----

----

| x      | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE |   |
|--------|---------------------------------------------------------------|--------|
|   | SECURITIES      EXCHANGE ACT OF 1934                          |   |
|   | For      the Quarterly period ended September 30, 2008        |   |
|   |                                                          |   |
|   | OR                                                            |   |

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

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

----

INDEX

| Part      I.  Financial Information | Page                                                                                                                                                                                                       |
|-----------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                          |                                                                                                                                                                                                       |   |
| Item 1.                                       | Financial Statements (unaudited)                                                                                                                                                                           |   |
|                                          |                                                                                                                                                                                                       |   |
|                                          | Condensed consolidated balance sheets — September 30,      2008 (unaudited) and December 31, 2007                                                                                                    | 1 |
|                                          |                                                                                                                                                                                                       |   |
|                                          | Condensed consolidated statements of operations — Three      and nine-month periods ended September 30, 2008 and 2007      (unaudited)                                                               | 3 |
|                                          |                                                                                                                                                                                                       |   |
|                                          | Condensed consolidated statements of cash flows —      nine-month periods ended September 30, 2008 and 2007      (unaudited)                                                                         | 4 |
|                                          |                                                                                                                                                                                                       |   |
|                                          | Notes to condensed consolidated financial statements —      September 30, 2008 and 2007                                                                                                              | 5 |
|                                          |                                                                                                                                                                                                       |   |
| Item 2.                                       | Management’s Discussion and Analysis of Results of      Operations and Financial Condition — September 30,2008                                                                                 | 13 |
|                                          |                                                                                                                                                                                                       |   |
| Item 3.                                       | Quantitative and Qualitative Disclosure of Market      Risk                                                                                                                                                | 19 |
|                                          |                                                                                                                                                                                                       |   |
| Part      II.  Other Information    |                                                                                                                                                                                                       |
|                                          |                                                                                                                                                                                                       |   |
|                                          | Signature page                                                                                                                                                                                             | 22 |
|                                          |                                                                                                                                                                                                       |   |
| 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)                                                                              |   |

----

Tableof Contents

BALANCE SHEETS

|                                                                               |   | (in thousands)     |    |
|------------------------------------------------------------------------------------|--------|--------------------|---------|
|                                                                               |   | September 30, 2008 |    |   | December 31, 2007 |   |
|                                                                               |   |               |    |   |   |   |
| ASSETS                                                                             |   |               |    |   |   |   |
| Current      assets:                                                               |   |               |    |   |   |   |
| Cash and cash      equivalents                                                     |   | $                  | 29,603  |   |   | $ | 32,620 |   |
| Restricted cash                                                                    |   |               | 167     |   |   |   | 1,700 |   |
| Accounts and notes      receivable:                                                |   |               |    |   |   |   |   |   |
| Trade, less allowance of $51 ($66      at December 31, 2007) for doubtful accounts |   |               | 9,337   |   |   |   | 7,676 |   |
| Other, including current      portion of long-term receivables and advances        |   |               | 4,212   |   |   |   | 1,151 |   |
| Total accounts and notes      receivable                                           |   |               | 13,549  |   |   |   | 8,827 |   |
| Inventories                                                                        |   |               | 563     |   |   |   | 607 |   |
| Current deferred tax      assets                                                   |   |               | 365     |   |   |   | 578 |   |
| Prepaid expenses and other      current assets                                     |   |               | 1,764   |   |   |   | 1,915 |   |
| Total current      assets                                                          |   |               | 46,011  |   |   |   | 46,247 |   |
|                                                                               |   |               |    |   |   |   |   |   |
| Long-term      receivables and advances                                            |   |               | 1,123   |   |   |   | 3,776 |   |
|                                                                               |   |               |    |   |   |   |   |   |
| Deferred      tax assets                                                           |   |               | 6,912   |   |   |   | 7,242 |   |
|                                                                               |   |               |    |   |   |   |   |   |
| Investment      in development partnership                                         |   |               | 33,666  |   |   |   | 33,791 |   |
|                                                                               |   |               |    |   |   |   |   |   |
| Property      and equipment, at cost:                                              |   |               |    |   |   |   |   |   |
| Land and land      improvements                                                    |   |               | 2,102   |   |   |   | 2,102 |   |
| Buildings                                                                          |   |               | 25,850  |   |   |   | 26,190 |   |
| Furniture and      equipment                                                       |   |               | 33,211  |   |   |   | 31,413 |   |
| Leasehold      improvements                                                        |   |               | 8,669   |   |   |   | 8,450 |   |
| Projects in    progress                                                            |   |               | 339     |   |   |   | 246 |   |
|                                                                               |   |               | 70,171  |   |   |   | 68,401 |   |
| Less accumulated depreciation and      amortization                                |   |               | 34,715  |   |   |   | 31,098 |   |
| Net property and      equipment                                                    |   |               | 35,456  |   |   |   | 37,303 |   |
|                                                                               |   |               |    |   |   |   |   |   |
| Other      long-term assets                                                        |   |               | 1,008   |   |   |   | 1,232 |   |
|                                                                               |   | $                  | 124,176 |   |   | $ | 129,591 |   |

----

Tableof Contents

|                                             |   | (in thousands)     |    |
|--------------------------------------------------|--------|--------------------|---------|
|                                             |   | September 30, 2008 |    |   | December 31, 2007 |   |
|                                             |   |               |    |   |   |   |
|                                             |   |               |    |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY  |   |               |    |   |   |   |
| Current      liabilities:                        |   |               |    |   |   |   |
| Current portion of long-term      debt           |   | $                  | 1,138   |   |   | $ | 1,059 |   |
| Accounts payable                                 |   |               | 2,737   |   |   |   | 4,494 |   |
| Advance deposits                                 |   |               | 1,537   |   |   |   | 2,936 |   |
| Accrued income    taxes                          |   |               | 378     |   |   |   | 306 |   |
| Accrued    liabilities:                          |   |               |    |   |   |   |   |   |
| Salaries and    wages                            |   |               | 1,488   |   |   |   | 2,000 |   |
| Rentals                                          |   |               | 3,724   |   |   |   | 3,575 |   |
| Interest                                         |   |               | 239     |   |   |   | 252 |   |
| Pension and other employee      benefits         |   |               | 589     |   |   |   | 2,341 |   |
| Other                                            |   |               | 1,215   |   |   |   | 839 |   |
|                                             |   |               | 7,255   |   |   |   | 9,007 |   |
| Total current      liabilities                   |   |               | 13,045  |   |   |   | 17,802 |   |
|                                             |   |               |    |   |   |   |   |   |
| Long-term      debt                              |   |               | 32,142  |   |   |   | 33,002 |   |
|                                             |   |               |    |   |   |   |   |   |
| Deferred      gain                               |   |               | 64,481  |   |   |   | 64,481 |   |
|                                             |   |               |    |   |   |   |   |   |
| Pension      liability, non-current              |   |               | 4,558   |   |   |   | 4,553 |   |
|                                             |   |               |    |   |   |   |   |   |
| Other      non-current liabilities               |   |               | 1,083   |   |   |   | 1,206 |   |
|                                             |   |               |    |   |   |   |   |   |
| 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 |   |
| Retainedearnings                                 |   |               | 15,388  |   |   |   | 15,068 |   |
| Treasury shares – 2,404, at      cost      |   |               | (12,053 | ) |   |   | (12,053 | ) |
| Accumulated other comprehensive      income      |   |               | 650     |   |   |   | 650 |   |
| Total      stockholders’ equity            |   |               | 8,867   |   |   |   | 8,547 |   |
|                                             |   | $                  | 124,176 |   |   | $ | 129,591 |   |

----

Tableof Contents

CONDENSED

|                                                                                     |   | Three      Months EndedSeptember 30 |        |   | Nine      Months Ended September 30 |   |
|------------------------------------------------------------------------------------------|--------|-------------------------------------|-------------|--------|------------------------------------------|--------|
|                                                                                     |   | 2008                                |        |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
| Revenues:                                                                                |   |                                |        |   |                                     |   |   |   |   |   |   |   |
| Rooms                                                                                    |   | $                                   | 9,893       |   |                                     | $      | 9,400 |   |   | $ | 31,400 |   |   | $ | 28,548 |   |
| Food      and beverage                                                                   |   |                                | 3,749       |   |                                     |   | 3,620 |   |   |   | 13,176 |   |   |   | 12,229 |   |
| Management,      license and service fees                                                |   |                                | 1,484       |   |                                     |   | 1,272 |   |   |   | 6,252 |   |   |   | 4,425 |   |
| Parking,      telephone and other                                                        |   |                                | 1,272       |   |                                     |   | 1,307 |   |   |   | 3,790 |   |   |   | 3,898 |   |
|                                                                                     |   |                                | 16,398      |   |                                     |   | 15,599 |   |   |   | 54,618 |   |   |   | 49,100 |   |
|      Other      revenues from managed and                       |   |                                |        |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
|       affiliated      properties                           |   |                                | 1,286       |   |                                     |   | 4,537 |   |   |   | 7,749 |   |   |   | 14,115 |   |
| Total      revenues                                                                      |   |                                | 17,684      |   |                                     |   | 20,136 |   |   |   | 62,367 |   |   |   | 63,215 |   |
|                                                                                     |   |                                |        |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Costs      and expenses:                                                                 |   |                                |        |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Costs      and operating expenses                                                        |   |                                | 7,518       |   |                                     |   | 7,322 |   |   |   | 23,325 |   |   |   | 22,004 |   |
| Advertising      and promotion                                                           |   |                                | 1,427       |   |                                     |   | 1,377 |   |   |   | 4,227 |   |   |   | 4,059 |   |
| Administrative      and general                                                          |   |                                | 3,123       |   |                                     |   | 3,179 |   |   |   | 9,713 |   |   |   | 9,669 |   |
| Human      resources                                                                     |   |                                | 320         |   |                                     |   | 286 |   |   |   | 929 |   |   |   | 846 |   |
| Maintenance                                                                              |   |                                | 890         |   |                                     |   | 843 |   |   |   | 2,724 |   |   |   | 2,626 |   |
| Rentals                                                                                  |   |                                | 386         |   |                                     |   | (13 | ) |   |   | 4,161 |   |   |   | 2,827 |   |
| Property      taxes                                                                      |   |                                | 281         |   |                                     |   | 418 |   |   |   | 1,026 |   |   |   | 1,238 |   |
| Depreciation      and amortization                                                       |   |                                | 1,321       |   |                                     |   | 1,378 |   |   |   | 4,571 |   |   |   | 4,123 |   |
|                                                                                     |   |                                | 15,266      |   |                                     |   | 14,790 |   |   |   | 50,676 |   |   |   | 47,392 |   |
|      Other      expenses from managed and affiliated properties |   |                                | 1,286  |   |                                     |   | 4,537  |   |   |   | 7,749  |   |   |   | 14,115  |   |
| Total      costs and expenses                                                            |   |                                | 16,552      |   |                                     |   | 19,327 |   |   |   | 58,425 |   |   |   | 61,507 |   |
|                                                                                     |   |                                |        |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Income      from Management Agreement settlement, net (see Note 9)                       |   |                                | 3,279  |   |                                     |   | --  |   |   |   | 3,279  |   |   |   | --  |   |
|                                                                                     |   |                                |        |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income                                                                    |   |                                | 4,411       |   |                                     |   | 809 |   |   |   | 7,221 |   |   |   | 1,708 |   |
|                                                                                     |   |                                |        |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Other      income (deductions):                                                          |   |                                |        |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                                                                    |   |                                | (744        | )      |                                     |   | (759 | ) |   |   | (2,233 | ) |   |   | (2,253 | ) |
| Interest      income                                                                     |   |                                | 312         |   |                                     |   | 486 |   |   |   | 925 |   |   |   | 1,270 |   |
| Foreign      exchange gain (loss)                                                        |   |                                | (9          | )      |                                     |   | 14 |   |   |   | 2 |   |   |   | 17 |   |
| Gain      on sales of assets                                                             |   |                                | 138         |   |                                     |   | 198 |   |   |   | 581 |   |   |   | 214 |   |
|                                                                                     |   |                                | (303        | )      |                                     |   | (61 | ) |   |   | (725 | ) |   |   | (752 | ) |
|                                                                                     |   |                                |        |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Income      before income taxes                                                          |   |                                | 4,108       |   |                                     |   | 748 |   |   |   | 6,496 |   |   |   | 956 |   |
| Income      tax provision                                                                |   |                                | 1,316       |   |                                     |   | 306 |   |   |   | 2,108 |   |   |   | 573 |   |
| Net      income                                                                          |   |                                | 2,792       |   |                                     |   | 442 |   |   |   | 4,388 |   |   |   | 383 |   |
|                                                                                     |   |                                |        |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Retained      earnings at beginning of period                                            |   |                                | 12,596      |   |                                     |   | 14,042 |   |   |   | 15,068 |   |   |   | 14,773 |   |
| Cumulative      effect of change in an accounting principle                              |   |                                | --          |   |                                     |   | -- |   |   |   | -- |   |   |   | (302 | ) |
| Cash      dividends                                                                      |   |                                | --          |   |                                     |   | -- |   |   |   | (4,068 | ) |   |   | (370 | ) |
| Retained      earnings at end of period                                                  |   | $                                   | 15,388      |   |                                     | $      | 14,484 |   |   | $ | 15,388 |   |   | $ | 14,484 |   |
|                                                                                     |   |                                |        |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Net      income per share                                                                |   | $                                   | 0.76        |   |                                     | $      | 0.12 |   |   | $ | 1.19 |   |   | $ | 0.10 |   |
| Weighted      average number of shares outstanding                                       |   |                                | 3,698       |   |                                     |   | 3,698 |   |   |   | 3,698 |   |   |   | 3,698 |   |

----

Tableof Contents

CASH FLOWS

|                                                                                   |   | (in thousands)                      |   |
|----------------------------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                                   |   | Nine      Months Ended September 30 |   |
|                                                                                   |   | 2008                                |   |   | 2007 |   |
| Cash      provided by operating activities                                             |   |                                |   |   |   |   |
| Net      income                                                                        |   | $                                   | 4,388  |   |   | $ | 383 |   |
| Adjustments      to reconcile net income to cash provided by operating      activities |   |                                |   |   |   |   |   |   |
| Depreciation      and amortization of property and equipment                           |   |                                | 4,571  |   |   |   | 4,123 |   |
| Other      amortization                                                                |   |                                | 31     |   |   |   | 31 |   |
| Prepaid      and deferred federal and state income tax provision                       |   |                                | 543    |   |   |   | 349 |   |
| Gain      on sales of assets                                                           |   |                                | (581   | ) |   |   | (214 | ) |
|   Changes      in assets and liabilities                                     |   |                                |   |   |   |   |   |   |
| Restricted      cash                                                                   |   |                                | 1,533  |   |   |   | -- |   |
| Accounts      and notes receivable                                                     |   |                                | (3,436 | ) |   |   | (756 | ) |
| Inventories                                                                            |   |                                | 44     |   |   |   | (37 | ) |
| Prepaid      expenses and other                                                        |   |                                | (6     | ) |   |   | 61 |   |
| Accounts      payable                                                                  |   |                                | (1,387 | ) |   |   | (653 | ) |
| Advance      deposits                                                                  |   |                                | (1,399 | ) |   |   | (4 | ) |
| Accrued      income taxes                                                              |   |                                | 230    |   |   |   | 22 |   |
| Accrued      liabilities                                                               |   |                                | (1,870 | ) |   |   | (2,198 | ) |
| Cash      provided  by operating activities                                  |   |                                | 2,661  |   |   |   | 1,107 |   |
|                                                                                   |   |                                |   |   |   |   |   |   |
|                                                                                   |   |                                |   |   |   |   |   |   |
| Cash      provided (used) by investing activities                                      |   |                                |   |   |   |   |   |   |
| Proceeds      from sales of assets                                                     |   |                                | 938    |   |   |   | 324 |   |
| Payments      received from development partnership                                    |   |                                | 125    |   |   |   | 1,000 |   |
| Expenditures      for property and equipment                                           |   |                                | (2,434 | ) |   |   | (2,809 | ) |
| Payments      received on long-term receivables and advances                           |   |                                | 974    |   |   |   | 1,766 |   |
| New      loans and advances                                                            |   |                                | (62    | ) |   |   | -- |   |
| Cash      provided (used) by investing activities                                      |   |                                | (459   | ) |   |   | 281 |   |
|                                                                                   |   |                                |   |   |   |   |   |   |
| Cash      used by financing activities                                                 |   |                                |   |   |   |   |   |   |
| Repayments      of long-term debt                                                      |   |                                | (781   | ) |   |   | -- |   |
| Cash      dividends paid                                                               |   |                                | (4,438 | ) |   |   | (740 | ) |
| Cash      used by financing activities                                                 |   |                                | (5,219 | ) |   |   | (740 | ) |
|                                                                                   |   |                                |   |   |   |   |   |   |
| Net      increase (decrease) in cash                                                   |   |                                | (3,017 | ) |   |   | 648 |   |
| Cash      and cash equivalents at beginning of period                                  |   |                                | 32,620 |   |   |   | 24,888 |   |
| Cash      and cash equivalents at end of period                                        |   | $                                   | 29,603 |   |   | $ | 25,536 |   |

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Tableof Contents

NOTES

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

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

|                                                             |   | (in      thousands) |   |
|------------------------------------------------------------------|--------|---------------------|--------|
|                                                             |   | September 30,2008   |   |   | December 31,2007 |   |
| Sharm      El Sheikh, Egypt (a)                                  |   | $                   | 1,343  |   |   | $ | -- |   |
| Sonesta      Bayfront Hotel Coconut Grove (b)                    |   |                | 2,615  |   |   |   | 3,397 |   |
| Trump International Sonesta Beach      Resort (c) |   |                | 1,135  |   |   |   | 1,135 |   |
| Other                                                            |   |                | 50     |   |   |   | 37 |   |
| Total long-term      receivables                                 |   |                | 5,143  |   |   |   | 4,569 |   |
| Less:  current      portion                            |   |                | 4,020  |   |   |   | 793 |   |
| Net long-term receivables and      advances                      |   | $                   | 1,123  |   |   | $ | 3,776 |   |

| (a) | This      loan was made in January 2008 to the owner 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.  See also Note10. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | This      loan was made to the owner of the Sonesta Bayfront Hotel Coconut Grove,      Miami, which opened in April 2002, to fund construction and furniture,      fixtures and equipment costs.  The interest rate is equal to the      prime rate (5% at September 30, 2008), plus 0.75%.  Following a      refinancing, this loan was repaid in full in October  2008. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | This      amount represents cash advances made to the owner of Trump International      Sonesta Beach Resort Sunny Isles for the Company’s share of losses of the      resort, which opened on April 1, 2003.  This amount was advanced      pursuant to the terms of the management agreement under which the Company      operated the hotel. This advance, on which no interest was charged, was      repaid in October 2008 (see Note9). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Tableof Contents

| 3. | Investment in      Development Partnership |
|----|--------------------------------------------|

|                                 |   |                                    |    |
|--------------------------------------|--------|-----------------------------------------|---------|
|                                 |   |         at September 30, 2008 |    |
|                                 |   |                                    |    |
| Total      assets, primarily land    |   | $                                       | 153,168 |   |
| Less      debt and other liabilities |   |                                    | (57,238 | ) |
| Partnership      equity              |   | $                                       | 95,930  |   |

|   | The      development partnership has not commenced  operations. |
|--------|-----------------------------------------------------------------|

| 4. | Borrowing      Arrangements |
|----|-----------------------------|

----

Tableof Contents

| 5. | Hotel Costs and      Operating Expenses |
|----|-----------------------------------------|

|                           |   | (in      thousands)                            |   |
|--------------------------------|--------|------------------------------------------------|--------|
|                           |   | Three      Months Ended September      30 |   |   | Nine      Months Ended September 30 |   |
|                           |   | 2008                                           |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
| Direct      departmental costs |   |                                           |   |   |   |   |   |   |   |   |   |   |
| Rooms                          |   | $                                              | 2,740  |   |   | $ | 2,697 |   |   | $ | 8,119 |   |   | $ | 7,819 |   |
| Food      and beverage         |   |                                           | 3,238  |   |   |   | 3,208 |   |   |   | 10,711 |   |   |   | 9,995 |   |
| Heat,      light and power     |   |                                           | 811    |   |   |   | 769 |   |   |   | 2,271 |   |   |   | 2,198 |   |
| Other                          |   |                                           | 729    |   |   |   | 648 |   |   |   | 2,224 |   |   |   | 1,992 |   |
|                           |   | $                                              | 7,518  |   |   | $ | 7,322 |   |   | $ | 23,325 |   |   | $ | 22,004 |   |

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

|                                                                    |   | (in      thousands)           |     |
|-------------------------------------------------------------------------|--------|-------------------------------|----------|
|                                                                    |   | Owned      &Leased Hotels |     |   | ManagementActivities |   |   | Consolidated |   |
|                                                                    |   |                          |     |   |   |   |   |   |   |
| Revenues                                                                |   | $                             | 14,909   |   |   | $ | 1,489 |   |   | $ | 16,398 |   |
| Other      revenues from managed and affiliated properties              |   |                          | --  |   |   |   | 1,286  |   |   |   | 1,286  |   |
| Total      revenues                                                     |   |                          | 14,909   |   |   |   | 2,775 |   |   |   | 17,684 |   |
|                                                                    |   |                          |     |   |   |   |   |   |   |   |   |   |
| Operating      income before depreciation and amortization expense |   |                          | 3,031    |   |   |   | 2,701 |   |   |   | 5,732 |   |
| Depreciation      and amortization                                      |   |                          | (1,251   | ) |   |   | (70 | ) |   |   | (1,321 | ) |
| Interest      income (expense), net                                     |   |                          | (744     | ) |   |   | 312 |   |   |   | (432 | ) |
| Other      income                                                       |   |                          | --       |   |   |   | 129 |   |   |   | 129 |   |
| Segment      pre-tax income                                             |   |                          | 1,036    |   |   |   | 3,072 |   |   |   | 4,108 |   |
|                                                                    |   |                          |     |   |   |   |   |   |   |   |   |   |
| Segment      assets                                                     |   |                          | 73,676   |   |   |   | 50,501 |   |   |   | 124,177 |   |
| Segment      capital additions                                          |   |                          | 818      |   |   |   | 135 |   |   |   | 953 |   |

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|                                                                    |   | (in      thousands)           |     |
|-------------------------------------------------------------------------|--------|-------------------------------|----------|
|                                                                    |   | Owned      &Leased Hotels |     |   | ManagementActivities |   |   | Consolidated |   |
|                                                                    |   |                          |     |   |   |   |   |   |   |
| Revenues                                                                |   | $                             | 48,346   |   |   | $ | 6,272 |   |   | $ | 54,618 |   |
| Other      revenues from managed and affiliated properties              |   |                          | --  |   |   |   | 7,749  |   |   |   | 7,749  |   |
| Total      revenues                                                     |   |                          | 48,346   |   |   |   | 14,021 |   |   |   | 62,367 |   |
|                                                                    |   |                          |     |   |   |   |   |   |   |   |   |   |
| Operating      income before depreciation and amortization expense |   |                          | 8,460    |   |   |   | 3,332 |   |   |   | 11,792 |   |
| Depreciation      and amortization                                      |   |                          | (3,735   | ) |   |   | (836 | ) |   |   | (4,571 | ) |
| Interest      income (expense), net                                     |   |                          | (2,231   | ) |   |   | 923 |   |   |   | (1,308 | ) |
| Other      income (deductions)                                          |   |                          | (4       | ) |   |   | 587 |   |   |   | 583 |   |
| Segment      pre-tax income                                             |   |                          | 2,490    |   |   |   | 4,006 |   |   |   | 6,496 |   |
|                                                                    |   |                          |     |   |   |   |   |   |   |   |   |   |
| Segment      assets                                                     |   |                          | 73,676   |   |   |   | 50,501 |   |   |   | 124,177 |   |
| Segment      capital additions                                          |   |                          | 2,222    |   |   |   | 212 |   |   |   | 2,434 |   |

|                                                                                |   | (in      thousands)           |   |
|-------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                |   | Owned      &Leased Hotels |   |   | ManagementActivities |   |   | Consolidated |   |
|                                                                                |   |                          |   |   |   |   |   |   |   |
| Revenues                                                                            |   | $                             | 14,318 |   |   | $ | 1,281 |   |   | $ | 15,599 |   |
| Other      revenues from managed and affiliated properties                          |   |                          | --     |   |   |   | 4,537 |   |   |   | 4,537 |   |
| Total      revenues                                                                 |   |                          | 14,318 |   |   |   | 5,818 |   |   |   | 20,136 |   |
|                                                                                |   |                          |   |   |   |   |   |   |   |   |   |   |
| Operating      income (loss) before depreciation and amortization      expense |   |                          | 3,036  |   |   |   | (849 | ) |   |   | 2,187 |   |
| Depreciation      and amortization                                                  |   |                          | (1,233 | ) |   |   | (145 | ) |   |   | (1,378 | ) |
| Interest      income (expense), net                                                 |   |                          | (757   | ) |   |   | 484 |   |   |   | (273 | ) |
| Other      income                                                                   |   |                          | --     |   |   |   | 212 |   |   |   | 212 |   |
| Segment      pre-tax income (loss)                                                  |   |                          | 1,046  |   |   |   | (298 | ) |   |   | 748 |   |
|                                                                                |   |                          |   |   |   |   |   |   |   |   |   |   |
| Segment      assets                                                                 |   |                          | 76,456 |   |   |   | 46,982 |   |   |   | 123,438 |   |
| Segment      capital additions                                                      |   |                          | 781    |   |   |   | 127 |   |   |   | 908 |   |

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|                                                                                |   | (in      thousands)           |     |
|-------------------------------------------------------------------------------------|--------|-------------------------------|----------|
|                                                                                |   | Owned      &Leased Hotels |     |   | ManagementActivities |   |   | Consolidated |   |
|                                                                                |   |                          |     |   |   |   |   |   |   |
| Revenues                                                                            |   | $                             | 44,642   |   |   | $ | 4,458 |   |   | $ | 49,100 |   |
| Other      revenues from managed and affiliated properties                          |   |                          | --  |   |   |   | 14,115  |   |   |   | 14,115  |   |
| Total      revenues                                                                 |   |                          | 44,642   |   |   |   | 18,573 |   |   |   | 63,215 |   |
|                                                                                |   |                          |     |   |   |   |   |   |   |   |   |   |
| Operating      income (loss) before depreciation and amortization      expense |   |                          | 7,704    |   |   |   | (1,873 | ) |   |   | 5,831 |   |
| Depreciation      and amortization                                                  |   |                          | (3,730   | ) |   |   | (393 | ) |   |   | (4,123 | ) |
| Interest      income (expense), net                                                 |   |                          | (2,248   | ) |   |   | 1,265 |   |   |   | (983 | ) |
| Other      income                                                                   |   |                          | --       |   |   |   | 231 |   |   |   | 231 |   |
| Segment      pre-tax income (loss)                                                  |   |                          | 1,726    |   |   |   | (770 | ) |   |   | 956 |   |
|                                                                                |   |                          |     |   |   |   |   |   |   |   |   |   |
| Segment      assets                                                                 |   |                          | 76,456   |   |   |   | 46,982 |   |   |   | 123,438 |   |
| Segment      capital additions                                                      |   |                          | 2,657    |   |   |   | 152 |   |   |   | 2,809 |   |

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

|                                                  |   | Three      months ended September 30 |   |   | Nine      months ended September 30 |   |
|-------------------------------------------------------|--------|--------------------------------------|--------|--------|-------------------------------------|--------|
|                                                  |   | 2008                                 |   |   | 2007                                |   |   | 2008 |   |   | 2007 |   |
| Numerator:                                            |   |                                 |   |   |                                |   |   |   |   |   |   |   |
|   Income      from operations               |   | $                                    | 2,792  |   |                                | $      | 442 |   |   | $ | 4,388 |   |   | $ | 383 |   |
|                                                  |   |                                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                          |   |                                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|   Weighted      average number of           |   |                                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|      shares      outstanding |   |                                 | 3,698  |   |                                |   | 3,698 |   |   |   | 3,698 |   |   |   | 3,698 |   |
|                                                  |   |                                 |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Net      income per share of common stock             |   | $                                    | 0.76   |   |                                | $      | 0.12 |   |   | $ | 1.19 |   |   | $ | 0.10 |   |

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

|                                                                |   | (in      thousands)                 |   |
|---------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                |   | Nine      Months ended September 30 |   |
|                                                                |   | 2008                                |   |   | 2007 |   |
|                                                                |   |                                |   |   |   |   |
| Interest      cost                                                  |   | $                                   | 1,237  |   |   | $ | 1,335 |   |
| Expected      return on assets                                      |   |                                | (1,416 | ) |   |   | (1,383 | ) |
| Recognized      actuarial (gain) loss                               |   |                                | (36    | ) |   |   | 28 |   |
| Net      credit included in the consolidated statementsofoperations |   | $                                   | (215   | ) |   | $ |  (20 | ) |

| 9. | Trump International      Sonesta Beach Resort SunnyIsles |
|----|----------------------------------------------------------|

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| Increase      in Long term Receivables | $1,473  |
|----------------------------------------|---------|
| Increase      in Long term Assets      | 545     |
| Decrease      in Accounts Receivable   | (2,018) |

| 11. | Impact of Recently      Issued Accounting Standards |
|-----|-----------------------------------------------------|

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MANAGEMENT’S DISCUSSION AND ANALYSIS

|                                                                                     |   | TOTAL      REVENUES(in      thousands) |   |
|------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|
|                                                                                     |   | NO.      OFROOMS                       |   |   | 2008 |   |   | 2007 |   |
| Royal      Sonesta Hotel Boston                                                          |   |                                   | 400    |   |   | $ | 23,434 |   |   | $ | 21,249 |   |
| Royal      Sonesta Hotel New Orleans                                                     |   |                                   | 500    |   |   |   | 24,911 |   |   |   | 23,392 |   |
| Management      and service fees and other revenues                                      |   |                                   |   |   |   |   | 6,273 |   |   |   | 4,459 |   |
| Total      revenues, excluding revenues from managed and affiliated      properties |   |                                   |   |   |   | $ | 54,618 |   |   | $ | 49,100 |   |

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|                                                                |   | OPERATING      INCOME (LOSS)(in thousands) |   |
|---------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                |   | 2008                                       |   |   | 2007 |   |
| Royal      Sonesta Hotel Boston                                     |   | $                                          | 4,207  |   |   | $ | 3,160 |   |
| Royal      Sonesta Hotel New Orleans                                |   |                                       | 517    |   |   |   | 814 |   |
| Operating      income from hotels after management and service fees |   |                                       | 4,724  |   |   |   | 3,974 |   |
| Management      activities and other                                |   |                                       | (782   | ) |   |   | (2,266 | ) |
| Subtotal                                                            |   |                                       | 3,942  |   |   |   | 1,708 |   |
| Income      from Management Agreement settlement, net               |   |                                       | 3,279  |   |   |   | -- |   |
| Operating      income                                               |   | $                                          | 7,221  |   |   | $ | 1,708 |   |

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|                                                                                |   | TOTAL      REVENUES(in thousands) |   |
|-------------------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                                |   | NO.      OFROOMS                  |   |   | 2008 |   |   |  2007 |   |
| Royal      Sonesta Hotel Boston (Cambridge)                                         |   |                              | 400    |   |   | $ | 9,105 |   |   | $ | 8,255 |   |
| Royal      Sonesta Hotel New Orleans                                                |   |                              | 500    |   |   |   | 5,803 |   |   |   | 6,063 |   |
| Management      and service fees and other revenues                                 |   |                              |   |   |   |   | 1,490 |   |   |   | 1,281 |   |
| Total      revenues, excluding revenues from managed and affiliated      properties |   |                              |   |   |   | $ | 16,398 |   |   | $ | 15,599 |   |

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|                                                                |   | OPERATING      INCOME (LOSS) (in thousands) |   |
|---------------------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                                |   | 2008                                             |   |   | 2007 |   |
| Royal      Sonesta Hotel Boston                                     |   | $                                                | 2,349  |   |   | $ | 1,860 |   |
| Royal      Sonesta Hotel New Orleans                                |   |                                             | (570   | ) |   |   | (58 | ) |
| Operating      income from hotels after management and service fees |   |                                             | 1,779  |   |   |   | 1,802 |   |
| Management      activities and other                                |   |                                             | (647   | ) |   |   | (993 | ) |
| Subtotal                                                            |   |                                             | 1,132  |   |   |   | 809 |   |
| Income      from Management Agreement settlement, net               |   |                                             | 3,279  |   |   |   | -- |   |
| Operating income                                                    |   | $                                                | 4,411  |   |   | $ | 809 |   |

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QUANTITATIVE

|                       |   | YEAR   |   |   |   |   |   |   |   |
|----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                       |   | 2008   |   |   | 2009   |   |   | 2010   |   |   | Thereafter |   |   | Total |   |   | Fair Value |   |
| Fixed      rate            |   | $      | 278    |   |   | $      | 1,163  |   |   | $ | 31,839 |   |   | $ | -0- |   |   | $ | 33,280 |   |   | $ | 32,746 |   |
| Average      interest rate |   |   | 8.6    | %      |   |   | 8.6    | %      |   |   | 8.6 | % |   |   |   |   |   |   |   |   |   |   |   |   |

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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:      November 12, 2008                  |

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