**FORM 10-Q**

 

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**(Mark One)**

 
| **ý**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | ** ** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |       |                                                                                                      |
| **For the  Quarterly period ended March 31, 2005**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **OR**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **o**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |       |                                                                                                      |
| **For the transition period from                                           to                                            ** |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **Commission  file number 0-9032**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

 

**SONESTA INTERNATIONAL HOTELS CORPORATION**

(Exact name of registrant as specified in its charter)

 
| **NEW  YORK**                                                                        | ** ** | **13-5648107**                        |
|--------------------------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction  or incorporation or organization)                     |       | (I.R.S. Employer  Identification No.) |
|                                                                                 |       |                                  |
| **116  Huntington Avenue, Boston, MA 02116**                                         |
| (Address of principal  executive offices)                                            |
|                                                                                 |       |                                  |
| (Zip Code)                                                                           |
| **617-421-5400**                                                                     |
|                                                                                 |       |                                  |
|                                                                                 |       |                                  |
| (Registrant’s  telephone number, including area code)                           |
|                                                                                 |       |                                  |
|                                                                                 |       |                                  |
| (Former name,  former address and former fiscal year,  if changed since last report) |

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by section 13 or 15 (d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.

 
| Yes ý |   | No o |
|------------|--------|-----------|

 

 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Exchange Act Rule 12b-02)

 
| Yes o |   | No ý |
|------------|--------|----------------|

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Number of Shares of Common Stock Outstanding

As of May 4, 2005 — $.80 par value,

Class A — 3,698,230

 

 

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**INDEX**

 

**SONESTAINTERNATIONAL HOTELS CORPORATION**

 

 
| Part I. Financial Information |                                                                                                                      | ** ** |
|------------------------------------|---------------------------------------------------------------------------------------------------------------------------|------------|
|                               |                                                                                                                      |       |
| Item 1.                            | Financial Statements                                                                                                      |       |
|                               |                                                                                                                      |       |
|                               | Condensed  consolidated balance sheets—March 31, 2005 (unaudited) and  December 31, 2004                   |       |
|                               |                                                                                                                      |       |
|                               | Condensed consolidated  statements of operations—Three month periods ended March 31, 2005 and  2004 (unaudited) |       |
|                               |                                                                                                                      |       |
|                               | Condensed  consolidated statements of cash flows—Three month periods ended  March 31, 2005 and 2004 (unaudited) |       |
|                               |                                                                                                                      |       |
|                               | Notes  to condensed consolidated financial statements—March 31, 2005 and 2004                                   |       |
|                               |                                                                                                                      |       |
| Item 2.                            | Management’s  Discussion and Analysis of Results of Operations and Financial Condition—March 31,  2005     |       |
|                               |                                                                                                                      |       |
| Item 3.                            | Quantitative  and Qualitative Disclosure of Market Risk                                                                   |       |
|                               |                                                                                                                      |       |
| Item 4.                            | Internal  Controls and Procedures                                                                                         |       |
|                               |                                                                                                                      |       |
| Part II. Other  Information   |                                                                                                                      |       |
|                               |                                                                                                                      |       |
|                               | Signature page                                                                                                            |       |
|                               |                                                                                                                      |       |
| 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                                                            |       |

 

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###### **Part I** –  Item 1.     Financial Information

 

**SONESTAINTERNATIONAL HOTELS CORPORATION**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

March 31, 2005and December 31, 2004

 
| ** **                                                                            | ** ** | **(in thousands)**       | ** ** |
|---------------------------------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                                                            | ** ** | **March  31  2005** | ** ** | **December 31  2004** | ** ** |
| ** **                                                                            | ** ** | **(unaudited)**          | ** ** | ** ** | ** ** |
| ** **                                                                            | ** ** | ** **               | ** ** | ** ** | ** ** |
| ASSETS                                                                                |       |                     |       |   |   |
| Current assets:                                                                       |       |                     |       |   |   |
| Cash and cash  equivalents                                                            |       | $                        | 5,220      |   | $ | 7,950 |   |
| Restricted cash                                                                       |       | 907                      |       | 927 |   |
| Accounts and  notes receivable:                                                       |       |                     |       |   |   |
| Trade, less  allowance of $223 ($212 at December 31, 2004) for doubtful accounts |       | 8,082                    |       | 6,960 |   |
| Other, including  current portion of long-term receivables and advances               |       | 1,410                    |       | 1,601 |   |
| Total accounts  and notes receivable                                                  |       | 9,492                    |       | 8,561 |   |
| Inventories                                                                           |       | 1,107                    |       | 1,215 |   |
| Prepaid and  current deferred taxes                                                   |       | 4,973                    |       | — |   |
| Prepaid expenses  and other                                                           |       | 2,641                    |       | 2,455 |   |
|                                                                                  |       |                     |       |   |   |
| Total current  assets                                                                 |       | 24,340                   |       | 21,108 |   |
|                                                                                  |       |                     |       |   |   |
| Long-term  receivables and advances                                                   |       | 8,777                    |       | 9,066 |   |
|                                                                                  |       |                     |       |   |   |
| Property and  equipment, at cost:                                                     |       |                     |       |   |   |
| Land and land  improvements                                                           |       | 9,102                    |       | 9,102 |   |
| Buildings                                                                             |       | 57,861                   |       | 57,861 |   |
| Furniture and  equipment                                                              |       | 42,278                   |       | 41,050 |   |
| Leasehold  improvements                                                               |       | 7,576                    |       | 7,527 |   |
| Projects in  progress                                                                 |       | 2                        |       | 148 |   |
|                                                                                  |       | 116,819                  |       | 115,688 |   |
|                                                                                  |       |                     |       |   |   |
| Less:  accumulated depreciation and amortization                                      |       | 40,968                   |       | 39,050 |   |
| Net property and  equipment                                                           |       | 75,851                   |       | 76,638 |   |
|                                                                                  |       |                     |       |   |   |
| Other long-term  assets                                                               |       | 2,561                    |       | 2,725 |   |
|                                                                                  |       | $                        | 111,529    |   | $ | 109,537 |   |

 

*See accompanying notes tocondensed consolidated financial statements.*

 

1

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** **

**SONESTAINTERNATIONAL HOTELS CORPORATION**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

March 31, 2005 and December 31,2004

 
| ** **                                                                                                   | ** ** | **(in thousands)** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                                                                   | ** ** | **March 31  2005** | ** ** | **December 31  2004** | ** ** |
| ** **                                                                                                   | ** ** | **(unaudited)**    | ** ** | ** ** | ** ** |
| ** **                                                                                                   | ** ** | ** **         | ** ** | ** ** | ** ** |
| LIABILITIES AND  COMMON STOCKHOLDERS’ EQUITY                                                            |       |               |       |   |   |
| Current  liabilities:                                                                                        |       |               |       |   |   |
| Accounts payable                                                                                             |       | $                  | 4,048      |   | $ | 3,383 |   |
| Advance deposits                                                                                             |       | 2,450              |       | 2,861 |   |
| Federal, foreign  and state income taxes                                                                     |       | 597                |       | 740 |   |
| Accrued  liabilities:                                                                                        |       |               |       |   |   |
| Salaries and  wages                                                                                          |       | 1,404              |       | 2,111 |   |
| Rentals                                                                                                      |       | 2,419              |       | 6,417 |   |
| Interest                                                                                                     |       | 1,147              |       | 305 |   |
| Pension and  other employee benefits                                                                         |       | 1,294              |       | 751 |   |
| Other                                                                                                        |       | 1,450              |       | 1,056 |   |
|                                                                                                         |       |               |       |   |   |
| Total accrued liabilities                                                                                    |       | 7,714              |       | 10,640 |   |
|                                                                                                         |       |               |       |   |   |
| Total current  liabilities                                                                                   |       | 14,809             |       | 17,624 |   |
|                                                                                                         |       |               |       |   |   |
| Long-term debt                                                                                               |       | 69,600             |       | 69,816 |   |
|                                                                                                         |       |               |       |   |   |
| Deferred federal  and state income taxes                                                                     |       | 5,881              |       | 5,131 |   |
|                                                                                                         |       |               |       |   |   |
| Other  non-current liabilities                                                                               |       | 5,872              |       | 5,702 |   |
|                                                                                                         |       |               |       |   |   |
| 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                                                                                           |       | 22,538             |       | 18,435 |   |
| Treasury  shares—2,404, at cost                                                                         |       | (12,053            | )          | (12,053 | ) |
| Total common  stockholders’ equity                                                                      |       | 15,367             |       | 11,264 |   |
|                                                                                                         |       | $                  | 111,529    |   | $ | 109,537 |   |

 

*See accompanying notes tocondensed consolidated financial statements.*

 

2

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** **

**SONESTAINTERNATIONAL HOTELS CORPORATION**

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

(in thousandsexcept for per share data)

 
| ** **                                     | ** ** | **Three Months Ended March 31** | ** ** |
|------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                     | ** ** | **2005**                             | ** ** | **2004** | ** ** |
| ** **                                     | ** ** | ** **                           | ** ** | ** ** | ** ** |
| Revenues:                                      |       |                                 |       |   |   |
| Rooms                                          |       | $                                    | 14,272     |   | $ | 13,996 |   |
| Food and  beverage                             |       | 6,667                                |       | 6,426 |   |
| Management,  license and service fees          |       | 1,715                                |       | 1,168 |   |
| Parking,  telephone and other                  |       | 2,474                                |       | 2,332 |   |
|                                           |       | 25,128                               |       | 23,922 |   |
|                                           |       |                                 |       |   |   |
| Costs and  expenses:                           |       |                                 |       |   |   |
| Costs and  operating expenses                  |       | 10,646                               |       | 10,137 |   |
| Advertising and promotion                      |       | 1,859                                |       | 1,810 |   |
| Administrative  and general                    |       | 4,246                                |       | 3,768 |   |
| Human resources                                |       | 402                                  |       | 362 |   |
| Maintenance                                    |       | 1,395                                |       | 1,354 |   |
| Rentals                                        |       | 2,569                                |       | 2,449 |   |
| Property taxes                                 |       | 674                                  |       | 607 |   |
| Depreciation and  amortization                 |       | 1,988                                |       | 2,112 |   |
|                                           |       | 23,779                               |       | 22,599 |   |
|                                           |       |                                 |       |   |   |
| Operating income                               |       | 1,349                                |       | 1,323 |   |
|                                           |       |                                 |       |   |   |
| Other income  (deductions):                    |       |                                 |       |   |   |
| Interest expense                               |       | (1,524                               | )          | (1,623 | ) |
| Interest income                                |       | 138                                  |       | 84 |   |
| Foreign exchange  loss                         |       | (10                                  | )          | (2 | ) |
| Gain on sales of  assets                       |       | —                               |       | 13 |   |
|                                           |       | (1,396)                              |       | (1,528 | ) |
|                                           |       |                                 |       |   |   |
| Loss before  income tax provision (benefit)    |       | (47                                  | )          | (205 | ) |
| Income tax  provision (benefit)                |       | (4,150                               | )          | 114 |   |
| Net income  (loss)                             |       | 4,103                                |       | (319 | ) |
|                                           |       |                                 |       |   |   |
| Retained  earnings at beginning of period      |       | 18,435                               |       | 23,037 |   |
| Retained  earnings at end of period            |       | $                                    | 22,538     |   | $ | 22,718 |   |
|                                           |       |                                 |       |   |   |
| Net income  (loss) per share of common stock   |       | $                                    | 1.11       |   | $ | (0.09 | ) |
|                                           |       |                                 |       |   |   |
| Weighted average  number of shares outstanding |       | 3,698                                |       | 3,698 |   |

 

*See accompanying notes tocondensed consolidated financial statements.*

 

3

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** **

**SONESTAINTERNATIONAL HOTELS CORPORATION**

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

Increase(Decrease) in Cash  (in thousands)

 
| ** **                                                                                          | ** ** | **ThreeMonths Ended March  31** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                                          | ** ** | **2005**                             | ** ** | **2004** | ** ** |
|                                                                                                |       |                                 |       |   |   |
| Cash provided  (used) by operating activities                                                       |       |                                 |       |   |   |
| Net income  (loss)                                                                                  |       | $                                    | 4,103      |   | $ | (319 | ) |
| Adjustments to  reconcile net income (loss) to net cash provided by (used in) operating  activities |       |                                 |       |   |   |
| Pension expense                                                                                     |       | 603                                  |       | 396 |   |
| Depreciation and  amortization of property and equipment                                            |       | 1,988                                |       | 2,112 |   |
| Other  amortization                                                                                 |       | 23                                   |       | 22 |   |
| Income tax  benefit                                                                                 |       | (4,223                               | )          | — |   |
| Gain on sales of  assets                                                                            |       | —                               |       | (13 | ) |
| Deferred  interest income                                                                           |       | (72                                  | )          | (54 | ) |
| Deferred  interest expense                                                                          |       | 626                                  |       | 629 |   |
|                                                                                                |       |                                 |       |   |   |
| Changes in  assets and liabilities                                                                  |       |                                 |       |   |   |
| Restricted cash                                                                                     |       | 20                                   |       | (1,268 | ) |
| Accounts and  notes receivable                                                                      |       | (1,098                               | )          | (45 | ) |
| Inventories                                                                                         |       | 108                                  |       | (12 | ) |
| Prepaid expenses  and other                                                                         |       | 17                                   |       | (124 | ) |
| Accounts payable                                                                                    |       | 586                                  |       | 573 |   |
| Advance deposits                                                                                    |       | (411                                 | )          | (359 | ) |
| Federal, foreign  and state income taxes                                                            |       | (143                                 | )          | 57 |   |
| Accrued  liabilities                                                                                |       | (4,202                               | )          | (2,844 | ) |
| Cash used by  operating activities                                                                  |       | (2,075                               | )          | (1,249 | ) |
|                                                                                                |       |                                 |       |   |   |
| Cash provided  (used) by investing activities                                                       |       |                                 |       |   |   |
| Expenditures for  property and equipment                                                            |       | (1,131                               | )          | (809 | ) |
| Other  investments                                                                                  |       | —                               |       | (27 | ) |
| Payments received  on long-term receivables and advances                                            |       | 476                                  |       | 261 |   |
| Proceeds from  sales of assets                                                                      |       | —                               |       | 13 |   |
| New loans and  advances                                                                             |       | —                               |       | (482 | ) |
| Cash used by  investing activities                                                                  |       | (655                                 | )          | (1,044 | ) |
|                                                                                                |       |                                 |       |   |   |
| Net decrease in  cash                                                                               |       | (2,730                               | )          | (2,293 | ) |
| Cash and cash equivalents  at beginning of period                                                   |       | 7,950                                |       | 4,327 |   |
| Cash and cash  equivalents at end of period                                                         |       | $                                    | 5,220      |   | $ | 2,034 |   |

 

*See accompanying notes tocondensed consolidated financial statements.*

 

4

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** **

Supplemental Schedule ofInterest and Income Taxes Paid

Cash paid for interest in the 2005 three-month periodand the 2004 three-month period was approximately $875,000 and $964,000,respectively.    Cash paid for incometaxes in the first quarter of 2005 and 2004 was approximately $232,000 and $57,000,respectively.

 

*See accompanying notes tocondensed consolidated financial statements.*

 

5

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**SONESTA INTERNATIONAL HOTELSCORPORATION**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

 

**1.**             **Basis of Presentation**

 

The accompanyingunaudited condensed consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesfor interim financial information and with the instructions to Form 10-Qand Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotesrequired by accounting principles generally accepted in the United States forcomplete financial statements.  In theopinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for a fair presentation have been included.  Operating results for the three month periodended March 31, 2005 are not necessarily indicative of the results that maybe expected for the year ended December 31, 2005.

 

The balance sheet at December 31,2004 has been derived from the audited financial statements at that date butdoes not include all of the information and footnotes required by accountingprinciples generally accepted in the United States for complete financialstatements.

 

For further information,refer to the consolidated financial statements and footnotes thereto includedin the Company’s Annual Report on Form 10-K for the year ended December 31,2004.

 

**2.****                                      Long-TermReceivables and Advances**

 
| ** **                                         | ** ** | **(in thousands)**       | ** ** |
|----------------------------------------------------|------------|--------------------------|------------|
| ** **                                         | ** ** | **March  31, 2005** | ** ** | **December 31, 2004** | ** ** |
| Sharm El Sheikh,  Egypt (a)                        |       | $                        | 583        |   | $ | 646 |   |
| Sonesta  Hotel & Suites Coconut Grove (b) |       | 5,143                    |       | 5,201 |   |
| Trump  International Sonesta Beach Resort (c)      |       | 3,687                    |       | 3,788 |   |
| Other                                              |       | 511                      |       | 741 |   |
| Total long-term  receivables                       |       | 9,924                    |       | 10,376 |   |
| Less: current  portion                             |       | 1,147                    |       | 1,310 |   |
| Net long-term  receivables                         |       | $                        | 8,777      |   | $ | 9,066 |   |

 

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(a)                            Thisloan, in the original amount of $1,000,000, was made in 1996 and 1997 to the ownerof the Sonesta Beach Resort, Sharm El Sheikh. The loan bears interest at the prime rate (5.75% at March 31, 2005)and is adjusted semi-annually.  Currently,the loan is being repaid with monthly payments of $23,800.  The loan matures in 2007.

 

(b)                             Thisloan was made to the owner of the Sonesta Hotel & Suites CoconutGrove, Miami, which opened in April 2002. The Company has loaned $4,000,000 to fund construction and furniture,fixtures and equipment (“FF&E”) costs, and, in addition, has loaned $1,000,000for pre-opening costs and working capital. The loan for construction and FF&E costs bears interest at the primerate plus 0.75% (6.50% at March 31, 2005). No interest is being charged on the loan for pre-opening costs.  These loans are secured by a mortgage on thehotel property.  Starting in 2004, theseloans are being repaid, the loan for pre-opening costs first, out of hotelprofits that would otherwise be available for distribution to the owner, and,to the extent the hotel’s earnings are insufficient to pay the owner theminimum annual owner’s return, out of the minimum returns funded by theCompany.

 

6

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** **

(c)                                  This amount represents advances made tothe owner of Trump International Sonesta Beach Resort Sunny Isles forpre-opening costs ($2,296,000) and for working capital and the Company’s shareof the losses of the resort from the opening on April 1, 2003 through October 31,2004 ($1,391,000).  No interest will becharged on these advances, which will be repaid out of future available profitsgenerated by the hotel.

 

**3.**             **Borrowing Arrangements**

 

*Credit Lines*

 

The Company has a$2,000,000 demand line of credit.  Thisline bears interest at the prime rate (5.75% at March 31, 2005).  Advances under this line require the bank’sapproval each time a request is made.  Noamounts were outstanding under this line of credit at March 31, 2005.

 

A subsidiary of theCompany has a $3,000,000 line of credit, which expires on December 31,2005.  The loan is secured by a mortgageon the Company’s leasehold interest in the Royal Sonesta Hotel New Orleans, andby a Company guaranty.   The terms of theline require a certain minimum level of income, a minimum net worth and amaximum defined debt to net worth ratio for Royal Sonesta Hotel NewOrleans.   The interest rate is LIBORplus 300 basis points (5.9% at March 31, 2005), and the commitment fee onthe unused portion of the line is 0.65% per annum.  No amounts were outstanding under this lineof credit at March 31, 2005.

 

## *Long-TermDebt*

##  

| ** **                                                          | ** ** | **(in thousands)**      | ** ** |
|---------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                          | ** ** | **March 31, 2005** | ** ** | **December 31, 2004** | ** ** |
| Charterhouse of  Cambridge Trust and Sonesta of Massachusetts Inc.: |       |                    | ** ** | ** ** | ** ** |
| First mortgage  note                                                |       | $                       | 39,633     |   | $ | 39,633 |   |
| Sonesta Beach  Resort Limited Partnership:                          |       |                    |       |   |   |
| First mortgage note                                                 |       | 29,967                  |       | 29,967 |   |
| Accrued interest                                                    |       | 842                     |       | 216 |   |
|                                                                |       | 70,442                  |       | 69,816 |   |
| Less current  portion of accrued interest                           |       | 842                     |       | — |   |
| Total long-term  debt                                               |       | $                       | 69,600     |   | $ | 69,816 |   |

 

The Company’s long-termdebt is secured by first mortgages on the Royal Sonesta Hotel Boston(Cambridge) and Sonesta Beach Resort Key Biscayne properties, which areincluded in fixed assets at net book values of $20,861,000 and $38,466,000 at March 31,2005, respectively.   Both loans areprovided by the same lender, and are cross-collateralized.   The interest rate on the loans is 8.6% forthe term of the loan.

 

In April 2005, theCompany closed on a transaction to sell the land and improvements of theSonesta Beach Resort, Key Biscayne (see Note 10, Subsequent Events).  As part of this transaction, the note securedby the Key Biscayne hotel was repaid.  Aprepayment penalty that was due was paid for by the buyer.  Out of the cash proceeds of the sale, theCompany also paid $5,572,000 to reduce the principal balance of the RoyalSonesta Hotel Boston (Cambridge) loan to $34,061,000.  No prepayment penalties were due on theseprincipal payments.

 

7

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** **

Effective December 1,2003, the Company and the Lender restructured the mortgage loans.  Through December 1, 2006, the Company isrequired to make payments of interest only at 5% per annum, and starting on January 1,2007 and through December 1, 2007, the Company will be required to makepayments of interest only at 8.6% per annum.  As of January 1, 2008, payments will be based on interest andprincipal, calculated on the original 25 year amortization schedule of theloan, taking into account the aforementioned prepayments of principal.   During the restructuring period, interestwill continue to accrue at 8.6%, and unpaid interest will be added to theprincipal balance of the loans at the end of each year.   During the remaining term of the restructuring,excess cash flow from the Cambridge hotel remaining after payment of interestis required to be paid into escrow, and may be used solely for the futurepayment of hotel expenses or capital expenditures, or to reduce the amount ofthe accrued and unpaid interest.   At March 31,2005, the excess cash flow equaled $907,000, which amount is included inRestricted Cash on the Company’s balance sheet.

 

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

 

Hotel costs and operatingexpenses in the accompanying condensed Consolidated Statements of Operationsare summarized below:

 
| ** **                 | ** ** | **(in thousands)**                   | ** ** |
|----------------------------|------------|--------------------------------------|------------|
| ** **                 | ** ** | **Three Months Ended March 31** | ** ** |
| ** **                 | ** ** | **2005**                             | ** ** | **2004** | ** ** |
| Direct  departmental costs |       |                                 |       |   |   |
| Rooms                      |       | $                                    | 3,411      |   | $ | 3,244 |   |
| Food and  beverage         |       | 5,266                                |       | 4,972 |   |
| Heat, light and  power     |       | 800                                  |       | 777 |   |
| Other                      |       | 1,169                                |       | 1,144 |   |
|                       |       | $                                    | 10,646     |   | $ | 10,137 |   |

 

Direct departmental costsinclude payroll expenses and related payroll burden, the cost of food andbeverage consumed and other departmental costs.

 

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

 

The provision(benefit) for income taxes in the accompanying condensed ConsolidatedStatements of Operations is summarized below:

 
| ** **                            | ** ** | **(in thousands)**                   | ** ** |
|---------------------------------------|------------|--------------------------------------|------------|
| ** **                            | ** ** | **Three Months Ended March 31** | ** ** |
| ** **                            | ** ** | **2005**                             | ** ** | **2004** | ** ** |
| Current federal  income tax provision |       | $                                    | 276        |   | $ | — |   |
| Current foreign  income tax provision |       | 118                                  |       | 67 |   |
| Current state  income tax provision   |       | 56                                   |       | 47 |   |
| Deferred state  income tax benefit    |       | (296                                 | )          | — |   |
| Deferred federal  income tax benefits |       | (4,304                               | )          | — |   |
| Income tax  provision (benefit)       |       | $                                    | (4,150     | ) | $ | 114 |   |

 

8

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** **

During 2003 and 2004, theCompany recorded valuation allowances totaling $3,862,000 against the federalincome tax benefits on its pretax losses of approximately $10.6 millionincurred during these two years, since it was uncertain if the Company couldrealize a future benefit for these losses. In addition, valuation allowances of $296,000 were recorded againstFlorida State tax loss carry forwards, for the same reason.  In April 2005, the Company completed thesale of the land and improvements of Sonesta Beach Resort Key Biscayne (seeNote 10 – Subsequent Events).  Thistransaction will result in significant taxable income, and it is now morelikely than not that the Company will realize the benefit of the prior yearlosses.  Accordingly, in the firstquarter of 2005, the Company reversed the valuation allowances previously recorded.

 

**6.****             SegmentInformation**

 

Segment information forthe Company’s two reportable segments, Owned & Leased Hotels andManagement Activities, for the three month periods ending March 31, 2005and 2004 follows:

 

Quarter ended March 31,2005

 
| ** **                                                            | ** ** | **(in thousands)**                  | ** ** |
|-----------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                            | ** ** | **Owned &  Leased Hotels** | ** ** | **Management  Activities** | ** ** | **Consolidated** | ** ** |
|                                                                  |       |                                |       |   |   |   |   |
| Revenues                                                              |       | $                                   | 23,269     |   | $ | 1,859 |   | $ | 25,128 |   |
| Operating income  (loss) before depreciation and amortization expense |       | 3,348                               |       | (11 | ) | 3,337 |   |
| Depreciation and  amortization                                        |       | (1,825                              | )          | (163 | ) | (1,988 | ) |
| Interest income  (expense), net                                       |       | (1,511                              | )          | 125 |   | (1,386 | ) |
| Other deductions                                                      |       | —                              |       | (10 | ) | (10 | ) |
| Segment pre-tax  profit (loss)                                        |       | 12                                  |       | (59 | ) | (47 | ) |
|                                                                  |       |                                |       |   |   |   |   |
| Segment assets                                                        |       | 84,563                              |       | 26,966 |   | 111,529 |   |
| Segment capital  additions                                            |       | 1,102                               |       | 29 |   | 1,131 |   |
|                                                                       |            |                                     |            |  |  |  |  |  |  |  |

 

Quarter ended March 31,2004

 
| ** **                                                            | ** ** | **(in thousands)**                  | ** ** |
|-----------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                            | ** ** | **Owned &  Leased Hotels** | ** ** | **Management  Activities** | ** ** | **Consolidated** | ** ** |
|                                                                  |       |                                |       |   |   |   |   |
| Revenues                                                              |       | $                                   | 22,743     |   | $ | 1,179 |   | $ | 23,922 |   |
| Operating income  (loss) before depreciation and amortization expense |       | 3,688                               |       | (253 | ) | 3,435 |   |
| Depreciation and  amortization                                        |       | (1,947                              | )          | (165 | ) | (2,112 | ) |
| Interest income  (expense), net                                       |       | (1,611                              | )          | 72 |   | (1,539 | ) |
| Other income                                                          |       | 7                                   |       | 4 |   | 11 |   |
| Segment pre-tax  profit (loss)                                        |       | 137                                 |       | (342 | ) | (205 | ) |
|                                                                  |       |                                |       |   |   |   |   |
| Segment assets                                                        |       | 88,109                              |       | 20,115 |   | 108,224 |   |
| Segment capital  additions                                            |       | 648                                 |       | 161 |   | 809 |   |
|                                                                       |            |                                     |            |  |  |  |  |  |  |  |

 

9

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**7.****             Earningsper Share**

 

As the Company has nodilutive securities, there is no difference between basic and diluted earningsper share of common stock.   Thefollowing table sets forth the computation of basic income (loss) per share ofcommon stock (in thousands, except for per share data):

 
| ** **                                     | ** ** | **Three months ended March 31** | ** ** |
|------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                     | ** ** | **2005**                             | ** ** | **2004** | ** ** |
| Numerator:                                     |       |                                 |       |   |   |
| Income (loss)  from operations                 |       | $                                    | 4,104      |   | $ | (319 | ) |
|                                           |       |                                 |       |   |   |
| Denominator:                                   |       |                                 |       |   |   |
| Weighted average  number of shares outstanding |       | 3,698                                |       | 3,698 |   |
|                                           |       |                                 |       |   |   |
| Income (loss)  per share of common stock       |       | $                                    | 1.11       |   | $ | (0.09 | ) |

 

**8.****                      PensionPlan**

 

The components of theCompany’s net periodic pension cost for the Company’s Pension Plan were asfollows (in thousands):

 

| ** **                                                                       | ** ** | **Three months ended March 31** | ** ** |
|----------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                       | ** ** | **2005**                             | ** ** | **2004** | ** ** |
|                                                                             |       |                                 |       |   |   |
| Service cost                                                                     |       | $                                    | 428        |   | $ | 326 |   |
| Interest cost                                                                    |       | 493                                  |       | 451 |   |
| Expected return  on assets                                                       |       | (421                                 | )          | (420 | ) |
| Amortization of  prior service cost                                              |       | 24                                   |       | 24 |   |
| Amortization of  transition asset                                                |       | (23                                  | )          | (24 | ) |
| Recognize  actuarial loss                                                        |       | 127                                  |       | 59 |   |
| Total plan  benefit cost                                                         |       | 628                                  |       | 416 |   |
| Less: amounts  charged to hotels operated under management agreements            |       | (25                                  | )          | (20 | ) |
| Net periodic  benefit cost included in the consolidated statements of operations |       | $                                    | 603        |   | $ | 396 |   |

 

The Company expects tomake contributions to the Pension Plan during 2005 of no less than $605,000.

 

The Company does not haveany other post-retirement benefit plans.

 

10

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**9.****             LegalProceedings**

 

Sonesta Hotels of Florida, Inc.(“SHF”), a wholly owned subsidiary of the Company, operates Trump InternationalSonesta Beach Resort, in Sunny Isles, Florida (the “Hotel”), under a ManagementAgreement with the Hotel’s owner, Sunny Isles Luxury Ventures L.C. (“SILV”).  The Hotel opened for business in April 2003.  The Hotel is a condominium hotel, and theguestrooms are owned by third party buyers and, to the extent condominium unitsremain unsold, by SILV.  Included in theManagement Agreement is an option to purchase the Hotel’s non-guestroom areas(the “Hotel Lot”).  The purchase price istwenty million dollars ($20,000,000), which would be 100% financed by SILV bymeans of a non-recourse, 25-year loan secured by a mortgage on the HotelLot.  The Company exercised its purchaseoption in September 2004, and the parties agreed that they would close thetransaction in early January 2005. Despite its earlier agreements, SILV has taken the position that it willnot close on this transaction.  TheCompany believes SILV has no basis to delay the closing date, and has filed a lawsuitin the Circuit Court of the 11th Judicial Circuit in Miami-Dade County,Florida, to compel SILV to close the transaction.  Because of this, the closing date will bepostponed pending either a ruling compelling SILV to close or the partiesotherwise agreeing to close.  In themeantime, the Company continues management of the Hotel as usual.  Since payments on the mortgage loan followingthe closing are the same as the payments of minimum owner’s return andadditional owner’s return under the Management Agreement, there is no effect onthe Company’s cash flow from operations as a result of this delay in closingthe transaction.  The delay does postponethe repayment to the Company of the approximately $2,296,000 it advanced forthe Hotel’s pre-opening expenses.

 

In addition, SILV and theCompany agreed to resolve in a binding arbitration issues related to whether ornot certain non-guestroom area furniture, fixtures and equipment (“FF&E”)falls within the Company’s obligation to fund “Excess FF&E” under theManagement Agreement, and SILV’s contention that Sonesta has spent excessiveamounts on pre-opening expenses.  Thearbitration proceedings were completed during February 2005, and adecision was rendered by the arbiter on March 29, 2005.  The Company’s position that the pre-openingexpenses were appropriate and in line with industry norms was upheld.  After disallowing approximately $101,000,primarily spent on computer-related training, SILV was found responsible for$2,296,000 in pre-opening expenses, to be repaid in accordance with themanagement agreement.  With regards tothe FF&E issue, the decision favored Sonesta’s position for the majority ofthe disputed items, especially construction related items which SILV claimedwere part of Sonesta’s funding obligation. The arbitrator did find in favor of SILV on certain items, and theCompany has increased its investment, which it previously estimated at$2,000,000, to $2,100,000.

 

**10.****          SubsequentEvents**

 

In January 2005Sonesta Beach Resort Limited Partnership (“SBRLP”), a wholly owned subsidiaryof the Company, and owner of Sonesta Beach Resort Key Biscayne, entered into apartnership agreement with Fortune International, a Miami-based real estatedevelopment and brokerage firm, for the purpose of redeveloping the SonestaBeach Resort.  SBRLP is a 50% limitedpartner in the new partnership (named SBR-Fortune Associates, LLLP), andFortune International will be the general partner and a limited partner, alsoowning a 50% interest.

 

On April 19, 2005SBRLP completed the sale of Sonesta Beach Resort, in Key Biscayne, Florida toSBR-Fortune Associates.

 

SBRLP contributed theland, which is valued at $120,000,000, to the Partnership.  At the closing in April 2005, SBRLPreceived $30,000,000 in cash, and was relieved of the approximately $30,000,000mortgage loan on the hotel.  In addition,SBRLP received a 50% partnership interest, with a priority return of $60,000,000to be paid from the net proceeds of the sales of condominium units in the newresort after paying off construction debt. Fortune International will have sole responsibility for arrangingfinancing and completing construction of the new Sonesta resort.

 

11

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The $30,000,000 mortgageloan on the hotel was provided by the same lender that holds the approximately $40,000,000mortgage loan on Royal Sonesta Hotel, in Cambridge, Massachusetts, which hotelthe Company owns and operates.  The twomortgage loans were cross-collateralized. By agreement with the lender, approximately $5,572,000 of the saleproceeds was used to pay down the Cambridge loan’s deferred principal paymentsof $1,077,000, and for an additional prepayment of $4,495,000 to obtain thelender’s release of cross-collateralization.

 

The Company expects tocontinue to operate the Sonesta Beach Resort Key Biscayne under a lease withSBR-Fortune Associates LLLP until August 2006, when construction of thenew resort is expected to begin, but has the right to cease operations soonerif the hotel’s revenues are insufficient to cover all expenses, including the$1 per year token rent.

 

12

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**Part I – Item 2**

** **

**MANAGEMENT’SDISCUSSION AND ANALYSIS**

**OFRESULTS OF OPERATIONS AND FINANCIAL CONDITION**

 

**FIRST QUARTER 2005 COMPARED TO2004**

 

In the first quarter of2005 the Company recorded net income of $4,103,000, or $1.11 per share,compared to a net loss of $319,000, or $(0.09) per share, in the first quarterof 2004.  The Company recorded a net taxbenefit of $4,150,000 during the 2005 first quarter.  During 2003 and 2004, the Company recordedvaluation allowances against federal and state income taxes benefits, becauseit was uncertain if the Company would realize a future benefit for the lossesincurred during these years.  Because ofthe sale of Sonesta Beach Resort Key Biscayne (see Note 10 – SubsequentEvents), the Company will realize significant taxable income in 2005, and it isnow more likely than not that the Company will realize the benefit of the prioryear losses.  Accordingly, in the firstquarter of 2005, the Company reversed the valuation allowances.  The loss before income taxes was $47,000 inthe 2005 quarter compared to a pre-tax loss of $205,000 during the 2004 firstquarter.  Increases in corporatemanagement income and increased profits from Royal Sonesta Hotel New Orleansoffset slightly lower earnings at Royal Sonesta Hotel Boston (Cambridge) andSonesta Beach Resort Key Biscayne.  Amore detailed analysis of the revenues and income by location follows.

 

**REVENUES**

 
| ** **                                      | ** ** | **TOTAL REVENUES  (in thousands)** | ** ** |
|-------------------------------------------------|------------|------------------------------------|------------|
| ** **                                      | ** ** | **NO. OF  ROOMS**                  | ** ** | **2005** | ** ** | **2004** | ** ** |
| Sonesta Beach  Resort Key Biscayne              |       | 300                                |       | $ | 9,466 |   | $ | 9,676 |   |
| Royal Sonesta  Hotel Boston (Cambridge)         |       | 400                                |       | 3,560 |   | 3,425 |   |
| Royal Sonesta  Hotel New Orleans                |       | 500                                |       | 10,243 |   | 9,642 |   |
| Management and  service fees and other revenues |       |                               |       | 1,859 |   | 1,179 |   |
| Total revenues                                  |       |                               |       | $ | 25,128 |   | $ | 23,922 |   |

 

Total revenues for thequarter ended March 31, 2005 were $25,128,000 compared to $23,922,000 in2004, an increase of approximately $1,206,000.

 

Revenues during the 2005first quarter at Sonesta Beach Resort Key Biscayne decreased by $210,000compared to the first quarter of 2004.  Room revenueswere virtually the same, because an increase in average room rates offset adecrease in occupancy.  However, due tothe lower occupancy the hotel’s income from food and beverage, and from otheroperating departments, decreased.  RoyalSonesta Hotel Boston (Cambridge) experienced a slight increase in revenues of$135,000 during the first quarter of 2005 compared to 2004.  Room revenues per available room (“REVPAR”)increased by 3%, due to a higher average room rate achieved.  Food and beverage revenues rose due toincreased banqueting business, in part due to increased business from the groupand convention market segment.  RoyalSonesta Hotel New Orleans had a strong first quarter, increasing revenues by$601,000, or 6%, during the 2005 first quarter compared to the 2004 firstquarter.  Room revenues increased by$295,000 due to a 6% increase in REVPAR, which was entirely due to higheroccupancies achieved in 2005, because of increased group and conventionbusiness.  The higher occupancy increasedother revenues, primarily food and beverage, by $306,000, or 9%, in the 2005first quarter compared to last year. Revenues from management activities increased by $680,000, from$1,179,000 during the 2004 first quarter to $1,859,000 during the 2005 firstquarter.  This was due to increases infee income from Trump International Sonesta Beach

 

13

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Resort Sunny Isles($295,000), Sonesta Hotel Suites Coconut Grove ($144,000), fee income fromSonesta Maho Beach St. Maarten, which hotel was added during the summer of 2004($103,000) and from the receipt of a $133,000 bonus guaranty fee from ChateauSonesta Hotel New Orleans (an additional $399,000 is still due and will berecorded as income when collected).  For2005, both the Sunny Isles and Coconut Grove condominium hotels, which openedin 2003 and 2002, respectively, are expected to produce sufficient income toprovide its owners with the required minimum returns due under the managementcontracts.  Once these minimum returnsare earned, the Company is entitled to receive management and marketing feesbased on revenues, and incentive fees based on net operating income.

 

**OPERATING INCOME**

 
| ** **                                                      | ** ** | **OPERATING INCOME** | ** ** |
|-----------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                      | ** ** | **(in thousands)**   | ** ** |
| ** **                                                      | ** ** | **2005**             | ** ** | **2004** | ** ** |
| Sonesta Beach  Resort Key Biscayne                              |       | $                    | 2,247      |   | $ | 2,481 |   |
| Royal Sonesta  Hotel Boston (Cambridge)                         |       | (1,413               | )          | (1,267 | ) |
| Royal Sonesta  Hotel New Orleans                                |       | 688                  |       | 528 |   |
| Operating income  from hotels after management and service fees |       | 1,522                |       | 1,742 |   |
| Management  activities and other                                |       | (173                 | )          | (419 | ) |
| Operating income                                                |       | $                    | 1,349      |   | $ | 1,323 |   |

 

Operating income for thethree-month period ended March 31, 2005 was $1,349,000, compared to operatingincome of $1,323,000 in the three-month period ended March 31, 2004, anincrease of approximately $26,000.

 

Sonesta Beach Resort KeyBiscayne reported operating income of $2,247,000 during the 2005 first quarter,compared to $2,481,000 during the 2004 first quarter, a decrease of$234,000.  Revenues decreased by$210,000, and expenses remained virtually the same compared to last year,increasing by $24,000 only, due to the lower occupancy in the 2005 firstquarter, and due to strict expense controls. Royal Sonesta Hotel Boston (Cambridge) reported an operating loss of$1,413,000 during the first quarter of 2005 compared to an operating loss of$1,267,000 in the 2004 first quarter, an increase of approximately$146,000.  A slight increase in revenuesof $135,000 was offset by an increase in expenses of $281,000, or 6%, in 2005compared to the 2004 quarter.  This wasmainly due to higher cost and operating expenses and a slight increase inrepairs and maintenance expense.  RoyalSonesta Hotel New Orleans reported 2005 first quarter operating income of $688,000,compared to $528,000 in the 2004 first quarter. Revenues during the 2005 quarter increased $601,000, and expensesincreased by $441,000, or 5%.  This was primarilydue to increased costs and operating expenses because of higher occupancylevels and higher food and beverage revenues in the 2005 period compared to2004.  Also, rent expense increased, becauseof the increase in operating profits. The loss from management activities which is computed after givingeffect to management income from the Company’s owned and leased hotels,decreased by $246,000, from $419,000 during the 2004 first quarter to $173,000in the 2005 quarter.  Revenues frommanagement activities increased by $680,000, and corporate expenses related tothese activities increased by $434,000. The increase was due to increased administrative and general expensesresulting from the addition of a director of development to the corporate staff,increased costs of benefits, including health care and pension benefits, and dueto costs incurred related to the arbitration of a dispute involving Trump InternationalSonesta Beach Resort Sunny Isles.

 

14

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**OTHER INCOME (DEDUCTIONS)**

 

Interest expense decreasedfrom $1,623,000 in the first quarter of 2004 to $1,524,000 in the 2005 firstquarter due to expenses incurred in 2004 related to the restructuring of theCompany’s mortgage debt on Royal Sonesta Hotel Boston (Cambridge) and SonestaBeach Resort Key Biscayne (see also Note 3—Borrowing Arrangements).

 

Interest income increasedby $54,000 to $138,000 in the first quarter of 2005 compared to last yearbecause of higher short-term investment income earned on the Company’s cashbalances, and due to higher interest income earned on loans to the owner ofSonesta Hotel & Suites Coconut Grove.

 

**FEDERAL, FOREIGN AND STATE INCOMETAXES**

 

The Company recorded anet tax benefit of $4,150,000 during the 2005 first quarter.  These benefits resulted from the reversal ofpreviously recorded valuation allowances. The Company recorded valuation allowances totaling $3,862,000 againstthe 2003 and 2004 federal income tax benefits because it was uncertain if theCompany would realize a future benefit for the losses incurred during 2003 and2004.  In addition, valuation allowances of$296,000 were recorded against Florida state tax loss carry-forwards.  During the second quarter of 2005, theCompany closed on a transaction to sell the Sonesta Beach Resort Key Biscayne(see Note 10 — Subsequent Events).  Thistransaction will provide the Company with significant taxable income, and it isnow more likely than not that the Company will realize the benefit of the prioryear losses.  Accordingly, in the firstquarter of 2005, the Company reversed the valuation allowances.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

The Company had cash andcash equivalents of approximately $5,220,000 at March 31, 2005.   In addition, the Company has $5,000,000available under two credit lines.  TheCompany closed on a transaction in April 2005 (see Note 10 — SubsequentEvents) which provided the Company with cash proceeds, before taxes but afterrepayment of long term debt obligations, of approximately $24.4 Million.  Company management believes these cashresources, and the available credit lines, will be adequate to meet its cashrequirements for 2005 and beyond.

 

15

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**PART I – Item 3**

 

**QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK**

 

The Company is exposed tomarket risk from changes in interest rates.   The Company uses fixed rate debt to finance the ownership of itsproperties.   The table that followssummarizes the Company’s fixed rate debt obligations outstanding at March 31,2005. This information should be read in conjunction with Note 3—BorrowingArrangements.

 

Short and Long Term Debt(in thousands) maturing or repaid in:

 
| ** **             | ** ** | **YEAR** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------|------------|----------|------------|------------|------------|------------|------------|------------|------------|
| ** **             | ** ** | **2005** | ** ** | **2006**   | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **Fair Value** | ** ** |
| Fixed rate             |       | $        | 36,381     |       | $          | —     |       | $          | —     |   | $ | 602 |   | $ | 665 |   | $ | 32,794 |   | $ | 70,442 |   | $ | 71,138 |   |
| Average interest  rate |       | 8.6      | %          | 8.6        | %          | 8.6        | %          | 8.6        | %          | 8.6 | % | 8.6 | % |   |   |   |   |
|                        |            |          |            |            |            |            |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

16

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**PART I – Item 4**

 

**INTERNAL CONTROLS AND PROCEDURES**

 

Asof March 31, 2005, the Company’s management carried out an evaluation,under the supervision and with the participation of the Company’s Chief ExecutiveOfficer and President, Chief Executive Officer and Vice Chairman, and VicePresident and Treasurer, of the effectiveness of the design and operation ofthe Company’s disclosure controls and procedures pursuant to Rules 13a-15and 15d-15 of the Securities Exchange Act of 1934.   Based on that evaluation, the Company’sChief Executive Officer and President, Chief Executive Officer and ViceChairman, and Vice President and Treasurer concluded that the Company’sdisclosure controls and procedures are effective, as of March 31, 2005.

 

Therehave been no significant changes in the Company’s internal controls regardingfinancial reporting during the quarter ended March 31, 2005 that havematerially affected, or are reasonably likely to materially affect, the Company’sinternal control regarding financial reporting, including any correctiveactions with regard to significant deficiencies and material weaknesses.

 

17

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**PART II – Other Information**

 

 

**Item Numbers 1, 2, 3, 4, 5 and 6**

 

Not applicable during thequarter ended March 31, 2005.

 

18

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**SIGNATURE**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the Registrant has duly caused this Report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|   | **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: May 12, 2005                       |                                                |
|        |                                               |                                                     |  |  |

 

19

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