----

----

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

----

Table of Contents

INDEX

| Part I.  Financial Information | Page                                                                                                                                                                                        |
|------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                     |                                                                                                                                                                                        |   |
| Item 1.                                  | Financial Statements (unaudited)                                                                                                                                                            |   |
|                                     |                                                                                                                                                                                        |   |
|                                     | Condensed consolidated balance sheets — September 30, 2010 (unaudited) and December 31, 2009                                                                                          |  1 |
|                                     |                                                                                                                                                                                        |   |
|                                     | Condensed consolidated statements of operations — Three and nine-month periods ended September 30, 2010 and 2009 (unaudited)                                                          |   3 |
|                                     |                                                                                                                                                                                        |   |
|                                     | Condensed consolidated statements of cash flows — nine-month periods ended September 30, 2010 and 2009 (unaudited)                                                                    |   4 |
|                                     |                                                                                                                                                                                        |   |
|                                     | Notes to condensed consolidated financial statements — September 30, 2010 and 2009                                                                                                    |  6 |
|                                     |                                                                                                                                                                                        |   |
| Item 2.                                  | Management’s Discussion and Analysis of Results of Operations and Financial Condition — September 30, 2010                                                                      |   16 |
|                                     |                                                                                                                                                                                        |   |
| Item 3.                                  | Quantitative and Qualitative Disclosure of Market Risk                                                                                                                                      | 24 |
|                                     |                                                                                                                                                                                        |   |
| Item 4.                                  | Internal Controls and Procedures                                                                                                                                                            | 25 |
|                                     |                                                                                                                                                                                        |   |
| Part II.  Other Information    | 26                                                                                                                                                                                          |
|                                     |                                                                                                                                                                                        |   |
|                                     | Signature page                                                                                                                                                                              | 27 |
|                                     |                                                                                                                                                                                        |   |
| 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)                                                                         |   |

----

Table of Contents

Part I 

|                                                                           |   | (in thousands)     |   |
|--------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                           |   | September 30, 2010 |   |   | December 31, 2009 |   |
|                                                                           |   |               |   |   |   |   |
| ASSETS                                                                         |   |               |   |   |   |   |
| Current assets:                                                                |   |               |   |   |   |   |
| Cash and cash equivalents                                                      |   | $                  | 24,824 |   |   | $ | 35,557 |   |
| Restricted cash                                                                |   |               | 2,500  |   |   |   | -- |   |
| Accounts and notes receivable:                                                 |   |               |   |   |   |   |   |   |
| Trade, less allowance of $109 ($70 at December 31, 2009) for doubtful accounts |   |               | 6,603  |   |   |   | 5,092 |   |
| Other, including current portion of long-term receivables and advances         |   |               | 2,005  |   |   |   | 1,242 |   |
| Total accounts and notes receivable                                            |   |               | 8,608  |   |   |   | 6,334 |   |
| Inventories                                                                    |   |               | 819    |   |   |   | 623 |   |
| Current deferred tax assets                                                    |   |               | 639    |   |   |   | 476 |   |
| Prepaid expenses and other current assets                                      |   |               | 1,704  |   |   |   | 1,242 |   |
| Total current assets                                                           |   |               | 39,094 |   |   |   | 44,232 |   |
|                                                                           |   |               |   |   |   |   |   |   |
| Restricted cash                                                                |   |               | 2,757  |   |   |   | -- |   |
|                                                                           |   |               |   |   |   |   |   |   |
| Long-term receivables and advances                                             |   |               | 1,590  |   |   |   | 1,354 |   |
|                                                                           |   |               |   |   |   |   |   |   |
| Property and equipment, at cost:                                               |   |               |   |   |   |   |   |   |
| Land and land improvements                                                     |   |               | 3,202  |   |   |   | 2,102 |   |
| Buildings                                                                      |   |               | 29,668 |   |   |   | 25,721 |   |
| Furniture and equipment                                                        |   |               | 32,310 |   |   |   | 30,859 |   |
| Leasehold improvements                                                         |   |               | 9,255  |   |   |   | 9,109 |   |
| Projects in progress                                                           |   |               | 51     |   |   |   | 64 |   |
|                                                                           |   |               | 74,486 |   |   |   | 67,855 |   |
| Less accumulated depreciation and amortization                                 |   |               | 36,643 |   |   |   | 33,585 |   |
| Net property and equipment                                                     |   |               | 37,843 |   |   |   | 34,270 |   |
|                                                                           |   |               |   |   |   |   |   |   |
| Other long-term assets                                                         |   |               | 3,806  |   |   |   | 875 |   |
|                                                                           |   | $                  | 85,090 |   |   | $ | 80,731 |   |

----

Table of Contents

|                                        |   | (in thousands)     |    |
|---------------------------------------------|--------|--------------------|---------|
|                                        |   | September 30, 2010 |    |   | December 31, 2009 |   |
|                                        |   |               |    |   |   |   |
|                                        |   |               |    |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY  |   |               |    |   |   |   |
| Current liabilities:                        |   |               |    |   |   |   |
| Current portion of long-term debt           |   | $                  | 665     |   |   | $ | 594 |   |
| Accounts payable                            |   |               | 2,549   |   |   |   | 2,887 |   |
| Advance deposits                            |   |               | 1,280   |   |   |   | 1,103 |   |
| Accrued income taxes                        |   |               | 365     |   |   |   | 327 |   |
| Accrued liabilities:                        |   |               |    |   |   |   |   |   |
| Salaries and wages                          |   |               | 2,132   |   |   |   | 1,278 |   |
| Rentals                                     |   |               | 3,159   |   |   |   | 3,741 |   |
| Interest                                    |   |               | 203     |   |   |   | 236 |   |
| Pension and other employee benefits         |   |               | 1,326   |   |   |   | 2,064 |   |
| Interest rate swap                          |   |               | 2,437   |   |   |   | -- |   |
| Other                                       |   |               | 1,668   |   |   |   | 1,028 |   |
|                                        |   |               | 10,925  |   |   |   | 8,347 |   |
| Total current liabilities                   |   |               | 15,784  |   |   |   | 13,258 |   |
|                                        |   |               |    |   |   |   |   |   |
| Long-term debt                              |   |               | 37,550  |   |   |   | 31,245 |   |
|                                        |   |               |    |   |   |   |   |   |
| Pension liability, non-current              |   |               | 6,033   |   |   |   | 6,554 |   |
|                                        |   |               |    |   |   |   |   |   |
|                                        |   |               |    |   |   |   |   |   |
| Other non-current liabilities               |   |               | 1,183   |   |   |   | 1,082 |   |
|                                        |   |               |    |   |   |   |   |   |
| Deferred tax liabilities                    |   |               | 551     |   |   |   | 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                           |   |               | 34,610  |   |   |   | 35,734 |   |
| Treasury shares – 2,404, at cost      |   |               | (12,053 | ) |   |   | (12,053 | ) |
| Accumulated other comprehensive loss        |   |               | (3,450  | ) |   |   | (1,910 | ) |
| Total stockholders’ equity            |   |               | 23,989  |   |   |   | 26,653 |   |
|                                        |   | $                  | 85,090  |   |   | $ | 80,731 |   |

----

Table of Contents

SONESTA

|                                                                      |   | Three Months EndedSeptember 30 |   |   | Nine Months Ended September 30 |   |
|---------------------------------------------------------------------------|--------|--------------------------------|--------|--------|-------------------------------------|--------|
|                                                                      |   | 2010                           |   |   | 2009                                |   |   | 2010 |   |   | 2009 |   |
| Revenues:                                                                 |   |                           |   |   |                                |   |   |   |   |   |   |   |
| Rooms                                                                     |   | $                              | 11,096 |   |                                | $      | 8,823 |   |   | $ | 30,831 |   |   | $ | 25,960 |   |
| Food and beverage                                                         |   |                           | 4,495  |   |                                |   | 3,613 |   |   |   | 13,627 |   |   |   | 11,545 |   |
| Management, license and service fees                                      |   |                           | 998    |   |                                |   | 840 |   |   |   | 3,810 |   |   |   | 2,973 |   |
| Parking, telephone and other                                              |   |                           | 1,148  |   |                                |   | 1,241 |   |   |   | 3,370 |   |   |   | 3,639 |   |
|                                                                      |   |                           | 17,737 |   |                                |   | 14,517 |   |   |   | 51,638 |   |   |   | 44,117 |   |
|      Other revenues from managed and             |   |                           |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|       affiliated properties                 |   |                           | 330    |   |                                |   | 1,045 |   |   |   | 3,019 |   |   |   | 3,348 |   |
| Total revenues                                                            |   |                           | 18,067 |   |                                |   | 15,562 |   |   |   | 54,657 |   |   |   | 47,465 |   |
|                                                                      |   |                           |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Costs and expenses:                                                       |   |                           |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Costs and operating expenses                                              |   |                           | 8,825  |   |                                |   | 6,964 |   |   |   | 24,280 |   |   |   | 20,668 |   |
| Advertising and promotion                                                 |   |                           | 2,021  |   |                                |   | 1,331 |   |   |   | 5,300 |   |   |   | 4,155 |   |
| Administrative and general                                                |   |                           | 3,344  |   |                                |   | 3,232 |   |   |   | 9,566 |   |   |   | 9,811 |   |
| Human resources                                                           |   |                           | 328    |   |                                |   | 213 |   |   |   | 893 |   |   |   | 673 |   |
| Maintenance                                                               |   |                           | 916    |   |                                |   | 828 |   |   |   | 2,661 |   |   |   | 2,451 |   |
| Rentals                                                                   |   |                           | 918    |   |                                |   | 104 |   |   |   | 3,894 |   |   |   | 3,139 |   |
| Property taxes                                                            |   |                           | 374    |   |                                |   | 348 |   |   |   | 997 |   |   |   | 1,051 |   |
| Depreciation and amortization                                             |   |                           | 1,454  |   |                                |   | 1,349 |   |   |   | 4,056 |   |   |   | 4,058 |   |
|                                                                      |   |                           | 18,180 |   |                                |   | 14,369 |   |   |   | 51,647 |   |   |   | 46,006 |   |
|      Other expenses from managed and             |   |                           |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|       affiliated properties                 |   |                           | 330    |   |                                |   | 1,045 |   |   |   | 3,019 |   |   |   | 3,348 |   |
| Total costs and expenses                                                  |   |                           | 18,510 |   |                                |   | 15,414 |   |   |   | 54,666 |   |   |   | 49,354 |   |
|                                                                      |   |                           |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Operating income  (loss)                                        |   |                           | (443   | )      |                                |   | 148 |   |   |   | (9 | ) |   |   | (1,889 | ) |
|                                                                      |   |                           |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Other income (deductions):                                                |   |                           |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                          |   |                           | (645   | )      |                                |   | (718 | ) |   |   | (1,750 | ) |   |   | (2,152 | ) |
| Interest income                                                           |   |                           | 70     |   |                                |   | 124 |   |   |   | 195 |   |   |   | 332 |   |
| Foreign exchange gain (loss)                                              |   |                           | 6      |   |                                |   | 3 |   |   |   | (6 | ) |   |   | (15 | ) |
| Gain (loss) on sales of assets and dissolution of development partnership |   |                           | --     |   |                                |   | 41,876 |   |   |   | (60 | ) |   |   | 41,874 |   |
|                                                                      |   |                           | (569   | )      |                                |   | 41,285 |   |   |   | (1,621 | ) |   |   | 40,039 |   |
|                                                                      |   |                           |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes                                         |   |                           | (1,012 | )      |                                |   | 41,433 |   |   |   | (1,630 | ) |   |   | 38,150 |   |
| Income tax provision (benefit)                                            |   |                           | (423   | )      |                                |   | 14,054 |   |   |   | (506 | ) |   |   | 13,092 |   |
| Net income (loss)                                                         |   |                           | (589   | )      |                                |   | 27,379 |   |   |   | (1,124 | ) |   |   | 25,058 |   |
|                                                                      |   |                           |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Retained earnings at beginning of period                                  |   |                           | 35,199 |   |                                |   | 11,834 |   |   |   | 35,734 |   |   |   | 14,155 |   |
| Dividends                                                                 |   |                           | --     |   |                                |   | (3,698 | ) |   |   | -- |   |   |   | (3,698 | ) |
| Retained earnings at end of period                                        |   | $                              | 34,610 |   |                                | $      | 35,515 |   |   | $ | 34,610 |   |   | $ | 35,515 |   |
|                                                                      |   |                           |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per share                                               |   | $                              | (0.16  | )      |                                | $      | 7.41 |   |   | $ | (0.30 | ) |   | $ | 6.78 |   |
| Weighted average number of shares outstanding                             |   |                           | 3,698  |   |                                |   | 3,698 |   |   |   | 3,698 |   |   |   | 3,698 |   |

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Table of Contents

SONESTA 

|                                                                            |   | (in thousands)                 |    |
|---------------------------------------------------------------------------------|--------|--------------------------------|---------|
|                                                                            |   | Nine Months Ended September 30 |    |
|                                                                            |   | 2010                           |    |   | 2009 |   |
| Cash used by operating activities                                               |   |                           |    |   |   |   |
| Net income  (loss)                                                    |   | $                              | (1,124  | ) |   | $ | 25,058 |   |
| Adjustments to reconcile net income (loss) to cash used by operating activities |   |                           |    |   |   |   |   |   |
| Depreciation and amortization                                                   |   |                           | 4,056   |   |   |   | 4,058 |   |
| Other amortization                                                              |   |                           | 79      |   |   |   | 58 |   |
| Prepaid and deferred income tax provision (benefit)                             |   |                           | (574    | ) |   |   | 11,762 |   |
| Loss (gain) on sales of assets and dissolution of partnership                   |   |                           | 60      |   |   |   | (41,874 | ) |
|   Changes in assets and liabilities                                   |   |                           |    |   |   |   |   |   |
| Restricted cash                                                                 |   |                           | --      |   |   |   | 92 |   |
| Accounts and notes receivable                                                   |   |                           | (1,286  | ) |   |   | 685 |   |
| Inventories                                                                     |   |                           | (9      | ) |   |   | 70 |   |
| Prepaid expenses and other                                                      |   |                           | 372     |   |   |   | 184 |   |
| Accounts payable                                                                |   |                           | (1,320  | ) |   |   | (368 | ) |
| Advance deposits                                                                |   |                           | 29      |   |   |   | (18 | ) |
| Accrued income taxes                                                            |   |                           | (380    | ) |   |   | 2,112 |   |
| Accrued liabilities                                                             |   |                           | (1,182  | ) |   |   | (3,462 | ) |
| Cash used by operating activities                                               |   |                           | (1,279  | ) |   |   | (1,643 | ) |
|                                                                            |   |                           |    |   |   |   |   |   |
|                                                                            |   |                           |    |   |   |   |   |   |
| Cash provided (used) by investing activities                                    |   |                           |    |   |   |   |   |   |
| Cash paid to purchase hotel, net of cash acquired                               |   |                           | (545    | ) |   |   | -- |   |
| Proceeds from sales of assets                                                   |   |                           | 383     |   |   |   | 258 |   |
| Payments received from development partnership                                  |   |                           | --      |   |   |   | 9,412 |   |
| Expenditures for property and equipment                                         |   |                           | (2,601  | ) |   |   | (3,300 | ) |
| Payments received on long-term receivables and advances                         |   |                           | 819     |   |   |   | 221 |   |
| New loans and advances                                                          |   |                           | (1,730  | ) |   |   | (560 | ) |
| Cash provided (used) by investing activities                                    |   |                           | (3,674  | ) |   |   | 6,031 |   |
|                                                                            |   |                           |    |   |   |   |   |   |
| Cash used by financing activities                                               |   |                           |    |   |   |   |   |   |
| Proceeds from issuance of long-term debt                                        |   |                           | 32,000  |   |   |   | -- |   |
| Cost of financing                                                               |   |                           | (399    | ) |   |   | -- |   |
| Payment on refinancing of long-term debt                                        |   |                           | (31,644 | ) |   |   | -- |   |
| Restricted cash                                                                 |   |                           | (5,257  | ) |   |   | -- |   |
| Scheduled payments of long-term debt                                            |   |                           | (480    | ) |   |   | (861 | ) |
| Cash dividends paid                                                             |   |                           | --      |   |   |   | (925 | ) |
| Cash used by financing activities                                               |   |                           | (5,780  | ) |   |   | (1,786 | ) |
|                                                                            |   |                           |    |   |   |   |   |   |
| Net increase (decrease) in cash                                                 |   |                           | (10,733 | ) |   |   | 2,602 |   |
| Cash and cash equivalents at beginning of period                                |   |                           | 35,557  |   |   |   | 37,463 |   |
| Cash and cash equivalents at end of period                                      |   | $                              | 24,824  |   |   | $ | 40,065 |   |

----

Table of Contents

| Fair value of assets acquired:          |   |   |   |
|-----------------------------------------|--------|--------|--------|
| Accounts receivable                     |   | $      | 468    |   |
| Other current assets                    |   |   | 660    |   |
| Land, property, furniture and equipment |   |   | 5,385  |   |
| Other long term assets                  |   |   | 2,564  |   |
| Cash acquired                           |   |   | 804    |   |
| Total assets acquired                   |   |   | 9,881  |   |
| Cash paid at closing                    |   |   | (1,349 | ) |
| Liabilities assumed                     |   | $      | 8,532  |   |
|                                    |   |   |   |   |
| Liabilities assumed consist of:         |   |   |   |   |
| Debt assumed                            |   | $      | 6,500  |   |
| Accounts payable and advance deposits   |   |   | 858    |   |
| Other current liabilities               |   |   | 838    |   |
| Non current liabilities                 |   |   | 336    |   |
| Total liabilities assumed               |   | $      | 8,532  |   |

----

Table of Contents

SONESTA 

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

| 2. | Purchase of Sonesta Bayfront Hotel Coconut Grove |
|----|--------------------------------------------------|

----

Table of Contents

| Cash paid at closing                                                      |   | $      | 1,349  |   |
|---------------------------------------------------------------------------|--------|--------|--------|--------|
| Debt assumed                                                              |   |   | 6,500  |   |
| Present value of estimated future profit participation payments to Seller |   |   | 336    |   |
| Total purchase price                                                      |   |   | 8,185  |   |
|                                                                      |   |   |   |   |
|     Allocated as:                                     |   |   |   |   |
| Cash                                                                      |   |   | 804    |   |
| Accounts receivable                                                       |   |   | 468    |   |
| Inventories                                                               |   |   | 192    |   |
| Prepaid expenses and other current assets                                 |   |   | 468    |   |
| Land                                                                      |   |   | 1,100  |   |
| Property                                                                  |   |   | 3,285  |   |
| Furniture, fixtures and equipment                                         |   |   | 1,000  |   |
| Other long-term assets                                                    |   |   | 2,564  |   |
| Accounts payable                                                          |   |   | (709   | )      |
| Advance deposits                                                          |   |   | (149   | )      |
| Other accrued liabilities                                                 |   |   | (838   | )      |
| Total                                                                     |   | $      | 8,185  |   |

----

Table of Contents

|                               |   | For the nine months endedSeptember 30, 2010 |   |   | For the nine months endedSeptember 30, 2009 |   |
|------------------------------------|--------|---------------------------------------------|--------|--------|---------------------------------------------|--------|
|                               |   | Sonesta                                     |   |   | Sonesta Bayfront Hotel                      |   |   | Pro Forma Adjustments |   |   | Pro Forma as Adjusted |   |   | Sonesta |   |   | Sonesta Bayfront Hotel |   |   | Pro Forma Adjustments |   |   | Pro Forma as Adjusted |   |
| Revenues                           |   | $                                           | 51,638 |   |                                        | $      | 5,750 |   |   | $ | (255 | ) |   | $ | 57,133 |   |   | $ | 44,117 |   |   | $ | 7,154 |   |   | $ | -- |   |   | $ | 51,271 |   |
| Other revenues from managed hotels |   |                                        | 3,019  |   |                                        |   | -- |   |   |   | (2,241 | ) |   |   | 778 |   |   |   | 3,348 |   |   |   | -- |   |   |   | (3,123 | ) |   |   | 225 |   |
| Total Revenues                     |   |                                        | 54,657 |   |                                        |   | 5,750 |   |   |   | (2,496 | ) |   |   | 57,911 |   |   |   | 47,465 |   |   |   | 7,154 |   |   |   | (3,123 | ) |   |   | 51,496 |   |
| Net Income (loss)                  |   | $                                           | (1,124 | )      |                                        | $      | 396 |   |   | $ | (797 | ) |   | $ | (1,525 | ) |   | $ | 25,058 |   |   | $ | 374 |   |   | $ | (603 | ) |   | $ | 24,829 |   |

| 3. | Long-Term Receivables and Advances |
|----|------------------------------------|

|                                     |   | (in thousands)    |   |
|------------------------------------------|--------|-------------------|--------|
|                                     |   | September 30,2010 |   |   | December 31,2009 |   |
| Sharm El Sheikh, Egypt (a)               |   | $                 | 722    |   |   | $ | 940 |   |
| Sharm El Sheikh, Egypt (b)               |   |              | 396    |   |   |   | -- |   |
| Luxor, Egypt (c)                         |   |              | 855    |   |   |   | 1,311 |   |
| St. Maarten, Netherlands Antilles (d)    |   |              | 680    |   |   |   | -- |   |
| New Orleans, Louisiana (e)               |   |              | 371    |   |   |   | -- |   |
| Other                                    |   |              | 209    |   |   |   | 215 |   |
| Total long-term receivables and advances |   |              | 3,233  |   |   |   | 2,466 |   |
| Less:  current portion         |   |              | 1,643  |   |   |   | 1,112 |   |
| Net long-term receivables and advances   |   | $                 | 1,590  |   |   | $ | 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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| (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 are being 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 being 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. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|                                                                                       |   | (in thousands)    |   |
|--------------------------------------------------------------------------------------------|--------|-------------------|--------|
|                                                                                       |   | September 30,2010 |   |   | December 31,2009 |   |
| Charterhouse of Cambridge Trust and Sonesta of    Massachusetts, Inc.: |   |              |   |   |   |   |
| First mortgage note (a)                                                                    |   | $                 | 31,732 |   |   | $ | 31,839 |   |
|                                                                                       |   |              |   |   |   |   |   |   |
| Sonesta of Coconut Grove, Inc.:                                                            |   |              |   |   |   |   |   |   |
| First mortgage note (b)                                                                    |   |              | 6,483  |   |   |   | -- |   |
|                                                                                       |   |              |   |   |   |   |   |   |
| Subtotal                                                                                   |   |              | 38,215 |   |   |   | 31,839 |   |
| Less:  current portion                                                           |   |              | 665    |   |   |   | 594 |   |
| Total long-term debt                                                                       |   | $                 | 37,550 |   |   | $ | 31,245 |   |

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

|                      |   | (in thousands)                       |   |
|---------------------------|--------|--------------------------------------|--------|
|                      |   | Three Months Ended September 30 |   |   | Nine Months EndedSeptember 30 |   |
|                      |   | 2010                                 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Direct departmental costs |   |                                 |   |   |   |   |   |   |   |   |   |   |
| Rooms                     |   | $                                    | 3,294  |   |   | $ | 2,640 |   |   | $ | 8,675 |   |   | $ | 7,344 |   |
| Food and beverage         |   |                                 | 4,213  |   |   |   | 3,175 |   |   |   | 11,832 |   |   |   | 9,743 |   |
| Heat, light and power     |   |                                 | 640    |   |   |   | 533 |   |   |   | 1,933 |   |   |   | 1,772 |   |
| Other                     |   |                                 | 678    |   |   |   | 616 |   |   |   | 1,840 |   |   |   | 1,809 |   |
|                      |   | $                                    | 8,825  |   |   | $ | 6,964 |   |   | $ | 24,280 |   |   | $ | 20,668 |   |

|   |   |
|--------|--------|

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

|                                                                 |   | (in thousands)           |   |
|----------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                 |   | Owned &Leased Hotels |   |   | ManagementActivities |   |   | Consolidated |   |
|                                                                 |   |                     |   |   |   |   |   |   |   |
| Revenues                                                             |   | $                        | 16,737 |   |   | $ | 1,000 |   |   | $ | 17,737 |   |
| Other revenues from managed and                                      |   |                     |   |   |   |   |   |   |   |   |   |   |
| affiliated properties                                                |   |                     | --     |   |   |   | 330 |   |   |   | 330 |   |
| Total revenues                                                       |   |                     | 16,737 |   |   |   | 1,330 |   |   |   | 18,067 |   |
| Operating income (loss) before depreciation and amortization expense |   |                     | 2,037  |   |   |   | (1,026 | ) |   |   | 1,011 |   |
| Depreciation and amortization                                        |   |                     | (1,387 | ) |   |   | (67 | ) |   |   | (1,454 | ) |
| Interest income (expense), net                                       |   |                     | (638   | ) |   |   | 63 |   |   |   | (575 | ) |
| Other income                                                         |   |                     | 1      |   |   |   | 5 |   |   |   | 6 |   |
| Segment pre-tax income (loss)                                        |   |                     | 13     |   |   |   | (1,025 | ) |   |   | (1,012 | ) |
|                                                                 |   |                     |   |   |   |   |   |   |   |   |   |   |
| Segment assets                                                       |   |                     | 54,643 |   |   |   | 30,447 |   |   |   | 85,090 |   |
| Segment capital additions                                            |   |                     | 903    |   |   |   | 10 |   |   |   | 913 |   |
| Hotel acquisition (see Note 2)                                       |   |                     | 8,185  |   |   |   | -- |   |   |   | 8,185 |   |

|                                                                      |   | (in thousands)           |   |
|---------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                      |   | Owned &Leased Hotels |   |   | ManagementActivities |   |   | Consolidated |   |
|                                                                      |   |                     |   |   |   |   |   |   |   |
| Revenues                                                                  |   | $                        | 47,818 |   |   | $ | 3,820 |   |   | $ | 51,638 |   |
| Other revenues from managed and                                           |   |                     |   |   |   |   |   |   |   |   |   |   |
| affiliated properties                                                     |   |                     | --     |   |   |   | 3,019 |   |   |   | 3,019 |   |
| Total revenues                                                            |   |                     | 47,818 |   |   |   | 6,839 |   |   |   | 54,657 |   |
| Operating income (loss) before depreciation and amortization expense |   |                     | 6,515  |   |   |   | (2,468 | ) |   |   | 4,047 |   |
| Depreciation and amortization                                             |   |                     | (3,855 | ) |   |   | (201 | ) |   |   | (4,056 | ) |
| Interest income (expense), net                                            |   |                     | (1,736 | ) |   |   | 181 |   |   |   | (1,555 | ) |
| Other deductions                                                          |   |                     | (56    | ) |   |   | (10 | ) |   |   | (66 | ) |
| Segment pre-tax income (loss)                                             |   |                     | 868    |   |   |   | (2,498 | ) |   |   | (1,630 | ) |
|                                                                      |   |                     |   |   |   |   |   |   |   |   |   |   |
| Segment assets                                                            |   |                     | 54,643 |   |   |   | 30,447 |   |   |   | 85,090 |   |
| Segment capital additions                                                 |   |                     | 2,465  |   |   |   | 136 |   |   |   | 2,601 |   |
| Hotel acquisition (see Note 2)                                            |   |                     | 8,185  |   |   |   | -- |   |   |   | 8,185 |   |

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|                                                                 |   | (in thousands)           |   |
|----------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                 |   | Owned &Leased Hotels |   |   | ManagementActivities |   |   | Consolidated |   |
|                                                                 |   |                     |   |   |   |   |   |   |   |
| Revenues                                                             |   | $                        | 13,675 |   |   | $ | 842 |   |   | $ | 14,517 |   |
| Other revenues from managed and                                      |   |                     |   |   |   |   |   |   |   |   |   |   |
| affiliated properties                                                |   |                     | --     |   |   |   | 1,045 |   |   |   | 1,045 |   |
| Total revenues                                                       |   |                     | 13,675 |   |   |   | 1,887 |   |   |   | 15,562 |   |
| Operating income (loss) before depreciation and amortization expense |   |                     | 2,614  |   |   |   | (1,119 | ) |   |   | 1,495 |   |
| Depreciation and amortization                                        |   |                     | (1,284 | ) |   |   | (64 | ) |   |   | (1,348 | ) |
| Interest income (expense), net                                       |   |                     | (716   | ) |   |   | 121 |   |   |   | (595 | ) |
| Other income                                                         |   |                     | --     |   |   |   | 41,881 |   |   |   | 41,881 |   |
| Segment pre-tax income                                               |   |                     | 614    |   |   |   | 40,819 |   |   |   | 41,433 |   |
|                                                                 |   |                     |   |   |   |   |   |   |   |   |   |   |
| Segment assets                                                       |   |                     | 39,395 |   |   |   | 44,812 |   |   |   | 84,207 |   |
| Segment capital additions                                            |   |                     | 527    |   |   |   | 7 |   |   |   | 534 |   |

|                                                                 |   | (in thousands)           |   |
|----------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                 |   | Owned &Leased Hotels |   |   | ManagementActivities |   |   | Consolidated |   |
|                                                                 |   |                     |   |   |   |   |   |   |   |
| Revenues                                                             |   | $                        | 41,131 |   |   | $ | 2,986 |   |   | $ | 44,117 |   |
| Other revenues from managed and                                      |   |                     |   |   |   |   |   |   |   |   |   |   |
| affiliated properties                                                |   |                     | --     |   |   |   | 3,348 |   |   |   | 3,348 |   |
| Total revenues                                                       |   |                     | 41,131 |   |   |   | 6,334 |   |   |   | 47,465 |   |
| Operating income (loss) before depreciation and amortization expense |   |                     | 5,446  |   |   |   | (3,277 | ) |   |   | 2,169 |   |
| Depreciation and amortization                                        |   |                     | (3,863 | ) |   |   | (195 | ) |   |   | (4,058 | ) |
| Interest income (expense), net                                       |   |                     | (2,143 | ) |   |   | 323 |   |   |   | (1,820 | ) |
| Other income (deductions)                                            |   |                     | (4     | ) |   |   | 41,863 |   |   |   | 41,859 |   |
| Segment pre-tax income (loss)                                        |   |                     | (564   | ) |   |   | 38,714 |   |   |   | 38,150 |   |
|                                                                 |   |                     |   |   |   |   |   |   |   |   |   |   |
| Segment assets                                                       |   |                     | 39,395 |   |   |   | 44,812 |   |   |   | 84,207 |   |
| Segment capital additions                                            |   |                     | 3,237  |   |   |   | 63 |   |   |   | 3,300 |   |

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| 7. | Comprehensive Income (Loss) |
|----|-----------------------------|

|                                              |   | (in thousands)                  |   |   | (in thousands)                 |   |
|---------------------------------------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
|                                              |   | Three months ended September 30 |   |   | Nine months ended September 30 |   |
|                                              |   | 2010                            |   |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
|                                              |   |                            |   |   |                           |   |   |   |   |   |   |   |
| Net income (loss)                                 |   | $                               | (589   | )      |                           | $      | 27,379 |   |   | $ | (1,124 | ) |   | $ | 25,058 |   |
|                                              |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized loss on interest rate swap, net of tax |   |                            | (473   | )      |                           |   | -- |   |   |   | (1,540 | ) |   |   | -- |   |
|                                              |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss)                       |   | $                               | (1,062 | )      |                           | $      | 27,379 |   |   | $ | (2,664 | ) |   | $ | 25,058 |   |

| 8. | Earnings per Share |
|----|--------------------|

|                                             |   | Three months ended September 30 |   |   | Nine months ended September 30 |   |
|--------------------------------------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
|                                             |   | 2010                            |   |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| Numerator:                                       |   |                            |   |   |                           |   |   |   |   |   |   |   |
|   Net income (loss)                    |   | $                               | (589   | )      |                           | $      | 27,379 |   |   | $ | (1,124 | ) |   | $ | 25,058 |   |
|                                             |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                     |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|   Weighted average number of           |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|      shares outstanding |   |                            | 3,698  |   |                           |   | 3,698 |   |   |   | 3,698 |   |   |   | 3,698 |   |
|                                             |   |                            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per share of common stock      |   | $                               | (0.16  | )      |                           | $      | 7.41 |   |   | $ | (0.30 | ) |   | $ | 6.78 |   |

|                                                             |   | (in thousands)                 |   |
|------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                             |   | Nine Months ended September 30 |   |
|                                                             |   | 2010                           |   |   | 2009 |   |
|                                                             |   |                           |   |   |   |   |
| Service cost                                                     |   | $                              | --     |   |   | $ | 62 |   |
| Interest cost                                                    |   |                           | 1,297  |   |   |   | 1,197 |   |
| Expected return on assets                                        |   |                           | (1,362 | ) |   |   | (1,287 | ) |
| Recognized actuarial loss                                        |   |                           | 130    |   |   |   | 152 |   |
| Net expense included in the consolidated statementsof operations |   | $                              | 65     |   |   | $ | 124 |   |

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| 10. | Derivative Financial Instruments |
|-----|----------------------------------|

|                                                |   | (in thousands)        |   |
|-----------------------------------------------------|--------|-----------------------|--------|
|                                                |   | Liability Derivatives |   |
|                                                |   | 2010                  |   |
| Derivatives designated as hedging instruments:      |   |                  |   |
| Interest rate swap – cash flow hedge          |   | $                     | 2,437  |   |
| Total derivatives designated as hedging instruments |   | $                     | 2,437  |   |
|                                                |   |                  |   |   |
| Derivatives not designated as hedging instruments:  |   | $                     | --     |   |
|                                                |   |                  |   |   |
| Total derivatives                                   |   | $                     | 2,437  |   |

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|                                           |   |                                                                 |   |                                                             |             |                                                     |   |
|------------------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------------------------------|------------------|----------------------------------------------------------|--------|
| 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                             |   | $                                                                    | (2,437 | )                                                                | Interest expense |                                                     | $      | -- |   |
|                                           |   |                                                                 |   |                                                             |             |                                                     |   |   |   |
| Total                                          |   | $                                                                    | (2,437 | )                                                                | Total            |                                                     | $      | -- |   |

| 11. | Fair Value Measurements |
|-----|-------------------------|

|               |   | (in thousands)                                       |   |
|--------------------|--------|------------------------------------------------------|--------|
|               |   | Quoted Prices in Active Markets for Identical Assets |   |   | Significant Observable Inputs |   |   | Significant Unobservable Inputs |   |   |   |   |
|               |   | (Level 1)                                            |   |   | (Level 2) |   |   | (Level 3) |   |   | Total Assets (Liabilities) |   |
|               |   |                                                 |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap |   | $                                                    | --     |   |   | $ | (2,437 | ) |   | $ |   -- |   |   | $ | (2,437 | ) |

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Part I – Item 2

|                                                                           |   | TOTAL REVENUES(in thousands) |   |
|--------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                           |   | NO. OFROOMS                  |   |   | 2010 |   |   | 2009 |   |
| Royal Sonesta Hotel Boston                                                     |   |                         | 400    |   |   | $ | 20,155 |   |   | $ | 18,138 |   |
| Royal Sonesta Hotel New Orleans                                                |   |                         | 500    |   |   |   | 26,249 |   |   |   | 22,994 |   |
| Sonesta Bayfront Hotel Coconut Grove                                           |   |                         | 200    |   |   |   | 1,414 |   |   |   | -- |   |
| Management and service fees and other revenues                                 |   |                         |   |   |   |   | 3,820 |   |   |   | 2,985 |   |
| Total revenues, excluding revenues from managed and affiliated properties |   |                         |   |   |   | $ | 51,638 |   |   | $ | 44,117 |   |

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|                                                           |   | OPERATING INCOME (LOSS)(in thousands) |   |
|----------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                           |   | 2010                                  |   |   | 2009 |   |
| Royal Sonesta Hotel Boston                                     |   | $                                     | 1,961  |   |   | $ | 1,222 |   |
| Royal Sonesta Hotel New Orleans                                |   |                                  | 1,309  |   |   |   | 361 |   |
| Sonesta Bayfront Hotel Coconut Grove                           |   |                                  | (611   | ) |   |   | -- |   |
| Operating income from hotels after management and service fees |   |                                  | 2,659  |   |   |   | 1,583 |   |
| Management activities and other                                |   |                                  | (2,668 | ) |   |   | (3,472 | ) |
| Operating loss                                                 |   | $                                     | (9     | ) |   | $ | (1,889 | ) |

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|                                                                      |   | TOTAL REVENUES(in thousands) |   |
|---------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                      |   | NO. OFROOMS                  |   |   | 2010 |   |   | 2009 |   |
| Royal Sonesta Hotel Boston                                                |   |                         | 400    |   |   | $ | 8,270 |   |   | $ | 7,637 |   |
| Royal Sonesta Hotel New Orleans                                           |   |                         | 500    |   |   |   | 7,053 |   |   |   | 6,039 |   |
| Sonesta Bayfront Hotel Coconut Grove                                      |   |                         | 200    |   |   |   | 1,414 |   |   |   | -- |   |
| Management and service fees and other revenues                            |   |                         |   |   |   |   | 1,000 |   |   |   | 841 |   |
| Total revenues, excluding revenues from managed and affiliated properties |   |                         |   |   |   | $ | 17,737 |   |   | $ | 14,517 |   |

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|                                                           |   | OPERATING INCOME (LOSS) (in thousands) |   |
|----------------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                           |   | 2010                                        |   |   | 2009 |   |
| Royal Sonesta Hotel Boston                                     |   | $                                           | 1,588  |   |   | $ | 1,480 |   |
| Royal Sonesta Hotel New Orleans                                |   |                                        | (331   | ) |   |   | (149 | ) |
| Sonesta Bayfront Hotel Coconut Grove                           |   |                                        | (611   | ) |   |   | -- |   |
| Operating income from hotels after management and service fees |   |                                        | 646    |   |   |   | 1,331 |   |
| Management activities and other                                |   |                                        | (1,089 | ) |   |   | (1,183 | ) |
| Operating income (loss)                                        |   | $                                           | (443   | ) |   | $ | 148 |   |

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PART I – Item 3

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PART I – Item 4

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PART II – Other Information

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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 11, 2010                  |

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