----

----

**FORM      10-Q**

**SECURITIES      AND EXCHANGE COMMISSION**

| x      | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE |   |
|--------|-------------------------------------------------------------------------|--------|
|   | SECURITIES                EXCHANGE ACT OF 1934                          |   |
|   | For                the Quarterly period ended September 30, 2007        |   |
|   |                                                                    |   |
|   | OR                                                                      |   |

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

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

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

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

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

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

----

**INDEX**

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

| Part                I.  Financial Information | **Page**                                                                                                                                                                      |
|---------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                    |                                                                                                                                                                          |   |
| Item                1.                                  | Financial                Statements (unaudited)                                                                                                                               |   |
|                                                    |                                                                                                                                                                          |   |
|                                                    | Condensed                consolidated balance sheets— September 30, 2007                (unaudited) and December 31, 2006                                               | 1 |
|                                                    |                                                                                                                                                                          |   |
|                                                    | Condensed                consolidated statements of operations—Three                and nine-month periods ended September 30, 2007 and 2006                (unaudited) | 3 |
|                                                    |                                                                                                                                                                          |   |
|                                                    | Condensed                consolidated statements of cash                flows—Nine-month periods ended September 30, 2007 and 2006                (unaudited)           | 4 |
|                                                    |                                                                                                                                                                          |   |
|                                                    | Notes                to condensed consolidated financial                statements—September 30, 2007 and 2006                                                          | 5 |
|                                                    |                                                                                                                                                                          |   |
| Item                2.                                  | Management’s                Discussion and Analysis of Results of                Operations and Financial Condition—September 30, 2007                            | 13 |
|                                                    |                                                                                                                                                                          |   |
| Item  3.                                      | Quantitative                and Qualitative Disclosure of Market                Risk                                                                                          | 19 |
|                                                    |                                                                                                                                                                          |   |
| Item  4.                                      | Internal                Controls and Procedures                                                                                                                               | 20 |
|                                                    |                                                                                                                                                                          |   |
| Part                II.  Other Information    |                                                                                                                                                                          |
|                                                    |                                                                                                                                                                          |   |
|                                                    | Signature                page                                                                                                                                                 | 22 |
|                                                    |                                                                                                                                                                          |   |
| Exhibits                31.1, 31.2, 31.3                | Certifications                by the Company’s Chief Executive Officers and Vice President and                Treasurer                                                 |   |
|                                                    |                                                                                                                                                                          |   |
| Exhibit                32                               | 18                U.S.C. Section 1350 Certification by Company                Officers                                                                                        |   |

----

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

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                                                                             |   | (in                thousands)   |    |
|------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|
|                                                                                                             |   | September                302007 |    |   | December                312006 |   |
|                                                                                                             |   |                            |    |   |   |   |
| ASSETS                                                                                                           |   |                            |    |   |   |   |
| Current                assets:                                                                                   |   |                            |    |   |   |   |
| Cash                and cash equivalents                                                                         |   | $                               | 25,536  |   |   | $ | 24,888 |   |
| Accounts                and notes receivable:                                                                    |   |                            |    |   |   |   |   |   |
| Trade,                less allowance of $78 ($87 at December 31, 2006) for doubtful                accounts |   |                            | 8,086   |   |   |   | 6,928 |   |
| Other,                including current portion of long-term receivables and                advances             |   |                            | 2,659   |   |   |   | 1,551 |   |
| Total                accounts and notes receivable                                                               |   |                            | 10,745  |   |   |   | 8,479 |   |
| Inventories                                                                                                      |   |                            | 569     |   |   |   | 532 |   |
| Current                deferred tax assets                                                                       |   |                            | 353     |   |   |   | 353 |   |
| Refundable                income taxes                                                                           |   |                            | 247     |   |   |   | 89 |   |
| Prepaid                expenses and other current assets                                                         |   |                            | 1,099   |   |   |   | 1,275 |   |
|                                                                                                             |   |                            |    |   |   |   |   |   |
| Total                current assets                                                                              |   |                            | 38,549  |   |   |   | 35,616 |   |
|                                                                                                             |   |                            |    |   |   |   |   |   |
| Long-term                receivables and advances                                                                |   |                            | 4,042   |   |   |   | 6,879 |   |
|                                                                                                             |   |                            |    |   |   |   |   |   |
| Deferred                tax assets                                                                               |   |                            | 7,680   |   |   |   | 7,873 |   |
|                                                                                                             |   |                            |    |   |   |   |   |   |
|    Investment                in development partnership                                           |   |                            | 34,166  |   |   |   | 35,291 |   |
|                                                                                                             |   |                            |    |   |   |   |   |   |
| Property                and equipment, at cost:                                                                  |   |                            |    |   |   |   |   |   |
| Land                                                                                                             |   |                            | 2,102   |   |   |   | 2,102 |   |
| Buildings                                                                                                        |   |                            | 26,209  |   |   |   | 25,984 |   |
| Furniture                and equipment                                                                           |   |                            | 33,277  |   |   |   | 30,730 |   |
| Leasehold                improvements                                                                            |   |                            | 8,360   |   |   |   | 8,076 |   |
| Projects                in progress                                                                              |   |                            | 134     |   |   |   | 560 |   |
|                                                                                                             |   |                            | 70,082  |   |   |   | 67,452 |   |
|                                                                                                             |   |                            |    |   |   |   |   |   |
| Less:                accumulated depreciation and amortization                                                   |   |                            | 32,935  |   |   |   | 29,052 |   |
| Net                property and equipment                                                                        |   |                            | 37,147  |   |   |   | 38,400 |   |
|                                                                                                             |   |                            |    |   |   |   |   |   |
| Other                long-term assets                                                                            |   |                            | 1,854   |   |   |   | 2,369 |   |
|                                                                                                             |   | $                               | 123,438 |   |   | $ | 126,428 |   |

*See      accompanying notes to condensed consolidated financial      statements.*

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                             |   | (in                thousands)   |    |
|------------------------------------------------------------------|--------|---------------------------------|---------|
|                                                             |   | September                302007 |    |   | December                312006 |   |
|                                                             |   |                            |    |   |   |   |
|                                                             |   |                            |    |   |   |   |
| LIABILITIES                AND COMMON STOCKHOLDERS’ EQUITY |   |                            |    |   |   |   |
| Current                liabilities:                              |   |                            |    |   |   |   |
| Current                portion of long-term debt                 |   | $                               | 443     |   |   | $ | -- |   |
| Accounts                payable                                  |   |                            | 2,759   |   |   |   | 3,782 |   |
| Advance                deposits                                  |   |                            | 825     |   |   |   | 829 |   |
| Accrued                income taxes                              |   |                            | 229     |   |   |   | 449 |   |
| Accrued                liabilities:                              |   |                            |    |   |   |   |   |   |
| Salaries                and wages                                |   |                            | 1,577   |   |   |   | 1,053 |   |
| Rentals                                                          |   |                            | 2,385   |   |   |   | 3,127 |   |
| Interest                                                         |   |                            | 244     |   |   |   | 252 |   |
| Employee                benefits                                 |   |                            | 678     |   |   |   | 262 |   |
| Other                                                            |   |                            | 971     |   |   |   | 1,320 |   |
|                                                             |   |                            |    |   |   |   |   |   |
| Total                accrued liabilities                         |   |                            | 5,855   |   |   |   | 6,014 |   |
|                                                             |   |                            |    |   |   |   |   |   |
| Total                current liabilities                         |   |                            | 10,111  |   |   |   | 11,074 |   |
|                                                             |   |                            |    |   |   |   |   |   |
| Long-term                debt                                    |   |                            | 33,618  |   |   |   | 34,061 |   |
|                                                             |   |                            |    |   |   |   |   |   |
| Deferred                gain                                     |   |                            | 64,481  |   |   |   | 64,481 |   |
|                                                             |   |                            |    |   |   |   |   |   |
| Long-term                pension liability                       |   |                            | 7,492   |   |   |   | 9,228 |   |
|                                                             |   |                            |    |   |   |   |   |   |
| Other                non-current liabilities                     |   |                            | 654     |   |   |   | 213 |   |
|                                                             |   |                            |    |   |   |   |   |   |
|                                                             |   |                            |    |   |   |   |   |   |
| Commitments                and contingencies                     |   |                            |    |   |   |   |   |   |
|                                                             |   |                            |    |   |   |   |   |   |
| Common                stockholders’ equity:                |   |                            |    |   |   |   |   |   |
| Common                stock:                                     |   |                            |    |   |   |   |   |   |
| Class                A, $ 0.80 par value:                        |   |                            |    |   |   |   |   |   |
| Authorized                – 10,000 shares                  |   |                            |    |   |   |   |   |   |
| Issued—6,102                shares at stated value         |   |                            | 4,882   |   |   |   | 4,882 |   |
| Retained                earnings                                 |   |                            | 14,484  |   |   |   | 14,773 |   |
| Treasury                shares—2,404, at cost              |   |                            | (12,053 | ) |   |   | (12,053 | ) |
| Accumulated                other comprehensive loss              |   |                            | (231    | ) |   |   | (231 | ) |
| Total                common stockholders’ equity           |   |                            | 7,082   |   |   |   | 7,371 |   |
|                                                             |   | $                               | 123,438 |   |   | $ | 126,428 |   |

*See      accompanying notes to condensed consolidated financial      statements.*

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

|                                                                                            |   | Three                Months Ended September                30 |   |   | Nine                Months Ended September                30 |   |
|-------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------|--------|
|                                                                                            |   | 2007                                                               |   |   | 2006                                                              |   |   | 2007 |   |   | 2006 |   |
| Revenues:                                                                                       |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |
| Rooms                                                                                           |   | $                                                                  | 9,400  |   |                                                              | $      | 9,124 |   |   | $ | 28,548 |   |   | $ | 37,019 |   |
| Food                and beverage                                                                |   |                                                               | 3,620  |   |                                                              |   | 4,271 |   |   |   | 12,229 |   |   |   | 16,180 |   |
| Management,                license and service fees                                             |   |                                                               | 1,272  |   |                                                              |   | 608 |   |   |   | 4,425 |   |   |   | 3,065 |   |
| Parking,                telephone and other                                                     |   |                                                               | 1,307  |   |                                                              |   | 1,615 |   |   |   | 3,898 |   |   |   | 6,131 |   |
|                                                                                            |   |                                                               | 15,599 |   |                                                              |   | 15,618 |   |   |   | 49,100 |   |   |   | 62,395 |   |
|      Other                revenues from managed and                    |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
|       affiliated                properties                        |   |                                                               | 4,537  |   |                                                              |   | 8,063 |   |   |   | 14,115 |   |   |   | 16,474 |   |
| Total                revenues                                                                   |   |                                                               | 20,136 |   |                                                              |   | 23,681 |   |   |   | 63,215 |   |   |   | 78,869 |   |
|                                                                                            |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
| Costs                and expenses:                                                              |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
| Costs                and operating expenses                                                     |   |                                                               | 7,322  |   |                                                              |   | 9,286 |   |   |   | 22,004 |   |   |   | 30,731 |   |
| Advertising                and promotion                                                        |   |                                                               | 1,377  |   |                                                              |   | 1,735 |   |   |   | 4,059 |   |   |   | 5,409 |   |
| Administrative                and general                                                       |   |                                                               | 3,179  |   |                                                              |   | 3,559 |   |   |   | 9,669 |   |   |   | 11,242 |   |
| Human                resources                                                                  |   |                                                               | 286    |   |                                                              |   | 356 |   |   |   | 846 |   |   |   | 1,294 |   |
| Maintenance                                                                                     |   |                                                               | 843    |   |                                                              |   | 1,164 |   |   |   | 2,626 |   |   |   | 3,774 |   |
| Rentals                                                                                         |   |                                                               | (13    | )      |                                                              |   | (502 | ) |   |   | 2,827 |   |   |   | 2,531 |   |
| Property                taxes                                                                   |   |                                                               | 418    |   |                                                              |   | 530 |   |   |   | 1,238 |   |   |   | 1,852 |   |
| Depreciation                and amortization                                                    |   |                                                               | 1,378  |   |                                                              |   | 2,594 |   |   |   | 4,123 |   |   |   | 7,960 |   |
|                                                                                            |   |                                                               | 14,790 |   |                                                              |   | 18,722 |   |   |   | 47,392 |   |   |   | 64,793 |   |
|      Other                expenses from managed and                    |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
|       affiliated                properties                        |   |                                                               | 4,537  |   |                                                              |   | 8,063 |   |   |   | 14,115 |   |   |   | 16,474 |   |
| Total                costs and expenses                                                         |   |                                                               | 19,327 |   |                                                              |   | 26,785 |   |   |   | 61,507 |   |   |   | 81,267 |   |
|                                                                                            |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
| Operating                income (loss)                                                          |   |                                                               | 809    |   |                                                              |   | (3,104 | ) |   |   | 1,708 |   |   |   | (2,398 | ) |
|                                                                                            |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (deductions):                                                       |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
| Interest                expense                                                                 |   |                                                               | (759   | )      |                                                              |   | (759 | ) |   |   | (2,253 | ) |   |   | (2,253 | ) |
| Interest                income                                                                  |   |                                                               | 486    |   |                                                              |   | 439 |   |   |   | 1,270 |   |   |   | 1,155 |   |
| Foreign                exchange gain (loss)                                                     |   |                                                               | 14     |   |                                                              |   | (3 | ) |   |   | 17 |   |   |   | 29 |   |
| Gain                on sales of assets                                                          |   |                                                               | 198    |   |                                                              |   | -- |   |   |   | 214 |   |   |   | 4 |   |
|                                                                                            |   |                                                               | (61    | )      |                                                              |   | (323 | ) |   |   | (752 | ) |   |   | (1,065 | ) |
|                                                                                            |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income taxes                                                |   |                                                               | 748    |   |                                                              |   | (3,427 | ) |   |   | 956 |   |   |   | (3,463 | ) |
| Income                tax provision (benefit)                                                   |   |                                                               | 306    |   |                                                              |   | (1,231 | ) |   |   | 573 |   |   |   | (1,044 | ) |
| Net                income (loss)                                                                |   |                                                               | 442    |   |                                                              |   | (2,196 | ) |   |   | 383 |   |   |   | (2,419 | ) |
|                                                                                            |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
| Retained                earnings at beginning of period                                         |   |                                                               | 14,042 |   |                                                              |   | 18,443 |   |   |   | 14,773 |   |   |   | 19,036 |   |
| Cumulative                effect of change in an accounting                                     |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
| principle                (see Note                12)                                           |   |                                                               | --     |   |                                                              |   | -- |   |   |   | (302 | ) |   |   | -- |   |
| Cash                dividends                                                                   |   |                                                               | --     |   |                                                              |   | -- |   |   |   | (370 | ) |   |   | (370 | ) |
| Retained                earnings at end of period                                               |   | $                                                                  | 14,484 |   |                                                              | $      | 16,247 |   |   | $ | 14,484 |   |   | $ | 16,247 |   |
|                                                                                            |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                                                               |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |
| Net                income (loss) per share                                                      |   | $                                                                  | 0.12   |   |                                                              | $      | (0.59 | ) |   | $ | 0.10 |   |   | $ | (0.65 | ) |
| Weighted                average number of shares      outstanding |   |                                                               | 3,698  |   |                                                              |   | 3,698 |   |   |   | 3,698 |   |   |   | 3,698 |   |

*See      accompanying notes to condensed consolidated financial      statements.*

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

|                                                                                                             |   | (in                thousands)                 |   |
|------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                                                             |   | Nine                Months Ended September 30 |   |
|                                                                                                             |   | 2007                                          |   |   | 2006 |   |
| Cash                provided (used) by operating activities                                                      |   |                                          |   |   |   |   |
| Net                income (loss)                                                                                 |   | $                                             | 383    |   |   | $ | (2,419 | ) |
| Adjustments                to reconcile net income (loss) to cash provided by                operatingactivities |   |                                          |   |   |   |   |   |   |
| Depreciation                and amortization of property and equipment                                           |   |                                          | 4,123  |   |   |   | 7,960 |   |
| Other                amortization                                                                                |   |                                          | 31     |   |   |   | 31 |   |
| Prepaid                and deferred federal and state income tax                provision(benefits)              |   |                                          | 349    |   |   |   | (945 | ) |
| Gain                on sales of assets                                                                           |   |                                          | (214   | ) |   |   | (4 | ) |
|   Changes                in assets and liabilities                                                     |   |                                          |   |   |   |   |   |   |
| Restricted                cash                                                                                   |   |                                          | --     |   |   |   | 267 |   |
| Accounts                and notes receivable                                                                     |   |                                          | (756   | ) |   |   | (2,018 | ) |
| Inventories                                                                                                      |   |                                          | (37    | ) |   |   | 620 |   |
| Prepaid                expenses and other                                                                        |   |                                          | 61     |   |   |   | 588 |   |
| Accounts                payable                                                                                  |   |                                          | (653   | ) |   |   | (1,900 | ) |
| Advance                deposits                                                                                  |   |                                          | (4     | ) |   |   | (1,214 | ) |
| Accrued                income taxes                                                                              |   |                                          | 22     |   |   |   | (65 | ) |
| Accrued                liabilities                                                                               |   |                                          | (2,198 | ) |   |   | (440 | ) |
| Cash                provided  by operating activities                                                  |   |                                          | 1,107  |   |   |   | 461 |   |
|                                                                                                             |   |                                          |   |   |   |   |   |   |
|                                                                                                             |   |                                          |   |   |   |   |   |   |
| Cash                provided (used) by investing activities                                                      |   |                                          |   |   |   |   |   |   |
| Proceeds                from sales of assets                                                                     |   |                                          | 324    |   |   |   | 383 |   |
| Payments                received from development partnership                                                    |   |                                          | 1,000  |   |   |   | -- |   |
| Expenditures                for property and equipment                                                           |   |                                          | (2,809 | ) |   |   | (4,831 | ) |
| Payments                received on long-term receivables and advances                                           |   |                                          | 1,766  |   |   |   | 3,976 |   |
| New                loans and advances                                                                            |   |                                          | --     |   |   |   | (1,370 | ) |
| Cash                provided (used) by investing activities                                                      |   |                                          | 281    |   |   |   | (1,842 | ) |
|                                                                                                             |   |                                          |   |   |   |   |   |   |
| Cash                used by financing activities                                                                 |   |                                          |   |   |   |   |   |   |
| Cash                dividends paid                                                                               |   |                                          | (740   | ) |   |   | (740 | ) |
| Cash                used by financing activities                                                                 |   |                                          | (740   | ) |   |   | (740 | ) |
|                                                                                                             |   |                                          |   |   |   |   |   |   |
| Net                increase (decrease) in cash                                                                   |   |                                          | 648    |   |   |   | (2,121 | ) |
| Cash                and cash equivalents at beginning of period                                                  |   |                                          | 24,888 |   |   |   | 24,941 |   |
| Cash                and cash equivalents at end of period                                                        |   | $                                             | 25,536 |   |   | $ | 22,820 |   |

*See      accompanying notes to condensed consolidated financial      statements.*

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL      STATEMENTS**

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

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

|                                                                       |   | (in                thousands)    |   |
|----------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                       |   | September                30,2007 |   |   | December                31,2006 |   |
| Sharm                El Sheikh, Egypt (a)                                  |   | $                                | --     |   |   | $ | 126 |   |
| Sonesta                Hotel & Suites Coconut Grove (b)                |   |                             | 3,514  |   |   |   | 4,346 |   |
| Trump International Sonesta Beach                Resort (c) |   |                             | 1,135  |   |   |   | 1,135 |   |
| Chateau                Sonesta Hotel New Orleans (d)                       |   |                             | 1,445  |   |   |   | 1,895 |   |
| Other                                                                      |   |                             | 180    |   |   |   | 565 |   |
| Total                long-term                receivables                  |   |                             | 6,274  |   |   |   | 8,067 |   |
| Less:  current                portion                            |   |                             | 2,232  |   |   |   | 1,188 |   |
| Net                long-term                receivables                    |   | $                                | 4,042  |   |   | $ | 6,879 |   |

| (a) | This                loan, in the original amount of $1,000,000, was made in 1996 and                1997 to                the owner of the Sonesta Beach Resort, Sharm El Sheikh.  The                loan was fully repaid in June 2007. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | This                loan was made to the owner of the Sonesta Hotel & Suites 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 (7.75% at September 30, 2007), plus                ¾%.  The loan is secured by a mortgage on the hotel property,                and is being repaid out of hotel profits that are available for                distribution to the owner, and, to the extent the hotel’s earnings are                insufficient to pay the owner certain minimum annual returns and                minimum                annual target returns due under the management agreement, out of                shortfalls funded by the Company. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

| (c) | This                amount represents advances made to the owner of Trump International                Sonesta Beach Resort Sunny Isles for the Company’s share of the losses of                the resort from the opening on April 1, 2003 through October 31,                2004                ($1,391,000).  This amount was due pursuant to the terms of the                management agreement under which the Company operates the                hotel.  The advance was reduced by $256,000 received from the                hotel in 2006.  No interest is charged on this                advance.  The Company is entitled to receive payment for these                advances upon the termination of its management agreement, which                it                expects to take place in April 2008 (see Note 11 – Trump International                Sonesta Beach Resort). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | Following                Hurricane Katrina, which struck New Orleans in late August 2005,                the                Company advanced cash to Chateau Sonesta Hotel New Orleans, which                it                operated under a management agreement until October 2007.  These                advances were repaid in October 2007 (see Note 10 – Chateau Sonesta Hotel                New Orleans). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|                                        |   |                                 |    |
|---------------------------------------------|--------|--------------------------------------|---------|
|                                        |   | at                September 30, 2007 |    |
|                                        |   |                                 |    |
| Total                assets, primarily land |   | $                                    | 148,143 |   |
| Less                debt                    |   |                                 | (54,373 | ) |
| Partnership                equity           |   | $                                    | 93,770  |   |

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

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

*Credit      Line*

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

*Long-Term      Debt*

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

|                                     |   | (in                thousands)                                      |   |
|------------------------------------------|--------|--------------------------------------------------------------------|--------|
|                                     |   | Three                Months Ended September                30 |   |   | Nine                Months EndedSeptember                30 |   |
|                                     |   | 2007                                                               |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
| Direct                departmental costs |   |                                                               |   |   |   |   |   |   |   |   |   |   |
| Rooms                                    |   | $                                                                  | 2,697  |   |   | $ | 2,970 |   |   | $ | 7,819 |   |   | $ | 9,680 |   |
| Food                and beverage         |   |                                                               | 3,208  |   |   |   | 4,161 |   |   |   | 9,995 |   |   |   | 14,206 |   |
| Heat,                light and power     |   |                                                               | 769    |   |   |   | 1,106 |   |   |   | 2,198 |   |   |   | 3,356 |   |
| Other                                    |   |                                                               | 648    |   |   |   | 1,049 |   |   |   | 1,992 |   |   |   | 3,489 |   |
|                                     |   | $                                                                  | 7,322  |   |   | $ | 9,286 |   |   | $ | 22,004 |   |   | $ | 30,731 |   |

| **6.** | **Federal,                Foreign and State Income                Tax** |
|--------|-------------------------------------------------------------------------|

|                                                           |   | (in                thousands)                 |   |
|----------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                           |   | Nine                Months Ended September 30 |   |
|                                                           |   | 2007                                          |   |   | 2006 |   |
|                                                           |   |                                          |   |   |   |   |
| Current                federal income tax benefit              |   | $                                             | (42    | ) |   | $ | (355 | ) |
| Current                foreign income tax provision            |   |                                          | 211    |   |   |   | 213 |   |
| Current                state income tax provision              |   |                                          | 55     |   |   |   | 37 |   |
| Deferred                state income tax provision             |   |                                          | 24     |   |   |   | 21 |   |
| Deferred                federal income tax provision (benefit) |   |                                          | 325    |   |   |   | (960 | ) |
| Income                tax provision (benefit)                  |   | $                                             | 573    |   |   | $ | (1,044 | ) |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

| **7.** | **Segment                Information** |
|--------|----------------------------------------|

|                                                                                                    |   | (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 |   |

|                                                                                                    |   | (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 |   |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

|                                                                                |   | (in                thousands)                          |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                                                                |   | Owned                &Leased                Hotels |   |   | ManagementActivities |   |   | Consolidated |   |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |
| Revenues                                                                            |   | $                                                      | 15,004 |   |   | $ | 614 |   |   | $ | 15,618 |   |
| Other                revenues from managed and affiliated properties                |   |                                                   | --     |   |   |   | 8,063 |   |   |   | 8,063 |   |
| Total                revenues                                                       |   |                                                   | 15,004 |   |   |   | 8,677 |   |   |   | 23,681 |   |
| Operating                income (loss) before depreciation and amortization expense |   |                                                   | 1,256  |   |   |   | (1,766 | ) |   |   | (510 | ) |
| Depreciation                and amortization                                        |   |                                                   | (2,470 | ) |   |   | (124 | ) |   |   | (2,594 | ) |
| Interest                income (expense), net                                       |   |                                                   | (743   | ) |   |   | 423 |   |   |   | (320 | ) |
| Other                deductions                                                     |   |                                                   | --     |   |   |   | (3 | ) |   |   | (3 | ) |
| Segment                pre-tax loss                                                 |   |                                                   | (1,957 | ) |   |   | (1,470 | ) |   |   | (3,427 | ) |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |   |   |
| Segment                assets                                                       |   |                                                   | 82,209 |   |   |   | 45,579 |   |   |   | 127,788 |   |
| Segment                capital additions                                            |   |                                                   | 745    |   |   |   | 2 |   |   |   | 747 |   |

|                                                                                                    |   | (in                thousands)                          |   |
|---------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                                                                                    |   | Owned                &Leased                Hotels |   |   | ManagementActivities |   |   | Consolidated |   |
|                                                                                                    |   |                                                   |   |   |   |   |   |   |   |
| Revenues                                                                                                |   | $                                                      | 59,298 |   |   | $ | 3,097 |   |   | $ | 62,395 |   |
| Other                revenues from managed and affiliated properties                                    |   |                                                   | --     |   |   |   | 16,474 |   |   |   | 16,474 |   |
| Total                revenues                                                                           |   |                                                   | 59,298 |   |   |   | 19,571 |   |   |   | 78,869 |   |
| Operating                income (loss) before depreciation and amortization                expense |   |                                                   | 8,642  |   |   |   | (3,080 | ) |   |   | 5,562 |   |
| Depreciation                and amortization                                                            |   |                                                   | (7,587 | ) |   |   | (373 | ) |   |   | (7,960 | ) |
| Interest                income (expense), net                                                           |   |                                                   | (2,208 | ) |   |   | 1,110 |   |   |   | (1,098 | ) |
| Other                income                                                                             |   |                                                   | --     |   |   |   | 33 |   |   |   | 33 |   |
| Segment                pre-tax loss                                                                     |   |                                                   | (1,153 | ) |   |   | (2,310 | ) |   |   | (3,463 | ) |
|                                                                                                    |   |                                                   |   |   |   |   |   |   |   |   |   |   |
| Segment                assets                                                                           |   |                                                   | 82,209 |   |   |   | 45,579 |   |   |   | 127,788 |   |
| Segment                capital additions                                                                |   |                                                   | 4,683  |   |   |   | 148 |   |   |   | 4,831 |   |
|                                                                                                    |   |                                                   |   |   |   |   |   |   |   |   |   |   |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

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

|                                                                     |   | Three                months ended September                30 |   |   | Nine                months ended September                30 |   |
|--------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|--------|--------------------------------------------------------------|--------|
|                                                                     |   | 2007                                                          |   |   | 2006                                                         |   |   | 2007 |   |   | 2006 |   |
| Numerator:                                                               |   |                                                          |   |   |                                                         |   |   |   |   |   |   |   |
|   Income                (loss) from operations                 |   | $                                                             | 442    |   |                                                         | $      | (2,196 | ) |   | $ | 383 |   |   | $ | (2,419 | ) |
|                                                                     |   |                                                          |   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                                             |   |                                                          |   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |
|   Weighted                average number of shares outstanding |   |                                                          | 3,698  |   |                                                         |   | 3,698 |   |   |   | 3,698 |   |   |   | 3,698 |   |
|                                                                     |   |                                                          |   |   |                                                         |   |   |   |   |   |   |   |   |   |   |   |
| Net                income (loss) per share of common stock               |   | $                                                             | 0.12   |   |                                                         | $      | (0.59 | ) |   | $ | 0.10 |   |   | $ | (0.65 | ) |

| **9.** | **Pension                Plan** |
|--------|---------------------------------|

|                                                                                                                                 |   | (in                thousands)                 |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                                                                                 |   | Nine                Months ended September 30 |   |
|                                                                                                                                 |   | 2007                                          |   |   | 2006 |   |
|                                                                                                                                 |   |                                          |   |   |   |   |
| Service                cost                                                                                                          |   | $                                             | --     |   |   | $ | 1,285 |   |
| Interest                cost                                                                                                         |   |                                          | 1,335  |   |   |   | 1,678 |   |
| Expected                return on assets                                                                                             |   |                                          | (1,383 | ) |   |   | (1,432 | ) |
| Amortization                of prior service cost                                                                                    |   |                                          | --     |   |   |   | 82 |   |
| Recognized                actuarial loss                                                                                             |   |                                          | 28     |   |   |   | 510 |   |
| Pension                plan termination cost – Key Biscayne                                                                    |   |                                          | --     |   |   |   | 1,340 |   |
| Total                plan benefit cost (credit)                                                                                      |   |                                          | (207   | ) |   |   | 3,463 |   |
| Less:                amounts charged to hotels operated under management agreements               |   |                                          | --     |   |   |   | (1,641 | ) |
| Net                periodic benefit cost (credit) included in theconsolidated statements                of                operations |   | $                                             | (20    | ) |   | $ | 1,822 |   |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

| **10.** | **Chateau                Sonesta Hotel New                Orleans** |
|---------|---------------------------------------------------------------------|

**11.           Trump      International Sonesta Beach Resort**

**12.           Impact      of Recently Issued Accounting Standards**

*EITF      Issue No. 06-2 – Accounting for Sabbatical Leaves and other Similar      Benefits*

*FIN      48 – Accounting for Uncertainty in Income Taxes*

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

*EITF      Issue No. 06-3 – Presentation of Sales Taxes in Income Statements, Gross Versus      Net*

----

**Part      I – Item 2**

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

**OF      RESULTS OF OPERATIONS AND FINANCIAL CONDITION**

**RECENT      DEVELOPMENTS**

**FIRST      NINE MONTHS 2007 COMPARED TO 2006**

**REVENUES**

|                                                                                                         |   | TOTAL                REVENUES(in                thousands) |   |
|--------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                                                                                         |   | NO.                OFROOMS                                 |   |   | 2007 |   |   | 2006 |   |
| Sonesta                Beach Resort Key Biscayne                                                             |   |                                                       | 300    |   |   | $ | -- |   |   | $ | 19,341 |   |
| Royal                Sonesta Hotel Boston (Cambridge)                                                        |   |                                                       | 400    |   |   |   | 21,249 |   |   |   | 19,455 |   |
| Royal                Sonesta Hotel New Orleans                                                               |   |                                                       | 500    |   |   |   | 23,392 |   |   |   | 20,502 |   |
| Management                and service fees and other revenues                                                |   |                                                       |   |   |   |   | 4,459 |   |   |   | 3,097 |   |
| Total                revenues, excluding revenues from managed and affiliated                properties |   |                                                       |   |   |   | $ | 49,100 |   |   | $ | 62,395 |   |

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

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

**OPERATING      INCOME**

|                                                                          |   | OPERATING                INCOME (LOSS)(in                thousands) |   |
|-------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|
|                                                                          |   | 2007                                                                |   |   | 2006 |   |
| Sonesta                Beach Resort Key Biscayne                              |   | $                                                                   | --     |   |   | $ | (1,073 | ) |
| Royal                Sonesta Hotel Boston (Cambridge)                         |   |                                                                | 3,160  |   |   |   | 1,317 |   |
| Royal                Sonesta Hotel New Orleans                                |   |                                                                | 814    |   |   |   | 811 |   |
| Operating                income from hotels after management and service fees |   |                                                                | 3,974  |   |   |   | 1,055 |   |
| Management                activities and other                                |   |                                                                | (2,266 | ) |   |   | (3,453 | ) |
| Operating                income (loss)                                        |   | $                                                                   | 1,708  |   |   | $ | (2,398 | ) |

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

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

**OTHER      INCOME (DEDUCTIONS)**

**THIRD      QUARTER 2007 COMPARED TO 2006**

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

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

**REVENUES**

|                                                                                                    |   | TOTAL                REVENUES(in                thousands) |   |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                                                                                    |   | NO.                OFROOMS                                 |   |   | 2007 |   |   |  2006 |   |
| Sonesta                Beach Resort Key Biscayne                                                        |   |                                                       | 300    |   |   | $ | -- |   |   | $ | 2,710 |   |
| Royal                Sonesta Hotel Boston (Cambridge)                                                   |   |                                                       | 400    |   |   |   | 8,255 |   |   |   | 7,364 |   |
| Royal                Sonesta Hotel New Orleans                                                          |   |                                                       | 500    |   |   |   | 6,063 |   |   |   | 4,930 |   |
| Management                and service fees and other revenues                                           |   |                                                       |   |   |   |   | 1,281 |   |   |   | 614 |   |
| Total                revenues, excluding revenues from managed and affiliated                properties |   |                                                       |   |   |   | $ | 15,599 |   |   | $ | 15,618 |   |

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

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

**OPERATING      INCOME**

|                                                                                                           |   | OPERATING                INCOME (LOSS) (in                thousands) |   |
|----------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|
|                                                                                                           |   | 2007                                                                      |   |   | 2006 |   |
| Sonesta                Beach Resort Key Biscayne                                                               |   | $                                                                         | --     |   |   | $ | (2,381 | ) |
| Royal                Sonesta Hotel Boston (Cambridge)                                                          |   |                                                                      | 1,860  |   |   |   | 1,057 |   |
| Royal                Sonesta Hotel New Orleans                                                                 |   |                                                                      | (58    | ) |   |   | 110 |   |
| Operating                income (loss) from hotels after  management and service                fees |   |                                                                      | 1,802  |   |   |   | (1,214 | ) |
| Management                activities and other                                                                 |   |                                                                      | (993   | ) |   |   | (1,890 | ) |
| Operating                income (loss)                                                                         |   | $                                                                         | 809    |   |   | $ | (3,104 | ) |

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

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

**OTHER      INCOME (DEDUCTIONS)**

**FEDERAL,      FOREIGN AND STATE INCOME TAXES**

**LIQUIDITY      AND CAPITAL RESOURCES**

----

**PART      I – Item 3**

**QUANTITATIVE      AND QUALITATIVE DISCLOSURE OF MARKET      RISK**

|                                 |   | YEAR   |   |   |   |   |   |   |   |   |   |   |
|--------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                 |   | 2007   |   |   | 2008   |   |   | 2009   |   |   | 2010   |   |   | Thereafter |   |   | Total |   |   | Fair                Value |   |
| Fixed                rate            |   | $      | --     |   |   | $      | 602    |   |   | $      | 665    |   |   | $ | 32,794 |   |   | $ | -- |   |   | $ | 34,061 |   |   | $ | 35,096 |   |
| Average                interest rate |   |   | 8.6    | %      |   |   | 8.6    | %      |   |   | 8.6    | %      |   |   | 8.6 | % |   |   |   |   |   |   |   |   |   |   |   |   |

----

**PART      I – Item 4**

**INTERNAL      CONTROLS AND PROCEDURES**

----

**PART      II – Other Information**

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

----

**SIGNATURE**

|   | **SONESTA                INTERNATIONAL HOTELS CORPORATION** |
|--------|-------------------------------------------------------------|
|   |                                                        |   |
|   |                                                        |   |
|   | By:                                                         |   |
|   |                                                        | Boy                van Riel |
|   |                                                        | Vice                President and Treasurer |
|   |                                                        |   |
|   |                                                        | (Authorized                to sign on behalf of the Registrant as Principal Financial                Officer) |
|   |                                                        |   |
|   | Date:                November 14, 2007                      |

----