |   |   | 38 |   |
| Expenditures for property and equipment                 |   |                     | (1,688  | ) |   |   | (2,766 | ) |
| Payments received on long-term receivables and advances |   |                     | 620     |   |   |   | 140 |   |
| Investment in development partnership                   |   |                     | --      |   |   |   | (1,834 | ) |
| New loans and advances                                  |   |                     | (1,579  | ) |   |   | (60 | ) |
| Cash used for investing activities                      |   |                     | (2,264  | ) |   |   | (4,482 | ) |
|                                                    |   |                     |    |   |   |   |   |   |
| Cash used for financing activities                      |   |                     |    |   |   |   |   |   |
| Proceeds from issuance of long-term debt                |   |                     | 32,000  |   |   |   | -- |   |
| Cost of financing                                       |   |                     | (399    | ) |   |   | -- |   |
| Payments on refinancing of long-term debt               |   |                     | (31,644 | ) |   |   | -- |   |
| Restricted cash                                         |   |                     | (5,000  | ) |   |   | -- |   |
| Scheduled payments on long term debt                    |   |                     | (329    | ) |   |   | (573 | ) |
| Cash dividends paid                                     |   |                     | --      |   |   |   | (925 | ) |
| Cash used for financing activities                      |   |                     | (5,372  | ) |   |   | (1,498 | ) |
|                                                    |   |                     |    |   |   |   |   |   |
| Net decrease in cash                                    |   |                     | (8,138  | ) |   |   | (9,436 | ) |
| Cash and cash equivalents at beginning of period        |   |                     | 35,557  |   |   |   | 37,463 |   |
| Cash and cash equivalents at end of period              |   | $                        | 27,419  |   |   | $ | 28,027 |   |

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Table of Contents

SONESTA 

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

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

|                                     |   | (in thousands) |   |
|------------------------------------------|--------|----------------|--------|
|                                     |   | June 30,2010   |   |   | December 31,2009 |   |
| Sharm El Sheikh, Egypt (a)               |   | $              | 796    |   |   | $ | 940 |   |
| Sharm El Sheikh, Egypt (b)               |   |           | 436    |   |   |   | -- |   |
| Luxor, Egypt (c)                         |   |           | 990    |   |   |   | 1,311 |   |
| St. Maarten, Netherlands Antilles (d)    |   |           | 517    |   |   |   | -- |   |
| New Orleans, Louisiana (e)               |   |           | 388    |   |   |   | -- |   |
| Other                                    |   |           | 140    |   |   |   | 215 |   |
| Total long-term receivables and advances |   |           | 3,267  |   |   |   | 2,466 |   |
| Less:  current portion         |   |           | 1,543  |   |   |   | 1,112 |   |
| Net long-term receivables and advances   |   | $              | 1,724  |   |   | $ | 1,354 |   |

| (a) | This loan was made in January 2008 to the owners of Sonesta Beach Hotel Sharm El Sheikh and Sonesta Club Sharm El Sheikh by converting receivables for fees and expenses into a five-year loan, payable in monthly installments, starting in January 2008.  The Company is accounting for this loan using an effective interest rate of 6.5%.  Monthly payments of $28,820 on this loan are paid directly from the hotels and deducted from distributions of profits to the owner of these managed hotels. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | This loan, in the original amount of $500,000, was made in January 2010 to the owner of Sonesta Beach Resort Sharm El Sheikh.  The interest rate is 5.25%, and the loan has a three-year term.  Monthly payments of principal and interest of $15,075 commenced in February 2010. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

| (c) | These loans, in the original amount of $1,363,000, were made in August 2009 to the owner of Sonesta St. George Hotel Luxor and Sonesta St. George I Cruise Ship, which are both managed by the Company.  The loans consisted of cash advances of $500,000, and the conversion of receivables for fees and expenses due to the Company totaling $863,000.  The Company made these loans to assist the owner with the financing of improvements to the Sonesta St. George Hotel Luxor, which included additional guest rooms and meeting/function space.  The interest rate is 5.25%, and monthly payments of interest and principal commenced in November 2009.  The last payment is due October 2011. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | In February 2010, the Company agreed to loan up to $1,000,000 to the owners of two hotels in St. Maarten, to which the Company licenses the use of its name.  At the same time, the license agreements for these hotels were extended until December 2019, with a mutual cancellation option beginning in May 2015.  The proceeds will be used to fund improvements at both of the properties.  The Company expects to fund the entire loan amount in 2010.  The loans shall be repaid in 10 annual payments of $100,000, the first of which will be due on March 31, 2011.  Interest is due quarterly and will be based on LIBOR plus a surcharge based on increases in room revenues from year to year.  The maximum surcharge is 1.5% per annum.  The Company is accounting for this loan using an effective interest rate of 6% and has discounted the loan accordingly.  The discount has been recorded as an other long-term asset and is amortized over the remaining term of the license agreements. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e) | This loan, in the original amount of $394,000, was made in connection with the sale by the Company in May 2010 of a laundry facility in New Orleans, Louisiana.  This loan will be repaid in 60 monthly installments, together with interest at 5%.  Loan repayments commenced in June 2010. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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Table of Contents

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

|                      |   | (in thousands)                  |   |
|---------------------------|--------|---------------------------------|--------|
|                      |   | Three Months Ended June 30 |   |   | Six Months Ended June 30 |   |
|                      |   | 2010                            |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Direct departmental costs |   |                            |   |   |   |   |   |   |   |   |   |   |
| Rooms                     |   | $                               | 2,946  |   |   | $ | 2,548 |   |   | $ | 5,381 |   |   | $ | 4,704 |   |
| Food and beverage         |   |                            | 4,009  |   |   |   | 3,416 |   |   |   | 7,619 |   |   |   | 6,568 |   |
| Heat, light and power     |   |                            | 544    |   |   |   | 577 |   |   |   | 1,162 |   |   |   | 1,239 |   |
| Other                     |   |                            | 643    |   |   |   | 578 |   |   |   | 1,293 |   |   |   | 1,193 |   |
|                      |   | $                               | 8,142  |   |   | $ | 7,119 |   |   | $ | 15,455 |   |   | $ | 13,704 |   |

| 5. | Segment Information |
|----|---------------------|

|                                                                      |   | (in thousands)           |   |
|---------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                      |   | Owned &Leased Hotels |   |   | ManagementActivities |   |   | Consolidated |   |
|                                                                      |   |                     |   |   |   |   |   |   |   |
| Revenues                                                                  |   | $                        | 17,722 |   |   | $ | 1,417 |   |   | $ | 19,139 |   |
| Other revenues from managed and                                           |   |                     |   |   |   |   |   |   |   |   |   |   |
| affiliated properties                                                     |   |                     | --     |   |   |   | 1,319 |   |   |   | 1,319 |   |
| Total revenues                                                            |   |                     | 17,722 |   |   |   | 2,736 |   |   |   | 20,458 |   |
| Operating income (loss) before depreciation and amortization expense |   |                     | 3,434  |   |   |   | (627 | ) |   |   | 2,807 |   |
| Depreciation and amortization                                             |   |                     | (1,155 | ) |   |   | (67 | ) |   |   | (1,222 | ) |
| Interest income (expense), net                                            |   |                     | (534   | ) |   |   | 61 |   |   |   | (473 | ) |
| Other deductions                                                          |   |                     | (57    | ) |   |   | (6 | ) |   |   | (63 | ) |
| Segment pre-tax income (loss)                                             |   |                     | 1,688  |   |   |   | (639 | ) |   |   | 1,049 |   |
|                                                                      |   |                     |   |   |   |   |   |   |   |   |   |   |
| Segment assets                                                            |   |                     | 44,633 |   |   |   | 33,680 |   |   |   | 78,313 |   |
| Segment capital additions                                                 |   |                     | 1,053  |   |   |   | 50 |   |   |   | 1,103 |   |

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|                                                                 |   | (in thousands)           |   |
|----------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                 |   | Owned &Leased Hotels |   |   | ManagementActivities |   |   | Consolidated |   |
|                                                                 |   |                     |   |   |   |   |   |   |   |
| Revenues                                                             |   | $                        | 31,081 |   |   | $ | 2,820 |   |   | $ | 33,901 |   |
| Other revenues from managed and                                      |   |                     |   |   |   |   |   |   |   |   |   |   |
| affiliated properties                                                |   |                     | --     |   |   |   | 2,689 |   |   |   | 2,689 |   |
| Total revenues                                                       |   |                     | 31,081 |   |   |   | 5,509 |   |   |   | 36,590 |   |
| Operating income (loss) before depreciation and amortization expense |   |                     | 4,478  |   |   |   | (1,442 | ) |   |   | 3,036 |   |
| Depreciation and amortization                                        |   |                     | (2,468 | ) |   |   | (134 | ) |   |   | (2,602 | ) |
| Interest income (expense), net                                       |   |                     | (1,098 | ) |   |   | 118 |   |   |   | (980 | ) |
| Other deductions                                                     |   |                     | (57    | ) |   |   | (15 | ) |   |   | (72 | ) |
| Segment pre-tax income (loss)                                        |   |                     | 855    |   |   |   | (1,473 | ) |   |   | (618 | ) |
|                                                                 |   |                     |   |   |   |   |   |   |   |   |   |   |
| Segment assets                                                       |   |                     | 44,633 |   |   |   | 33,680 |   |   |   | 78,313 |   |
| Segment capital additions                                            |   |                     | 1,562  |   |   |   | 126 |   |   |   | 1,688 |   |

|                                                                      |   | (in thousands)           |   |
|---------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                      |   | Owned &Leased Hotels |   |   | ManagementActivities |   |   | Consolidated |   |
|                                                                      |   |                     |   |   |   |   |   |   |   |
| Revenues                                                                  |   | $                        | 15,486 |   |   | $ | 1,011 |   |   | $ | 16,497 |   |
| Other revenues from managed and                                           |   |                     |   |   |   |   |   |   |   |   |   |   |
| affiliated properties                                                     |   |                     | --     |   |   |   | 1,082 |   |   |   | 1,082 |   |
| Total revenues                                                            |   |                     | 15,486 |   |   |   | 2,093 |   |   |   | 17,579 |   |
| Operating income (loss) before depreciation and amortization expense |   |                     | 2,856  |   |   |   | (1,139 | ) |   |   | 1,717 |   |
| Depreciation and amortization                                             |   |                     | (1,290 | ) |   |   | (64 | ) |   |   | (1,354 | ) |
| Interest income (expense), net                                            |   |                     | (714   | ) |   |   | 81 |   |   |   | (633 | ) |
| Other deductions                                                          |   |                     | (4     | ) |   |   | (7 | ) |   |   | (11 | ) |
| Segment pre-tax income (loss)                                             |   |                     | 848    |   |   |   | (1,129 | ) |   |   | (281 | ) |
|                                                                      |   |                     |   |   |   |   |   |   |   |   |   |   |
| Segment assets                                                            |   |                     | 76,847 |   |   |   | 43,156 |   |   |   | 120,003 |   |
| Segment capital additions                                                 |   |                     | 911    |   |   |   | 8 |   |   |   | 919 |   |

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|                                                                 |   | (in thousands)           |   |
|----------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                 |   | Owned &Leased Hotels |   |   | ManagementActivities |   |   | Consolidated |   |
|                                                                 |   |                     |   |   |   |   |   |   |   |
| Revenues                                                             |   | $                        | 27,456 |   |   | $ | 2,144 |   |   | $ | 29,600 |   |
| Other revenues from managed and                                      |   |                     |   |   |   |   |   |   |   |   |   |   |
| affiliated properties                                                |   |                     | --     |   |   |   | 2,303 |   |   |   | 2,303 |   |
| Total revenues                                                       |   |                     | 27,456 |   |   |   | 4,447 |   |   |   | 31,903 |   |
| Operating income (loss) before depreciation and amortization expense |   |                     | 2,832  |   |   |   | (2,160 | ) |   |   | 672 |   |
| Depreciation and amortization                                        |   |                     | (2,580 | ) |   |   | (129 | ) |   |   | (2,709 | ) |
| Interest income (expense), net                                       |   |                     | (1,427 | ) |   |   | 201 |   |   |   | (1,226 | ) |
| Other deductions                                                     |   |                     | (4     | ) |   |   | (16 | ) |   |   | (20 | ) |
| Segment pre-tax loss                                                 |   |                     | (1,179 | ) |   |   | (2,104 | ) |   |   | (3,283 | ) |
|                                                                 |   |                     |   |   |   |   |   |   |   |   |   |   |
| Segment assets                                                       |   |                     | 76,847 |   |   |   | 43,156 |   |   |   | 120,003 |   |
| Segment capital additions                                            |   |                     | 2,710  |   |   |   | 56 |   |   |   | 2,766 |   |

| 6. | Comprehensive Income (Loss) |
|----|-----------------------------|

|                                              |   | (in thousands)             |   |   | (in thousands)           |   |
|---------------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                                              |   | Three months ended June 30 |   |   | Six months ended June 30 |   |
|                                              |   | 2010                       |   |   | 2009                     |   |   | 2010 |   |   | 2009 |   |
|                                              |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Net income (loss)                                 |   | $                          | 657    |   |                     | $      | (109 | ) |   | $ | (535 | ) |   | $ | (2,321 | ) |
|                                              |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized loss on interest rate swap, net of tax |   |                       | (597   | )      |                     |   | -- |   |   |   | (1,067 | ) |   |   | -- |   |
|                                              |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss)                       |   | $                          | 60     |   |                     | $      | (109 | ) |   | $ | (1,602 | ) |   | $ | (2,321 | ) |

| 7. | Earnings (Loss) per Share |
|----|---------------------------|

|                                             |   | Three months ended June 30 |   |   | Six months ended June 30 |   |
|--------------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                                             |   | 2010                       |   |   | 2009                     |   |   | 2010 |   |   | 2009 |   |
| Numerator:                                       |   |                       |   |   |                     |   |   |   |   |   |   |   |
|   Income (loss) from operations        |   | $                          | 657    |   |                     | $      | (109 | ) |   | $ | (535 | ) |   | $ | (2,321 | ) |
|                                             |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                     |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|   Weighted average number of           |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|      shares outstanding |   |                       | 3,698  |   |                     |   | 3,698 |   |   |   | 3,698 |   |   |   | 3,698 |   |
|                                             |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per share of common stock      |   | $                          | 0.18   |   |                     | $      | (0.03 | ) |   | $ | (0.14 | ) |   | $ | (0.63 | ) |

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

|                                                              |   | (in thousands)           |   |
|-------------------------------------------------------------------|--------|--------------------------|--------|
|                                                              |   | Six Months ended June 30 |   |
|                                                              |   | 2010                     |   |   | 2009 |   |
|                                                              |   |                     |   |   |   |   |
| Service cost                                                      |   | $                        | --     |   |   | $ | 41 |   |
| Interest cost                                                     |   |                     | 995    |   |   |   | 798 |   |
| Expected return on assets                                         |   |                     | (1,045 | ) |   |   | (858 | ) |
| Recognized actuarial loss                                         |   |                     | 99     |   |   |   | 101 |   |
| Net expense included in the consolidated statements of operations |   | $                        | 49     |   |   | $ | 82 |   |

| 9. | Derivative Financial Instruments |
|----|----------------------------------|

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|                                                |   | (in thousands)        |   |
|-----------------------------------------------------|--------|-----------------------|--------|
|                                                |   | Liability Derivatives |   |
|                                                |   | 2010                  |   |
| Derivatives designated as hedging instruments:      |   |                  |   |
| Interest rate swap – cash flow hedge          |   | $                     | 1,688  |   |
| Total derivatives designated as hedging instruments |   | $                     | 1,688  |   |
|                                                |   |                  |   |   |
| Derivatives not designated as hedging instruments:  |   | $                     | --     |   |
|                                                |   |                  |   |   |
| Total derivatives                                   |   | $                     | 1,688  |   |

|                                           |   |                                                                       |   |                                                             |             |                                                     |   |
|------------------------------------------------|--------|-----------------------------------------------------------------------|--------|------------------------------------------------------------------|------------------|----------------------------------------------------------|--------|
| Derivatives in Cash Flow Hedging Relationships |   | Pre-tax Loss Recognized in OCI on Derivative (Effective Portion) 2010 |   | Location of Amount Reclassified from Accumulated OCI into Income |             | Amount Reclassified from Accumulated OCI into Income2010 |   |
|                                           |   |                                                                  |   |                                                             |             |                                                     |   |
| Interest rate swap                             |   | $                                                                     | (1,688 | )                                                                | Interest expense |                                                     | $      | -- |   |
|                                           |   |                                                                  |   |                                                             |             |                                                     |   |   |   |
| Total                                          |   | $                                                                     | (1,688 | )                                                                | Total            |                                                     | $      | -- |   |

| 10. | Fair Value Measurements |
|-----|-------------------------|

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|               |   | (in thousands)                                       |   |
|--------------------|--------|------------------------------------------------------|--------|
|               |   | Quoted Prices in Active Markets for Identical Assets |   |   | Significant Observable Inputs |   |   | Significant Unobservable Inputs |   |   |   |   |
|               |   | (Level 1)                                            |   |   | (Level 2) |   |   | (Level 3) |   |   | Total |   |
|               |   |                                                 |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap |   | $                                                    | --     |   |   | $ | (1,688 | ) |   | $ |   -- |   |   | $ | (1,688 | ) |

| 11. | Subsequent Events |
|-----|-------------------|

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Part I 

|                                                                     |   | TOTAL REVENUES(in thousands) |   |
|--------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                     |   | NO. OFROOMS                  |   |   | 2010 |   |   | 2009 |   |
| Royal Sonesta Hotel Boston                                               |   |                         | 400    |   |   | $ | 11,885 |   |   | $ | 10,501 |   |
| Royal Sonesta Hotel New Orleans                                          |   |                         | 500    |   |   |   | 19,196 |   |   |   | 16,955 |   |
| Management and service fees and other revenues                           |   |                         |   |   |   |   | 2,820 |   |   |   | 2,144 |   |
| Total revenues, excluding revenues frommanaged and affiliated properties |   |                         |   |   |   | $ | 33,901 |   |   | $ | 29,600 |   |

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|                                                           |   | OPERATING INCOME (LOSS)(in thousands) |   |
|----------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                           |   | 2010                                  |   |   | 2009 |   |
| Royal Sonesta Hotel Boston                                     |   | $                                     | 373    |   |   | $ | (258 | ) |
| Royal Sonesta Hotel New Orleans                                |   |                                  | 1,640  |   |   |   | 510 |   |
| Operating income from hotels after management and service fees |   |                                  | 2,013  |   |   |   | 252 |   |
| Management activities and other                                |   |                                  | (1,579 | ) |   |   | (2,289 | ) |
| Operating income (loss)                                        |   | $                                     | 434    |   |   | $ | (2,037 | ) |

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|                                           |   | TOTAL REVENUES(in thousands) |   |
|------------------------------------------------|--------|------------------------------|--------|
|                                           |   | NO. OFROOMS                  |   |   | 2010 |   |   | 2009 |   |
| Royal Sonesta Hotel Boston                     |   |                         | 400    |   |   | $ | 8,157 |   |   | $ | 7,151 |   |
| Royal Sonesta Hotel New Orleans                |   |                         | 500    |   |   |   | 9,565 |   |   |   | 8,335 |   |
| Management and service fees and other revenues |   |                         |   |   |   |   | 1,417 |   |   |   | 1,011 |   |
| Total revenues, excluding revenues from        |   |                         |   |   |   |   |   |   |   |   |   |   |
| managed and affiliated properties              |   |                         |   |   |   | $ | 19,139 |   |   | $ | 16,497 |   |

|                                                           |   | OPERATING INCOME (LOSS) (in thousands) |   |
|----------------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                           |   | 2010                                        |   |   | 2009 |   |
| Royal Sonesta Hotel Boston                                     |   | $                                           | 1,778  |   |   | $ | 1,255 |   |
| Royal Sonesta Hotel New Orleans                                |   |                                        | 503    |   |   |   | 311 |   |
| Operating income from hotels after management and service fees |   |                                        | 2,281  |   |   |   | 1,566 |   |
| Management activities and other                                |   |                                        | (696   | ) |   |   | (1,203 | ) |
| Operating income                                               |   | $                                           | 1,585  |   |   | $ | 363 |   |

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PART I

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PART I 

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PART II 

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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: August 13, 2010                    |

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