----

----

**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 June 30, 2006             |   |
|   |                                                                    |   |
|   | 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 |
|----------------------|---------------------|

| Large                  Accelerated Filer o | Accelerated                  Filer o | Non-Accelerated                  Filer  x |
|--------------------------------------------|--------------------------------------|------------------------------------------------|

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

----

**INDEX**

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

| Part                I. Financial Information |                                                                                                                                                                          |  **Page** |
|----------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
|                                         |                                                                                                                                                                          |           |
| Item                1.                       | Financial                Statements (unaudited)                                                                                                                               |           |
|                                         | Condensed                consolidated balance sheets—June                30, 2006 (unaudited) and December                31, 2005                                      |   1  |
|                                         | Condensed                consolidated statements of  operations—Three                and six-month periods ended                June 30, 2006 and 2005 (unaudited) |   3  |
|                                         | Condensed                consolidated statements of cash flows—Six-month                periods ended June                30, 2006 and 2005 (unaudited)                 |   4  |
|                                         | Notes                to condensed consolidated financial statements—June                30, 2006 and 2005                                                               |  6        |
| Item                2.             | Management’s                Discussion and Analysis of Results                of Operations and Financial Condition—June                30, 2006                  |  13       |
| Item                3.                       | Quantitative                and Qualitative Disclosure of Market                Risk                                                                                          |  18       |
| Item                4.                       | Internal                Controls and                Procedures                                                                                                                |  19       |
| Part                II. Other Information    |                                                                                                                                                                          |           |
| Item                4.                       | Submission                of Matters to a Vote of Security Holders                                                                                                            | 20        |
|                                         | Signature                page                                                                                                                                                 | 21             |
|                                         |                                                                                                                                                                          |           |
| Exhibits                31.1, 31.2, 31.3     | Certifications                by the Company’s Chief Executive                Officers and Vice President and Treasurer                                                 |  22       |
| Exhibit                99.1                  | 18                U.S.C. Section 1350 Certification                byCompany                Officers                                                                          |  25       |

----

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

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**CONDENSED      CONSOLIDATED BALANCE      SHEETS**

|                                                                                                                     |   | (in                thousands) |    |
|--------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                                                                     |   | June                302006    |    | December                312005 |   |
|                                                                                                                     |   |                          |    |   |   |
| ASSETS                                                                                                                   |   |                          |    |   |   |   |   |
| Current                assets:                                                                                           |   |                          |    |   |   |   |   |
| Cash                and cash equivalents                                                                                 |   | $                             | 25,299  |   | $ | 24,941 |   |
| Restricted                cash                                                                                           |   |                          | --      |   |   | 267 |   |
| Accounts                and notes receivable:                                                                            |   |                          |    |   |   |   |   |
|                  Trade, less allowance of  $91 ($94 at December 31, 2005) for doubtful                accounts |   |                          | 8,070   |   |   | 8,821 |   |
| Other,                including current portion of long-term receivables and                advances                     |   |                          | 1,304   |   |   | 3,634 |   |
| Total                accounts and notes receivable                                                                       |   |                          | 9,374   |   |   | 12,455 |   |
| Inventories                                                                                                              |   |                          | 882     |   |   | 1,156 |   |
| Current                deferred tax assets                                                                               |   |                          | 423     |   |   | 456 |   |
| Refundable                income taxes                                                                                   |   |                          | 993     |   |   | 883 |   |
| Prepaid                expenses and other current assets                                                                 |   |                          | 1,761   |   |   | 1,784 |   |
|                                                                                                                     |   |                          |    |   |   |   |   |
| Total                current assets                                                                                      |   |                          | 38,732  |   |   | 41,942 |   |
|                                                                                                                     |   |                          |    |   |   |   |   |
| Long-term                receivables and advances                                                                        |   |                          | 7,637   |   |   | 7,520 |   |
|                                                                                                                     |   |                          |    |   |   |   |   |
| Deferred                tax assets                                                                                       |   |                          | 6,047   |   |   | 6,077 |   |
|                                                                                                                     |   |                          |    |   |   |   |   |
| Property                and equipment, at cost:                                                                          |   |                          |    |   |   |   |   |
| Land                and land improvements                                                                                |   |                          | 9,102   |   |   | 9,102 |   |
| Buildings                                                                                                                |   |                          | 58,186  |   |   | 57,895 |   |
| Furniture                and equipment                                                                                   |   |                          | 42,422  |   |   | 38,555 |   |
| Leasehold                improvements                                                                                    |   |                          | 7,822   |   |   | 7,486 |   |
| Projects                in progress                                                                                      |   |                          | 87      |   |   | 538 |   |
|                                                                                                                     |   |                          | 117,619 |   |   | 113,576 |   |
|                                                                                                                     |   |                          |    |   |   |   |   |
| Less:                accumulated depreciation and amortization                                                           |   |                          | 46,002  |   |   | 40,777 |   |
| Net                property and equipment                                                                                |   |                          | 71,617  |   |   | 72,799 |   |
|                                                                                                                     |   |                          |    |   |   |   |   |
| Other                long-term assets                                                                                    |   |                          | 2,229   |   |   | 2,281 |   |
|                                                                                                                     |   | $                             | 126,262 |   | $ | 130,619 |   |

*See      accompanying notes to condensed consolidated financial      statements.*

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                                                                       |   | (in                thousands) |    |
|------------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                                                       |   | June                302006    |    | December                312005 |   |
|                                                                                                       |   |                          |    |   |   |
|                                                                                                       |   |                          |    |   |   |
| LIABILITIES                AND COMMON STOCKHOLDERS’ EQUITY                                           |   |                          |    |   |   |   |   |
| Current                liabilities:                                                                        |   |                          |    |   |   |   |   |
| Accounts                payable                                                                            |   | $                             | 3,424   |   | $ | 4,935 |   |
| Advance                deposits                                                                            |   |                          | 1,433   |   |   | 2,126 |   |
| Accrued                income taxes                                                                        |   |                          | 295     |   |   | 1,160 |   |
| Accrued                liabilities:                                                                        |   |                          |    |   |   |   |   |
| Salaries                and wages                                                                          |   |                          | 1,898   |   |   | 1,277 |   |
| Rentals                                                                                                    |   |                          | 2,721   |   |   | 6,176 |   |
| Interest                                                                                                   |   |                          | 864     |   |   | 252 |   |
| Pension                and other employee benefits                                                         |   |                          | 1,335   |   |   | 788 |   |
| Other                                                                                                      |   |                          | 2,212   |   |   | 1,773 |   |
|                                                                                                       |   |                          |    |   |   |   |   |
| Total                accrued liabilities                                                                   |   |                          | 9,030   |   |   | 10,266 |   |
|                                                                                                       |   |                          |    |   |   |   |   |
| Total                current liabilities                                                                   |   |                          | 14,182  |   |   | 18,487 |   |
|                                                                                                       |   |                          |    |   |   |   |   |
| Long-term                debt                                                                              |   |                          | 34,061  |   |   | 34,061 |   |
|                                                                                                       |   |                          |    |   |   |   |   |
| Finance                obligation (proceeds from Key Biscayne transaction, see                footnote 10) |   |                          | 59,728  |   |   | 59,728 |   |
|                                                                                                       |   |                          |    |   |   |   |   |
| Other                non-current liabilities                                                               |   |                          | 7,019   |   |   | 6,478 |   |
|                                                                                                       |   |                          |    |   |   |   |   |
| 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                                                                           |   |                          | 18,443  |   |   | 19,036 |   |
| Treasury                shares—2,404, at cost                                                        |   |                          | (12,053 | ) |   | (12,053 | ) |
| Total                common stockholders’ equity                                                     |   |                          | 11,272  |   |   | 11,865 |   |
|                                                                                                       |   | $                             | 126,262 |   | $ | 130,619 |   |

*See      accompanying notes to condensed consolidated financial      statements.*

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

|                                                                                     |   |  Three                Months EndedJune                30 |   |  Six                Months EndedJune                30 |   |
|------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|-------------------------------------------------------------|--------|
|                                                                                     |   |
|                                                                                     |   |
|                                                                                     |   |                                                          |   |                                                        |   |   |   |   |   |
|                                                                                     |   | 2006                                                          |   | 2005                                                        |   | 2006 |   | 2005 |   |
| Revenues:                                                                                |   |                                                          |   |                                                        |   |   |   |   |   |   |   |   |   |
| Rooms                                                                                    |   | $                                                             | 13,024 |                                                        | $      | 14,409 |   | $ | 27,895 |   | $ | 28,681 |   |
| Food                and beverage                                                         |   |                                                          | 6,481  |                                                        |   | 7,769 |   |   | 11,909 |   |   | 14,436 |   |
| Management,                license and service fees                                      |   |                                                          | 1,060  |                                                        |   | 1,372 |   |   | 2,457 |   |   | 3,087 |   |
| Parking,                telephone and other                                              |   |                                                          | 2,274  |                                                        |   | 2,350 |   |   | 4,516 |   |   | 4,824 |   |
|                                                                                     |   |                                                          | 22,839 |                                                        |   | 25,900 |   |   | 46,777 |   |   | 51,028 |   |
| Costs                and expenses:                                                       |   |                                                          |   |                                                        |   |   |   |   |   |   |   |   |   |
| Costs                and operating expenses                                              |   |                                                          | 11,011 |                                                        |   | 11,363 |   |   | 21,445 |   |   | 22,009 |   |
| Advertising                and promotion         |   |                                                          | 1,779  |                                                        |   | 2,044 |   |   | 3,674 |   |   | 3,903 |   |
| Administrative                and general                                                |   |                                                          | 3,992  |                                                        |   | 3,937 |   |   | 7,683 |   |   | 8,183 |   |
| Human                resources                                                           |   |                                                          | 539    |                                                        |   | 372 |   |   | 938 |   |   | 774 |   |
| Maintenance                                                                              |   |                                                          | 1,216  |                                                        |   | 1,459 |   |   | 2,610 |   |   | 2,854 |   |
| Rentals                                                                                  |   |                                                          | 683    |                                                        |   | 2,085 |   |   | 3,033 |   |   | 4,654 |   |
| Property                taxes                                                            |   |                                                          | 647    |                                                        |   | 678 |   |   | 1,322 |   |   | 1,352 |   |
| Depreciation                and amortization                                             |   |                                                          | 2,857  |                                                        |   | 1,913 |   |   | 5,366 |   |   | 3,901 |   |
|                                                                                     |   |                                                          | 22,724 |                                                        |   | 23,851 |   |   | 46,071 |   |   | 47,630 |   |
| Operating                income                                                          |   |                                                          | 115    |                                                        |   | 2,049 |   |   | 706 |   |   | 3,398 |   |
|                                                                                     |   |                                                          |   |                                                        |   |   |   |   |   |   |   |   |   |
| Other                income (deductions):                                                |   |                                                          |   |                                                        |   |   |   |   |   |   |   |   |   |
| Interest                expense                                                          |   |                                                          | (751   | )                                                           |   | (923 | ) |   | (1,494 | ) |   | (2,447 | ) |
| Interest                income                                                           |   |                                                          | 342    |                                                        |   | 273 |   |   | 716 |   |   | 411 |   |
| Foreign                exchange gain (loss)                                              |   |                                                          | 26     |                                                        |   | -- |   |   | 32 |   |   | (10 | ) |
| Gain                on sales of assets                                                   |   |                                                          | --     |                                                        |   | 125 |   |   | 4 |   |   | 125 |   |
|                                                                                     |   |                                                          | (383   | )                                                           |   | (525 | ) |   | (742 | ) |   | (1,921 | ) |
|                                                                                     |   |                                                          |   |                                                        |   |   |   |   |   |   |   |   |   |
| Income                (loss) before income tax provision                (benefit)        |   |                                                          | (268   | )                                                           |   | 1,524 |   |   | (36 | ) |   | 1,477 |   |
| Income                tax provision (benefit)                                            |   |                                                          | (35    | )                                                           |   | 631 |   |   | 187 |   |   | (3,519 | ) |
| Net                income (loss)                                                         |   |                                                          | (233   | )                                                           |   | 893 |   |   | (223 | ) |   | 4,996 |   |
|                                                                                     |   |                                                          |   |                                                        |   |   |   |   |   |   |   |   |   |
| Retained                earnings at beginning of period                                  |   |                                                          | 19,046 |                                                        |   | 22,538 |   |   | 19,036 |   |   | 18,435 |   |
| Cash                dividends                                                            |   |                                                          | (370   | )                                                           |   | (3,698 | ) |   | (370 | ) |   | (3,698 | ) |
| Retained                earnings at end of period                                        |   | $                                                             | 18,443 |                                                        | $      | 19,733 |   | $ | 18,443 |   | $ | 19,733 |   |
|                                                                                     |   |                                                          |   |                                                        |   |   |   |   |   |   |   |   |   |
| Net                income (loss) per share                                               |   | $                                                             | (0.06  | )                                                           | $      | 0.24 |   | $ | (0.06 | ) | $ | 1.35 |   |
| 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)    |   |
|--------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                                 |   | Six                Months Ended June 30 |   |
|                                                                                 |   | 2006                                    |   | 2005 |   |
| Cash                provided (used) by operating activities                          |   |                                    |   |   |   |   |   |
| Net                income (loss)                                                     |   | $                                       | (223   | ) | $ | 4,996 |   |
| Adjustments                to reconcile net income to net cash provided              |   |                                    |   |   |   |   |   |
| by                operating activities                                               |   |                                    |   |   |   |   |   |
| Depreciation                and amortization of property and equipment               |   |                                    | 5,366  |   |   | 3,901 |   |
| Other                amortization                                                    |   |                                    | 21     |   |   | 33 |   |
| Deferred                federal and state income tax provision (benefit)             |   |                                    | 63     |   |   | (4,181 | ) |
| Gain                on sales of assets                                               |   |                                    | (4     | ) |   | (125 | ) |
| Deferred                interest income                                              |   |                                    | --     |   |   | (151 | ) |
| Changes                in assets and liabilities                                     |   |                                    |   |   |   |   |   |
| Restricted                cash                                                       |   |                                    | 267    |   |   | 17 |   |
| Accounts                and notes receivable                                         |   |                                    | 647    |   |   | (465 | ) |
| Inventories                                                                          |   |                                    | 274    |   |   | 90 |   |
| Prepaid                expenses and other                                            |   |                                    | 23     |   |   | 438 |   |
| Accounts                payable                                                      |   |                                    | (1,511 | ) |   | 212 |   |
| Advance                deposits                                                      |   |                                    | (693   | ) |   | (911 | ) |
| Accrued                income taxes                                                  |   |                                    | (975   | ) |   | 270 |   |
| Accrued                liabilities                                                   |   |                                    | (695   | ) |   | 307 |   |
| Cash                provided by operating activities                                 |   |                                    | 2,560  |   |   | 4,431 |   |
|                                                                                 |   |                                    |   |   |   |   |   |
|                                                                                 |   |                                    |   |   |   |   |   |
| Cash                provided (used) by investing activities                          |   |                                    |   |   |   |   |   |
| Proceeds                from sales of assets                                         |   |                                    | 17     |   |   | 523 |   |
| Proceeds                from finance obligation                                      |   |                                    | --     |   |   | 59,978 |   |
| Expenditures                for property and equipment                               |   |                                    | (4,084 | ) |   | (2,112 | ) |
| Payments                received on long-term receivablesand                advances |   |                                    | 3,605  |   |   | 825 |   |
| New                loans and advances                                                |   |                                    | (1,370 | ) |   | (815 | ) |
| Cash                provided (used) by investing activities                          |   |                                    | (1,832 | ) |   | 58,399 |   |
|                                                                                 |   |                                    |   |   |   |   |   |
| Cash                used by financing activities                                     |   |                                    |   |   |   |   |   |
| Repayment                of long-term debt                                           |   |                                    | --     |   |   | (35,539 | ) |
| Cash                dividends paid                                                   |   |                                    | (370   | ) |   | (3,698 | ) |
| Cash                used by financing activities                                     |   |                                    | (370   | ) |   | (39,237 | ) |
| Net                increase in cash                                                  |   |                                    | 358    |   |   | 23,593 |   |
| Cash                and cash equivalents at beginning of period                      |   |                                    | 24,941 |   |   | 7,950 |   |
| Cash                and cash equivalents at end of period                            |   | $                                       | 25,299 |   | $ | 31,543 |   |

*See      accompanying notes to condensed consolidated financial      statements.*

----

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)      (continued)**

*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) |   |
|-------------------------------------------------------------|--------|-------------------------------|--------|
|                                                        |   | June                30, 2006  |   | December                31, 2005 |   |
| Sharm                El Sheikh, Egypt (a)                   |   | $                             | 260    |   | $ | 391 |   |
| Sonesta                Hotel & Suites Coconut Grove (b) |   |                          | 4,421  |   |   | 5,003 |   |
| Trump                International Sonesta Beach Resort (c) |   |                          | 1,391  |   |   | 3,720 |   |
| Chateau                Sonesta Hotel New Orleans (d)        |   |                          | 1,895  |   |   | 1,025 |   |
| Other                                                       |   |                          | 680    |   |   | 740 |   |
| Total                long-term receivables                  |   |                          | 8,647  |   |   | 10,879 |   |
| Less:                current portion                        |   |                          | 1,010  |   |   | 3,359 |   |
| Net                long-term receivables                    |   | $                             | 7,637  |   | $ | 7,520 |   |

| (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                bears                interest at the prime rate (8.25% at June 30, 2006) and is adjusted                semi-annually. Currently, the loan is being repaid with monthly payments                of $23,800. The loan matures in                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 loan bears interest                at the                prime rate (8.25% at June 30, 2006) plus 0.75%. The loan is secured                by a                mortgage on the hotel property and is being repaid out of the 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.                This amount was due pursuant to the terms of the management agreement                under which the Company operates the hotel. A separate advance for                pre-opening expenses ($2,328,000) was repaid in January 2006. No                interest                is charged on the advance for losses, which will be repaid out of                future                available profits generated by the hotel, or will be settled when                the                Company closes on the purchase option it has for the hotel (see Note                9 -                Legal Proceedings). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | Following                Hurricane Katrina, which struck New Orleans in late August 2005,                the                Company advanced $1,895,000 to Chateau Sonesta Hotel New Orleans,                which it                operates under a long-term management agreement. These advances were                used                for the payment of ongoing expenses during the period the hotel was                closed                from August 29 to November 30, 2005, and to repair damage from Hurricane                Katrina. The hotel’s owner has filed claims under its building insurance                policy, which includes business interruption provisions, but the                amount                and the timing of the insurance recovery is uncertain. If insurance                proceeds are insufficient, the Company will recover these advances,                together with interest, out of first available income from the hotel.                The                interest rate on these advances ranges from prime (8.25% at June                30, 2006)                plus one (1) to three (3) percentage                points. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

*Credit      Line*

*Long-Term      Debt*

|                                                                              |   | (in                thousands) |   |
|-----------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                              |   | June                30, 2006  |   | December                31, 2005 |   |
| Charterhouse                of Cambridge Trust and Sonesta of Massachusetts Inc.: |   |                          |   |   |   |   |   |
| First                mortgage note                                                |   | $                             | 34,061 |   | $ | 34,061 |   |
| Accrued                interest                                                   |   |                          | 864    |   |   | 106 |   |
|                                                                              |   |                          | 34,925 |   |   | 34,167 |   |
| Less                current portion of accrued interest                           |   |                          | (864   | ) |   | (106 | ) |
| Total                long-term debt                                               |   | $                             | 34,061 |   | $ | 34,061 |   |
|                                                                              |   |                          |   |   |   |   |   |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

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

|                                     |   | (in                thousands)                            |   |
|------------------------------------------|--------|----------------------------------------------------------|--------|
|                                     |   | Three                Months Ended June                30 |   | Six                Months Ended June                30 |   |
|                                     |   | 2006                                                     |   | 2005 |   | 2006 |   | 2005 |   |
| Direct                departmental costs |   |                                                     |   |   |   |   |   |   |   |   |   |   |   |
| Rooms                                    |   | $                                                        | 3,510  |   | $ | 3,639 |   | $ | 6,710 |   | $ | 7,050 |   |
| Food                and beverage         |   |                                                     | 5,289  |   |   | 5,636 |   |   | 10,045 |   |   | 10,902 |   |
| Heat,                light and power     |   |                                                     | 1,004  |   |   | 905 |   |   | 2,250 |   |   | 1,705 |   |
| Other                                    |   |                                                     | 1,208  |   |   | 1,183 |   |   | 2,440 |   |   | 2,352 |   |
|                                     |   | $                                                        | 11,011 |   | $ | 11,363 |   | $ | 21,445 |   | $ | 22,009 |   |

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

|                                                           |   | (in                thousands)           |   |
|----------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                           |   | Six                months Ended June 30 |   |
|                                                           |   | 2006                                    |   | 2005 |   |
|                                                           |   |                                    |   |   |   |
| Current                federal income tax provision (benefit)  |   | $                                       | (119   | ) | $ | 255 |   |
| Current                foreign income tax provision            |   |                                    | 193    |   |   | 201 |   |
| Current                state income tax provision              |   |                                    | 50     |   |   | 206 |   |
| Deferred                state income tax provision (benefit)   |   |                                    | 4      |   |   | (296 | ) |
| Deferred                federal income tax provision (benefit) |   |                                    | 59     |   |   | (3,885 | ) |
| Income                tax provision (benefit)                  |   | $                                       | 187    |   | $ | (3,519 | ) |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

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

|                                                                                |   | (in                thousands)                          |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                                                                |   | Owned                &Leased                Hotels |   | ManagementActivities |   |  Consolidated |   |
|                                                                                |   |                                                   |   |   |   |   |   |
| Revenues                                                                            |   | $                                                      | 21,770 |   | $ | 1,069 |   | $ | 22,839 |   |
| Operating                income (loss) before depreciation and amortization expense |   |                                                   | 3,865  |   |   | (893 | ) | $ | 2,972 |   |
| Depreciation                and amortization                                        |   |                                                   | (2,733 | ) |   | (124 | ) |   | (2,857 | ) |
| Interest                income (expense), net                                       |   |                                                   | (733   | ) |   | 324 |   |   | (409 | ) |
| Other                income                                                         |   |                                                   | --     |   |   | 26 |   |   | 26 |   |
| Segment                pre-tax income (loss)                                        |   |                                                   | 399    |   |   | (667 | ) |   | (268 | ) |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |
| Segment                assets                                                       |   |                                                   | 78,772 |   |   | 47,490 |   |   | 126,262 |   |
| Segment                capital additions                                            |   |                                                   | 1,111  |   |   | 27 |   |   | 1,138 |   |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |

|                                                                                |   | (in                thousands)                          |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                                                                |   | Owned                &Leased                Hotels |   | ManagementActivities |   |  Consolidated |   |
|                                                                                |   |                                                   |   |   |   |   |   |
| Revenues                                                                            |   | $                                                      | 44,294 |   | $ | 2,483 |   | $ | 46,777 |   |
| Operating                income (loss) before depreciation and amortization expense |   |                                                   | 7,387  |   |   | (1,315 | ) |   | 6,072 |   |
| Depreciation                and amortization                                        |   |                                                   | (5,118 | ) |   | (248 | ) |   | (5,366 | ) |
| Interest                income (expense), net                                       |   |                                                   | (1,465 | ) |   | 687 |   |   | (778 | ) |
| Other                income                                                         |   |                                                   | --     |   |   | 36 |   |   | 36 |   |
| Segment                pre-tax income (loss)                                        |   |                                                   | 804    |   |   | (840 | ) |   | (36 | ) |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |
| Segment                assets                                                       |   |                                                   | 78,772 |   |   | 47,490 |   |   | 126,262 |   |
| Segment                capital additions                                            |   |                                                   | 3,938  |   |   | 146 |   |   | 4,084 |   |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

|                                                                                |   | (in                thousands)                          |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                                                                |   | Owned                &Leased                Hotels |   | ManagementActivities |   |  Consolidated |   |
|                                                                                |   |                                                   |   |   |   |   |   |
| Revenues                                                                            |   | $                                                      | 24,518 |   | $ | 1,382 |   | $ | 25,900 |   |
| Operating                income (loss) before depreciation and amortization expense |   |                                                   | 4,206  |   |   | (244 | ) |   | 3,962 |   |
| Depreciation                and amortization                                        |   |                                                   | (1,768 | ) |   | (145 | ) |   | (1,913 | ) |
| Interest                income (expense), net                                       |   |                                                   | (912   | ) |   | 262 |   |   | (650 | ) |
| Other                income                                                         |   |                                                   | --     |   |   | 125 |   |   | 125 |   |
| Segment                pre-tax income (loss)                                        |   |                                                   | 1,526  |   |   | (2 | ) |   | 1,524 |   |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |
| Segment                assets                                                       |   |                                                   | 81,960 |   |   | 54,078 |   |   | 136,038 |   |
| Segment                capital additions                                            |   |                                                   | 848    |   |   | 133 |   |   | 981 |   |

|                                                                                |   | (in                thousands)                          |   |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                                                                                |   | Owned                &Leased                Hotels |   | ManagementActivities |   |  Consolidated |   |
|                                                                                |   |                                                   |   |   |   |   |   |
| Revenues                                                                            |   | $                                                      | 47,787 |   | $ | 3,241 |   | $ | 51,028 |   |
| Operating                income (loss) before depreciation and amortization expense |   |                                                   | 7,554  |   |   | (255 | ) |   | 7,299 |   |
| Depreciation                and amortization                                        |   |                                                   | (3,593 | ) |   | (308 | ) |   | (3,901 | ) |
| Interest                income (expense), net                                       |   |                                                   | (2,423 | ) |   | 387 |   |   | (2,036 | ) |
| Other                income                                                         |   |                                                   | --     |   |   | 115 |   |   | 115 |   |
| Segment                pre-tax income (loss)                                        |   |                                                   | 1,538  |   |   | (61 | ) |   | 1,477 |   |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |
| Segment                assets                                                       |   |                                                   | 81,960 |   |   | 54,078 |   |   | 136,038 |   |
| Segment                capital additions                                            |   |                                                   | 1,950  |   |   | 162 |   |   | 2,112 |   |
|                                                                                |   |                                                   |   |   |   |   |   |   |   |   |

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

|                                                       |   | Three                months ended June 30 |   | Six                months ended June 30 |   |
|------------------------------------------------------------|--------|-------------------------------------------|--------|-----------------------------------------|--------|
|                                                       |   | 2006                                      |   | 2005                                    |   | 2006 |   | 2005 |   |
| Numerator:                                                 |   |                                      |   |                                    |   |   |   |   |   |   |   |   |   |
| Income                (loss) from operations               |   | $                                         | (233   | )                                       | $      | 893 |   | $ | (223 | ) | $ | 4,996 |   |
|                                                       |   |                                      |   |                                    |   |   |   |   |   |   |   |   |   |
| Denominator:                                               |   |                                      |   |                                    |   |   |   |   |   |   |   |   |   |
| Weighted                average number of                  |   |                                      |   |                                    |   |   |   |   |   |   |   |   |   |
| shares                outstanding                          |   |                                      | 3,698  |                                    |   | 3,698 |   |   | 3,698 |   |   | 3,698 |   |
|                                                       |   |                                      |   |                                    |   |   |   |   |   |   |   |   |   |
| Net                income (loss) per share of common stock |   | $                                         | (0.06  | )                                       | $      | 0.24 |   | $ | (0.06 | ) | $ | 1.35 |   |

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

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

|                                                                                                         |   | (in                thousands)           |   |
|--------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                                                         |   | Six                Months ended June 30 |   |
|                                                                                                         |   | 2006                                    |   | 2005 |   |
|                                                                                                         |   |                                    |   |   |   |
| Service                cost                                                                                  |   | $                                       | 818    |   | $ | 941 |   |
| Interest                cost                                                                                 |   |                                    | 1,073  |   |   | 1,015 |   |
| Expected                return on assets                                                                     |   |                                    | (917   | ) |   | (853 | ) |
| Amortization                of prior service cost                                                            |   |                                    | 54     |   |   | 45 |   |
| Amortization                of transition asset                                                              |   |                                    | --     |   |   | (44 | ) |
| Recognized                actuarial loss                                                                     |   |                                    | 331    |   |   | 341 |   |
| Total                plan benefit cost                                                                       |   |                                    | 1,359  |   |   | 1,445 |   |
| Less:                amounts charged to hotels operated under management                agreements           |   |                                    | (187   | ) |   | (181 | ) |
| Net                periodic benefit cost included in the consolidatedstatements                of operations |   | $                                       | 1,172  |   | $ | 1,264 |   |

| **9.** | **Legal                Proceedings** |
|--------|--------------------------------------|

*Trump      International Sonesta Beach Resort Sunny Isles*

----

**SONESTA      INTERNATIONAL HOTELS CORPORATION**

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

| **10.  ** | **Sonesta                Beach Resort Key                Biscayne** |
|---------------------|---------------------------------------------------------------------|

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

----

**Part      I - Item 2**

**MANAGEMENT’S      DISCUSSION AND      ANALYSIS**

**OF      RESULTS OF OPERATIONS AND FINANCIAL CONDITION**

**FIRST      SIX MONTHS 2006 COMPARED TO 2005**

**REVENUES**

|                                                          |   | TOTAL                REVENUES(in                thousands) |   |
|---------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                                          |   | NO.                OFROOMS                                 |   |  2006 |   |  2005 |   |
| Sonesta                Beach Resort Key Biscayne              |   |                                                       | 300    |   | $ | 16,631 |   | $ | 17,066 |   |
| Royal                Sonesta Hotel Boston (Cambridge)         |   |                                                       | 400    |   |   | 12,091 |   |   | 10,996 |   |
| Royal                Sonesta Hotel New Orleans                |   |                                                       | 500    |   |   | 15,572 |   |   | 19,726 |   |
| Management                and service fees and other revenues |   |                                                       |   |   |   | 2,483 |   |   | 3,240 |   |
| Total                revenues                                 |   |                                                       |   |   | $ | 46,777 |   | $ | 51,028 |   |

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

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

**OPERATING      INCOME**

|                                                                          |   | OPERATING                INCOME (LOSS)(in                thousands) |   |
|-------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|
|                                                                          |   | 2006                                                                |   | 2005 |   |
| Sonesta                Beach Resort Key Biscayne                              |   | $                                                                   | 1,308  |   | $ | 2,727 |   |
| Royal                Sonesta Hotel Boston (Cambridge)                         |   |                                                                | 260    |   |   | (12 | ) |
| Royal                Sonesta Hotel New Orleans                                |   |                                                                | 701    |   |   | 1,245 |   |
| Operating                income from hotels after management and service fees |   |                                                                | 2,269  |   |   | 3,960 |   |
| Management                activities and other                                |   |                                                                | (1,563 | ) |   | (562 | ) |
| Operating                income                                               |   | $                                                                   | 706    |   | $ | 3,398 |   |

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

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

**OTHER      INCOME (DEDUCTIONS)**

**SECOND      QUARTER 2006 COMPARED TO 2005**

**REVENUES**

|                                                          |   | TOTAL                REVENUES(in                thousands) |   |
|---------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                                          |   | NO.                OFROOMS                                 |   |  2006 |   |  2005 |   |
| Sonesta                Beach Resort Key Biscayne              |   |                                                       | 300    |   | $ | 7,037 |   | $ | 7,600 |   |
| Royal                Sonesta Hotel Boston (Cambridge)         |   |                                                       | 400    |   |   | 8,189 |   |   | 7,436 |   |
| Royal                Sonesta Hotel New Orleans                |   |                                                       | 500    |   |   | 6,544 |   |   | 9,483 |   |
| Management                and service fees and other revenues |   |                                                       |   |   |   | 1,069 |   |   | 1,381 |   |
| Total                revenues                                 |   |                                                       |   |   | $ | 22,839 |   | $ | 25,900 |   |

----

**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

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

**OPERATING      INCOME**

|                                                                          |   | OPERATING                INCOME (LOSS)(in                thousands) |   |
|-------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|
|                                                                          |   | 2006                                                                |   | 2005 |   |
| Sonesta                Beach Resort Key Biscayne                              |   | $                                                                   | (465   | ) | $ | 480 |   |
| Royal                Sonesta Hotel Boston (Cambridge)                         |   |                                                                | 1,559  |   |   | 1,401 |   |
| Royal                Sonesta Hotel New Orleans                                |   |                                                                | 38     |   |   | 557 |   |
| Operating                income from hotels after management and service fees |   |                                                                | 1,132  |   |   | 2,438 |   |
| Management                activities and other                                |   |                                                                | (1,017 | ) |   | (389 | ) |
| Operating                income                                               |   | $                                                                   | 115    |   | $ | 2,049 |   |

----

**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   |   |   |   |   |   |   |   |
|--------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                 |   | 2006   |   | 2007   |   | 2008   |   | 2009   |   | 2010 |   | Thereafter |   | Total |   | Fair                Value |   |
| Fixed                rate            |   | $      | --     |   | $      | --     |   | $      | 602    |   | $ | 665 |   | $ | 32,794 |   | $ | -0- |   | $ | 34,061 |   | $ | 36,092 |   |
| Average                interest rate |   |   | 8.6    | %      |   | 8.6    | %      |   | 8.6    | % |   | 8.6 | % |   | 8.6 | % |   | 8.6 | % |   |   |   |   |   |   |

----

**PART      I - Item 4**

**INTERNAL      CONTROLS AND      PROCEDURES**

----

**PART      II - Item 4**

**SUBMISSION      OF MATTERS TO A VOTE OF SECURITY      HOLDERS**

**ELECTION      OF COMMON STOCK DIRECTORS**

| **DIRECTOR**                         | ** ****VOTES                  RECEIVED** | **VOTES                  WITHHELD** |
|--------------------------------------|-----------------------------------------------|-------------------------------------|
|                                 |                                          |                                |
| George                  S. Abrams    | 2,507,580                                     | 845,497                             |
| Vernon                  R. Alden     | 2,506,640                                     | 846,437                             |
| Joseph                  L. Bower     | 2,436,206                                     | 916,871                             |
| Charles                  J. Clark    | 2,502,528                                     | 850,549                             |
| Paul                  Sonnabend      | 2,502,484                                     | 850,593                             |
| Peter                  J. Sonnabend  | 2,507,612                                     | 845,465                             |
| Roger                  P. Sonnabend  | 2,507,568                                     | 845,509                             |
| Stephanie                  Sonnabend | 2,507,616                                     | 845,461                             |
| Jean                  C. Tempel      | 2,507,628                                     | 845,449                             |

**PART      II - Other Information**

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

----

**SIGNATURE**

|   | **SONESTA                INTERNATIONAL HOTELS CORPORATION** |
|--------|-------------------------------------------------------------|
|   |                                                        |   |
|   |                                                        |   |
|   | By:                                                         | /S/                Boy                van Riel |
|   |                                                        | Boy                van Riel |
|   |                                                        | Vice                President and Treasurer |
|   |                                                        |   |
|   |                                                        | (Authorized                to sign on behalf of the Registrant as Principal Financial                Officer) |
|   |                                                        |   |
|   | Date:                August 14 2006                         |

----