<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 1999

                         Commission File Number 0-24568

                              INNKEEPERS USA TRUST
             (Exact name of registrant as specified in its charter)




                Maryland                                   65-0503831
     (State or other Jurisdiction of                    (I.R.S. employer
     Incorporation or Organization)                    identification no.)

        306 Royal Poinciana Plaza                        (561) 835-1800
          Palm Beach, FL 33480                   (Registrant's telephone number
(Address of principal executive offices)              including area code)
               (zip code)


                                       N/A
                                  (former name)


Indicate by check mark whether the Registrant (i) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such short period that the Registrant was
required to file such report), and (ii) has been subject to such filing
requirements for the past 90 days.


                     X    Yes                             No
                   -----                           -----

The number of common shares of beneficial interest, $.01 par value, outstanding
on May 1, 1999, was 34,676,586.


<PAGE>   2



                              INNKEEPERS USA TRUST

                                      INDEX

<TABLE>
<CAPTION>
                                                                           Page Number
                                                                           -----------
<S>           <C>                                                          <C>
PART I.       Financial Information

Item 1.       Financial Statements                                           

              INNKEEPERS USA TRUST

              Consolidated Balance Sheets at
                 March 31, 1999 (unaudited) and December 31, 1998                1

              Consolidated Statements of Income for the
                 three months ended March 31, 1999 and
                 1998 (unaudited)                                                2

              Consolidated Statements of Cash Flows for the three months
                 ended March 31, 1999 and 1998 (unaudited)                       3

              Notes to Consolidated Financial Statements                         4

              INNKEEPERS HOSPITALITY

              Combined Balance Sheets at March 31, 1999
              (unaudited) and December 31, 1998                                 11

              Combined Statements of Income for the
                 three months ended March 31, 1999 and 1998
                 (unaudited)                                                    12

              Combined Statements of Cash Flows for
                 the three months ended March 31, 1999 and 1998
                 (unaudited)                                                    13

              Notes to Combined Financial Statements                            14

Item 2.       Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                            16

Item 3.       Quantitative and Qualitative Disclosures About Market Risk        27


PART II.      Other Information

Item 6.       Exhibits and Reports on Form 8-K                                  28

              Signature                                                         29
</TABLE>


<PAGE>   3



                              INNKEEPERS USA TRUST
                           CONSOLIDATED BALANCE SHEETS
                 (in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                     March 31, 1999   December 31, 1998
                                                                     --------------   -----------------
                                                                      (Unaudited)
<S>                                                                  <C>              <C>
                                             ASSETS
Investment in hotel properties:
   Land and improvements                                               $  94,026         $  90,103
   Buildings and improvements                                            610,935           573,846
   Furniture and equipment                                                93,722            87,828
   Renovations in process                                                 13,212            12,228
   Hotels under development                                                  227               216
                                                                       ---------         ---------
                                                                         812,122           764,221

   Accumulated depreciation                                              (74,635)          (65,923)
                                                                       ---------         ---------
   Net investment in hotel properties                                    737,487           698,298

Cash and cash equivalents                                                  5,448             2,642
Restricted cash and cash equivalents                                       6,989             6,893
Due from Lessees                                                          12,150            10,699
Deferred expenses, net                                                     4,083             4,191
Deposits under purchase agreements                                            --             1,000
Other assets                                                               1,550             1,391
                                                                       ---------         ---------
              Total assets                                             $ 767,707         $ 725,114
                                                                       =========         =========

                           LIABILITIES AND SHAREHOLDERS' EQUITY

Long-term debt                                                         $ 237,874         $ 191,183
Accounts payable and accrued expenses                                      7,707             6,714
Distributions payable                                                     13,061            13,023
Minority interest in Partnership                                          59,548            59,802
                                                                       ---------         ---------
              Total liabilities                                          318,190           270,722
                                                                       ---------         ---------

Commitments and contingencies (Note 4)

Shareholders' equity:
   Preferred Shares, $.01 par value, 20,000,000 shares
      authorized, 4,630,000 shares issued and outstanding                115,750           115,750
   Common Shares, $.01 par value, 100,000,000 shares
      authorized, 34,676,586 and 34,541,586 shares issued
      and outstanding at March 31, 1999 and
      December 31, 1998, respectively                                        347               345
   Additional paid-in capital                                            367,172           365,711
   Unearned compensation                                                  (6,139)           (4,901)
   Distributions in excess of net earnings                               (27,613)          (22,513)
                                                                       ---------         ---------
              Total shareholders' equity                                 449,517           454,392
                                                                       ---------         ---------
              Total liabilities and shareholders' equity               $ 767,707         $ 725,114
                                                                       =========         =========
</TABLE>



              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                        1

<PAGE>   4



                              INNKEEPERS USA TRUST
                        CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands, except per share data)


<TABLE>
<CAPTION>
                                                       Three Months Ended
                                                            March 31,
                                                   ---------------------------                  
                                                      1999            1998
                                                   (Unaudited)     (Unaudited)
                                                                    (Restated)
<S>                                                <C>             <C>
Revenue:
   Percentage Lease revenue                         $ 25,806         $ 23,680
   Other revenue                                         209              176
                                                    --------         --------
      Total revenue                                   26,015           23,856
                                                    --------         --------

Expenses:
   Depreciation                                        8,712            7,441
   Amortization of franchise costs                        18               18
   Ground rent                                           114              112
   Interest expense                                    3,960            4,805
   Amortization of loan origination
      fees                                               238              268
   Real estate and personal
      property taxes and property
      insurance                                        2,977            2,355
   General and administrative                          1,155            1,126
   Amortization of unearned
      compensation                                       357              149
                                                    --------         --------
          Total expenses                              17,531           16,274
                                                    --------         --------


Income before minority interest
   and extraordinary loss                              8,484            7,582
Minority interest, common                               (205)            (292)
Minority interest, preferred                          (1,173)          (1,173)
Extraordinary loss                                        --           (2,760)
                                                    --------         --------
Net income                                             7,106            3,357
Preferred share dividends                             (2,496)              -- 
                                                    --------         --------
Net income applicable
    to common shareholders                          $  4,610         $  3,357
                                                    ========         ========

Earnings per share data:
    Basic - before extraordinary loss               $   0.14         $   0.19
    Extraordinary loss                                    --            (0.08)
                                                    --------         --------
    Basic                                           $   0.14         $   0.10
                                                    ========         ========

    Diluted - before extraordinary loss             $   0.13         $   0.18
    Extraordinary loss                                    --            (0.08)
                                                    --------         --------
    Diluted                                         $   0.13         $   0.10
                                                    ========         ========
</TABLE>



                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                        2

<PAGE>   5



                              INNKEEPERS USA TRUST
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                                  March 31,                
                                                                       -----------------------------
                                                                          1999              1998
                                                                       (Unaudited)       (Unaudited)
                                                                                         (Restated)
<S>                                                                    <C>               <C> 
Cash flows from operating activities:
     Net income                                                          $  7,106         $   3,357
     Adjustments to reconcile net income to
        net cash provided by operating activities:
          Depreciation and amortization                                     9,325             7,876
          Minority interests                                                1,378             1,465
          Extraordinary loss                                                   --             2,760
     Changes in operating assets and liabilities:
          Due from Lessees                                                 (1,451)           (6,896)
          Other assets                                                       (159)              214
          Accounts payable and accrued expenses                               993               417
                                                                         --------         ---------
              Net cash provided by operating activities                    17,192             9,193
                                                                         --------         ---------


Cash flows from investing activities:
     Investment in hotel properties                                       (46,899)          (99,133)
     Net deposits into restricted cash accounts                               (96)              (34)
     Payments for franchise fees                                               --               (27)
     Deposits under purchase agreements                                        --              (250)
                                                                         --------         ---------
             Net cash used in investing activities                        (46,995)          (99,444)
                                                                         --------         ---------

Cash flows from financing activities:
     Proceeds from long-term debt issuance                                 47,000           268,330
     Payments on long-term debt                                              (309)         (163,666)
     Dividend reinvestment plan and shelf registration costs paid            (133)              (24)
     Distributions paid to unit holders                                    (1,605)           (1,961)
     Distributions paid to shareholders                                   (12,167)           (8,541)
     Redemption of units                                                      (27)               --
     Loan origination fees and costs paid                                    (150)           (2,473)
                                                                         --------         ---------
             Net cash provided by financing activities                     32,609            91,665
                                                                         --------         ---------

Net increase in cash and cash equivalents                                   2,806             1,414

Cash and cash equivalents at beginning of period                            2,642             4,228
                                                                         --------         ---------


Cash and cash equivalents at end of period                               $  5,448         $   5,642
                                                                         ========         =========

Supplemental cash flow information:
  Interest paid                                                          $  3,330         $   4,936
                                                                         ========         =========
</TABLE>




                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                        3

<PAGE>   6


                              INNKEEPERS USA TRUST
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       ORGANIZATION AND RECENT DEVELOPMENTS

         ORGANIZATION

         Innkeepers USA Trust ("Innkeepers") is a self-administered real estate
         investment trust ("REIT"), which at March 31, 1999, owned interests in
         66 hotels with an aggregate of 8,043 rooms (the "Hotels") through its
         general partnership interest in Innkeepers USA Limited Partnership
         (with its subsidiary partnerships, the "Partnership" and collectively
         with Innkeepers, the "Company"). The Hotels are comprised of 44
         Residence Inn by Marriott hotels, 12 Hampton Inn hotels, six
         Summerfield Suites hotels, one Comfort Inn hotel, one Courtyard by
         Marriott hotel, one Holiday Inn Express hotel and one Sunrise Suites
         hotel. The Hotels are located in 23 states, with 11 hotels located in
         California.

         The Company leases 59 of the Hotels to Innkeepers Hospitality, Inc. (or
         other entities under common ownership, collectively the "IH Lessee")
         and seven of the Hotels to affiliates of Patriot American Hospitality,
         Inc. (the "Summerfield Lessee" and collectively with the IH Lessee, the
         "Lessees") pursuant to leases which provide for rent based on the room
         revenues of the Hotels ("Percentage Leases"). Two officers of the
         Company are the shareholders of the IH Lessee. A trustee of the Company
         is a director of the Summerfield Lessee.

         These unaudited financial statements have been prepared pursuant to the
         rules and regulations of the Securities and Exchange Commission ("SEC")
         and should be read in conjunction with the financial statements and
         notes thereto of the Company and the IH Lessee included in the
         Company's Annual Report on Form 10-K for the fiscal year ended December
         31, 1998 (the "10-K"). The notes to the financial statements included
         herein highlight significant changes to the notes included in the 10-K
         and present interim disclosures required by the SEC. In the opinion of
         management, all adjustments, consisting of normal recurring accruals,
         considered necessary for a fair presentation have been included. The
         results of any interim period are not necessarily indicative of results
         for the full year.

         RECENT DEVELOPMENTS

         On January 8, 1999, the Company purchased two Residence Inn by Marriott
         hotels located in Chicago (Rosemont), Illinois and Richmond
         (Northwest), Virginia with an aggregate of 296 rooms for a cash price
         of approximately $31,268,000. The purchase price was funded through the
         Line of Credit and available cash.



                                        4

<PAGE>   7


                              INNKEEPERS USA TRUST
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

1.       ORGANIZATION AND RECENT DEVELOPMENTS, CONTINUED

         On March 12, 1999, the Company purchased a 112-room Residence Inn by
         Marriott hotel located in Detroit (Livonia), Michigan for a cash price
         of approximately $10,200,000. The purchase price was funded through the
         Line of Credit and available cash. This purchase completes the
         acquisition of the six newly-built Residence Inn by Marriott hotels
         announced by the Company in April 1998.

2.       RESTATEMENT OF 1998 INTERIM RESULTS

         In May 1998, the Financial Accounting Standards Board's Emerging Issues
         Task Force (the "EITF") released EITF issue 98-9, "Accounting for
         Contingent Rent in Interim Financial Periods" ("EITF 98-9"). EITF 98-9
         provides that a lessor shall defer recognition of contingent rental
         income in interim periods until specified annual targets that trigger
         the contingent income are met. The Company reviewed the terms of its
         Percentage Leases and determined that the provisions of EITF 98-9
         impacted the Company's revenue recognition on an interim basis, but had
         no impact on the Company's annual Percentage Lease revenue recognition
         or interim cash flow from its Lessees. The Company adopted the
         provisions of EITF 98-9 as a change in accounting principle, restated
         the first quarter results of 1998 and recorded the results of the
         second and third quarters of 1998 in accordance with the new
         pronouncement.

         On November 19, 1998, the EITF rescinded EITF 98-9, which allowed
         companies to recognize revenue on the basis used prior to the issuance
         of EITF 98-9. Therefore, the Company has again restated the three
         months ended March 31, 1998 to recognize Percentage Lease revenue on
         the basis used prior to the issuance of EITF 98-9.

         The following table presents the effects of the reversal of EITF 98-9
         on the three months ended March 31, 1998:

<TABLE>
<CAPTION>
                                                       As                                    As
                                                    Reported          Adjustments        Restated
                                                    --------          -----------        -------- 
<S>                                                <C>                <C>               <C>
                Percentage Lease Revenue           $13,336,000        $10,344,000       $23,680,000

                Net income applicable to
                   common shareholders              (6,146,000)         9,503,000         3,357,000

                Basic and diluted
                   earnings per share                    (0.19)              0.29              0.10
</TABLE>







                                        5

<PAGE>   8


                              INNKEEPERS USA TRUST
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED




3.       EARNINGS PER SHARE

         The following table sets forth the computation of basic and diluted
         earnings per share for the three months ended March 31, 1999 and 1998:


<TABLE>
<CAPTION>
                                                         1999            1998
                                                         ----            ----
<S>                                                 <C>              <C>
          Numerator:
               Net income                           $  7,106,000     $  3,357,000
               Preferred share dividends              (2,496,000)              -- 
                                                    ------------     ------------
               Net income applicable to
                   common shareholders                 4,610,000        3,357,000
               Extraordinary loss                             --        2,760,000
                                                    ------------     ------------
               Net income applicable to common
                    shareholders before
                    extraordinary loss              $  4,610,000     $  6,117,000
                                                    ============     ============
          Denominator:
               Denominator for basic
                    earnings per share -
                    weighted-average shares           34,064,095       32,858,291
               Effect of dilutive securities:
                     Stock options                        30,144          316,661
                     Restricted shares                    74,900           20,325
                                                    ------------     ------------
               Denominator for diluted
                   earnings per share -
                   adjusted weighted
                   average shares and
                  assumed conversions                 34,169,139       33,195,277
                                                    ============     ============
          Earnings per share data:
               Basic-before extraordinary loss      $       0.14     $       0.19
               Extraordinary loss                             --     $      (0.08)
                                                    ------------     ------------
               Basic                                $       0.14     $       0.10
                                                    ============     ============

               Diluted-before extraordinary loss    $       0.13     $       0.18
               Extraordinary loss                             --     $      (0.08)
                                                    ------------     ------------
               Diluted                              $       0.13     $       0.10
                                                    ============     ============
</TABLE>






                                        6

<PAGE>   9


                              INNKEEPERS USA TRUST
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

4.       COMMITMENTS,  CONTINGENCIES AND RELATED PARTY TRANSACTIONS

         Pursuant to the Partnership's partnership agreement, limited partners
         who hold common units of limited partnership interest in the
         Partnership ("Common Units") have redemption rights ("Redemption
         Rights") which enable them to redeem each of their Common Units for
         cash at the then-current fair market value of a common share or, at
         Innkeepers' option, one common share. Substantially all of the
         Redemption Rights are currently effective. The aggregate number of
         Common Units outstanding was 1,537,323 and 2,849,806 at March 31, 1999
         and 1998, respectively.

         Additionally, limited partners who hold preferred units of limited
         partnership interest in the Partnership ("Class B Preferred Units" and
         collectively with the Common Units, "Units") have Redemption Rights
         which enable them to redeem each of their Preferred Units for cash at
         the then-current fair market value of a common share or, at Innkeepers'
         option, one common share. The aggregate number of Class B Preferred
         Units outstanding was 4,063,329 at March 31, 1999 and 1998.

         The Company pays regular quarterly distributions on its common shares
         and Common Units and the current quarterly distribution is $0.28 per
         share or unit ($1.12 on an annualized basis). Annual preferred
         distributions of $1.10 to $1.155 are payable on each Class B Preferred
         Unit, and are based on the dividends payable on the common shares. The
         current quarterly preferred distribution rate is $0.28875 for each
         Class B Preferred Unit ($1.155 on an annualized basis). The Class B
         Preferred Units have a preference value of $11.00 per unit, may be
         converted into Common Units at any time on a one-for-one basis and will
         be converted into Common Units on November 1, 2006 unless previously
         converted or redeemed.

         In May 1998, the Company issued 4,630,000 8.625% Series A cumulative
         convertible preferred shares of beneficial interest (the "Series A
         Preferred Shares"). The Series A Preferred Shares are convertible into
         1.4811 common shares at any time and, therefore, the Company has
         reserved 6,857,493 common shares for issuance upon conversion. The
         Series A Preferred Shares may be redeemed by the Company after May 18,
         2003 and have no stated maturity or sinking fund requirements. The
         Series A Preferred Shares have a liquidation preference of $25 per
         share and are entitled to annual dividends equal to the greater of (i)
         $2.15624 per share ($0.53906 per share payable quarterly) or (ii) the
         cash dividend paid or payable on the number of common shares into which
         a Series A Preferred Share is then convertible.





                                        7

<PAGE>   10


                              INNKEEPERS USA TRUST
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

4.       COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS,
         CONTINUED

         The Hotels are operated under franchise or management agreements with
         the Lessees as Residence Inn by Marriott, Summerfield Suites, Sunrise
         Suites, Hampton Inn, Courtyard by Marriott, Holiday Inn Express or
         Comfort Inn hotels. The Company has paid the cost of obtaining or
         transferring certain franchise license agreements to the IH Lessee. For
         certain hotels which did not require a franchise transfer fee, the
         Company has advanced to the IH Lessee the working capital deposit
         required under the IH Lessee's management agreements with Residence Inn
         by Marriott, Inc. ("RIBM"). The franchise and management agreements
         require the Lessees to pay fees based on percentages of hotel revenue.
         The Company has guaranteed certain of the IH Lessee's obligations under
         the franchise licenses and is secondarily liable for certain of the IH
         Lessee's obligations under the RIBM management agreements, generally in
         exchange for certain rights to substitute replacement lessees if the
         Company terminates the related Percentage Lease.

         Under the Percentage Leases, the Company generally is obligated to pay
         the costs of certain capital improvements, real estate and personal
         property taxes and property insurance for the Hotels. Additionally, the
         Company must make available to the Lessees an amount equal to 4.0% of
         room revenues from the Hotels, on a monthly basis, for the periodic
         replacement or refurbishment of furniture and equipment and certain
         other expenditures at the Hotels. The Second Term Loan and Third Term
         Loan require that the Company make available for such purposes, at the
         Hotels collateralizing those loans, an additional 1.0% (for a total of
         5.0%) of room revenues from such Hotels.

         For the three months ended March 31, 1999 and 1998, Percentage Lease
         revenue consisted of base rents of $14,538,000 and $13,336,000,
         respectively, and percentage rents in excess of base rents of
         $11,268,000 and $10,344,000, respectively. The Lessees have future
         minimum base rent commitments to the Company under the Percentage Lease
         agreements. Minimum future base rent revenue, under the Percentage
         Lease agreements assuming no further increases in base rent pursuant to
         increases in the Consumer Price Index, are as follows through the year
         2012 (in thousands):

<TABLE>
<CAPTION>
                              YEAR                              AMOUNT
                              ----                             --------
                          <S>                                  <C>         
                              1999                             $ 60,027
                              2000                               60,027
                              2001                               60,027
                              2002                               60,027
                              2003                               60,027
                          Thereafter                            332,062
                                                               --------
                                                               $632,197
                                                               ========
</TABLE>

                                        8

<PAGE>   11


                              INNKEEPERS USA TRUST
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


4.       COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS,
         CONTINUED

         The Company's Declaration of Trust limits the consolidated indebtedness
         of the Company to 50.0% of the Company's investment in hotels, at cost,
         after giving effect to the Company's use of proceeds from any
         indebtedness. The Company's consolidated indebtedness was approximately
         $237,874,000, or 29.3% of its investment in hotels, at cost, at March
         31, 1999.

         The Company has two fifty-year term ground leases expiring July 2034
         and May 2035, respectively, and a 98-year term ground lease expiring
         October 2084, on the land underlying three of its hotel properties.
         Minimum annual rent payable under these leases is approximately
         $460,000 in the aggregate.

         The Company is committed to purchase a 95-room Towne Place Suites hotel
         located in Horsham, Pennsylvania, for approximately $8,000,000 upon
         completion of its development, which is anticipated in May 1999. The
         Company expects to fund this purchase through the Line of Credit and
         available cash.

         The Company has paid $25,000 to the IH Lessee for shared personnel and
         services in each of the three month periods ended March 31, 1999 and
         1998. This amount has been recorded in general and administrative
         expense in the statements of income.

         The Company places substantially all of its insurance with a full
         service commercial insurance broker that has developed a specialty in
         brokering insurance for hotels. The broker is a private company of
         which a trustee of the Company owns 47% of the stock. For the year
         ended December 31, 1998, the gross amount of premiums paid for
         insurance placed by this broker was approximately $930,000.

5.       PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

         The unaudited pro forma statements of income of the Company are
         presented as if the acquisition of the Hotels and the equity offering
         in 1998 had occurred at the beginning of the periods presented and all
         of the Hotels had been leased to the Lessees pursuant to Percentage
         Leases at the beginning of the periods presented. Such pro forma
         information is based in part on the consolidated statements of income
         of the Company and the IH Lessee. In management's opinion, all
         adjustments necessary to reflect the effects of these transactions have
         been made.



                                        9

<PAGE>   12


                              INNKEEPERS USA TRUST
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

5.       PRO FORMA FINANCIAL INFORMATION (UNAUDITED), CONTINUED

         The unaudited pro forma statements of income of the Company for the
         periods presented are not necessarily indicative of what the results of
         the operations of the Company would have been assuming such
         transactions had been completed as of the beginning of the periods
         presented, nor does it purport to represent the results of operations
         for future periods.




              UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                               Three Months Ended
                                                     March 31,             
                                              ---------------------
                                                1999         1998
                                                ----         ----
<S>                                           <C>          <C>
Revenue:
   Percentage Lease revenue                   $ 26,069     $ 26,095
   Other revenue                                   209          176
                                              --------     --------
         Total revenue                          26,278       26,271
                                              --------     --------

Expenses:
   Depreciation                                  8,782        8,267
   Amortization of franchise costs                  18           18
   Ground rent                                     114          112
   Interest expense                              4,087        4,384
   Amortization of loan origination fees           238          268
   Real estate and personal property taxes
      and property insurance                     3,013        2,822
   General and administrative                    1,155        1,126
   Amortization of unearned compensation           357          149
                                              --------     --------
         Total expenses                         17,764       17,146
                                              --------     --------

Income before minority interest                  8,514        9,125
Minority interest, common                         (208)        (447)
Minority interest, preferred                    (1,173)      (1,173)
                                              --------     --------
         Net income                              7,133        7,505
         Preferred share dividends              (2,496)      (2,496)
                                              --------     --------
         Net income applicable to
             common shareholders              $  4,637     $  5,009
                                              ========     ========

Diluted earnings per share                    $   0.14     $   0.15
</TABLE>


                                       10

<PAGE>   13



                             INNKEEPERS HOSPITALITY
                             COMBINED BALANCE SHEETS
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                        March 31, 1999  December 31, 1998
                                                        --------------  -----------------
                                                          (Unaudited)
<S>                                                     <C>             <C>
                                    ASSETS
Current assets:
  Cash and cash equivalents                                $ 15,472         $13,562
  Marketable securities                                       2,987           2,366
  Accounts receivable, net                                    7,160           4,384
  Prepaid expenses                                              381             443
                                                           --------         -------

      Total current assets                                   26,000          20,755

Other assets                                                    138             158
                                                           --------         -------

      Total assets                                         $ 26,138         $20,913
                                                           ========         =======

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                         $  4,632         $ 4,139
  Accrued expenses                                            3,878           3,466
  Payable to Manager                                          5,464           2,442
  Due to Partnership                                         10,341           9,882
                                                           --------         -------

      Total current liabilities                              24,315          19,929

Other long-term liabilities                                     910             745
                                                           --------         -------

      Total liabilities                                      25,225          20,674
                                                           --------         -------

Commitments (Note 2)

Shareholders' equity:
  Common shares, $1 par value, 7,000 shares
     authorized, issued and outstanding                           7               7
  Unrealized gain (loss) on marketable securities              (343)             26
  Retained earnings                                           1,249             206
                                                           --------         -------

      Total shareholders' equity                                913             239
                                                           --------         -------

      Total liabilities and shareholders' equity           $ 26,138         $20,913
                                                           ========         =======
</TABLE>




                   The accompanying notes are an integral part
                    of these combined financial statements.



                                       11

<PAGE>   14



                             INNKEEPERS HOSPITALITY
                          COMBINED STATEMENTS OF INCOME
                                 (in thousands)


<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                         March 31,                 
                                                ----------------------------
                                                   1999             1998
                                                   ----             ----
                                                (Unaudited)      (Unaudited)
<S>                                             <C>              <C>
Gross operating revenue:
  Rooms                                          $ 46,250         $ 41,572
  Food and beverage                                    13              158
  Telephone                                         1,373            1,311
  Other                                               891              807
                                                 --------         --------
         Gross operating revenue                   48,527           43,848

Departmental expenses:
  Rooms                                             9,160            7,653
  Food and beverage                                     1              150
  Telephone                                           447              447
  Other                                               425              347
                                                 --------         --------
         Total departmental profit                 38,494           35,251
                                                 --------         --------

Unallocated operating expenses:
  General and administrative                        3,681            3,385
  Franchise fees                                    2,935            2,694
  Advertising and promotions                        2,248            1,948
  Utilities                                         2,156            1,897
  Repairs and maintenance                           2,182            1,830
  Management fees                                   1,083              871
                                                 --------         --------
         Total unallocated operating
           expenses                                14,285           12,625
                                                 --------         --------

         Gross profit                              24,209           22,626

  Insurance                                          (219)            (264)
  Lessee overhead                                    (776)            (795)
  Percentage Lease payments                       (21,997)         (20,070)
                                                 --------         --------

         Net income                                 1,217            1,497

Other comprehensive income -
  unrealized gains (losses) on marketable
  securities                                         (369)              95
                                                 --------         --------

         Comprehensive income                    $    848         $  1,592
                                                 ========         ========
</TABLE>




                   The accompanying notes are an integral part
                    of these combined financial statements.



                                       12

<PAGE>   15



                             INNKEEPERS HOSPITALITY
                        COMBINED STATEMENTS OF CASH FLOWS
                                 (in thousands)



<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                                    March 31,                    
                                                           -------------------------
                                                             1999            1998
                                                             ----            ---- 
                                                          (Unaudited)     (Unaudited)
<S>                                                       <C>             <C>
Cash flows from operating activities:
      Net income                                           $  1,217         $  1,497
      Adjustments to reconcile net income to
         net cash provided by operating activities:
      Depreciation and amortization                              20               12
      Changes in operating assets and liabilities:
         Accounts receivable                                 (2,776)          (3,372)
         Inventory                                               --                3
         Prepaid expenses                                        62              102
         Other assets                                            --               (1)
         Accounts payable                                       493            2,345
         Accrued expenses                                       412              935
         Payable to Manager                                   3,022              769
         Due to Partnership                                     459            6,014
                                                           --------         --------

         Net cash provided by operating activities            2,909            8,304
                                                           --------         --------

Cash flows from investing activities:
     Advances from Partnership                                  165               --
     Purchase of marketable securities                         (990)             (77)
                                                           --------         --------
         Net cash used in investing activities                 (825)             (77)
                                                           --------         --------

Cash flows from investing activities:
     Distributions                                             (174)              -- 
                                                           --------         --------
         Net cash used in investing activities                 (174)              -- 
                                                           --------         --------

Net increase in cash and cash equivalents                     1,910            8,227

Cash and cash equivalents at beginning of period             13,562            7,863
                                                           --------         --------

Cash and cash equivalents at end of period                 $ 15,472         $ 16,090
                                                           ========         ========
</TABLE>








                   The accompanying notes are an integral part
                    of these combined financial statements.




                                       13

<PAGE>   16


                             INNKEEPERS HOSPITALITY
                     NOTES TO COMBINED FINANCIAL STATEMENTS


1.       ORGANIZATION AND BASIS OF PRESENTATION

         Innkeepers Hospitality, Inc., formally known as JF Hotel, Inc., and
         other entities with identical ownership (collectively "IH" or the "IH
         Lessee") are under common control and were formed primarily to lease
         and operate hotels owned by Innkeepers USA Trust ("Innkeepers") through
         Innkeepers USA Limited Partnership and its subsidiary partnerships
         (collectively the "Partnership," and together with Innkeepers, the
         "Company"). The IH Lessee leased 59 hotels (the "IH Leased Hotels")
         from the Company at March 31, 1999.

         The IH Lessee operates 31 of the IH Leased Hotels, Residence Inn by 
         Marriott, Inc. ("RIBM", a wholly-owned subsidiary of Marriott 
         International, Inc.) operates 26 of the IH Leased Hotels, and an 
         unaffiliated party operates two of the Hotels.

         These unaudited financial statements should be read in conjunction with
         the financial statements and notes thereto of the Company and the IH
         Lessee included in the Company's Annual Report on Form 10-K for the
         fiscal year ended December 31, 1998 (the "10-K"). The notes to the
         financial statements included herein highlight significant changes to
         the notes included in the 10-K and present interim disclosures required
         by the SEC. In the opinion of management, all adjustments, consisting
         of normal recurring accruals, considered necessary for a fair
         presentation have been included. The results of any interim period are
         not necessarily indicative of results for the full year.

2.       COMMITMENTS AND RELATED PARTY TRANSACTIONS

         RIBM operates 26 of the IH Leased Hotels under management agreements
         with the IH Lessee (the "RIBM Management Agreements"). The RIBM
         Management Agreements, generally, have an initial term of 13 years and
         provide for base fees and incentive fees which are based on the
         performance of each RIBM managed hotel, as defined in the RIBM
         Management Agreements. The payment of incentive fees is subordinate to
         the IH Lessee's obligations under the Percentage Leases at the RIBM
         managed hotels. The RIBM Management Agreements also contain substantial
         penalties for early termination without cause. Amounts due to RIBM
         under the RIBM Management Agreements are included in "Payable to
         Manager" in the accompanying combined balanced sheets. The right to
         operate the 26 hotels as Residence Inn by Marriott hotels is contained
         in the RIBM Management Agreements. In lieu of a franchise fee, the RIBM
         Management Agreements provide for a system fee of 5% of gross revenues
         at the RIBM managed hotels. The system fee is included in "Franchise
         fees" in the accompanying combined statements of income.



                                       14

<PAGE>   17


                             INNKEEPERS HOSPITALITY
                NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED


2.       COMMITMENTS AND RELATED PARTY TRANSACTIONS, CONTINUED

         Two of the IH Leased Hotels are operated under management agreements
         with an unaffiliated party with remaining terms of approximately two
         years and providing for a base fee of 2% of gross revenues and an
         incentive fee based on the performance of the hotels managed.

         The Company has reimbursed the IH Lessee $25,000 for shared personnel
         and services in each of the three month periods ended March 31, 1999
         and 1998, respectively. The Company has paid the cost of obtaining or
         transferring certain franchise license agreements to the IH Lessee. For
         certain hotels which did not require a franchise transfer fee, the
         Company has advanced to the IH Lessee the working capital deposit
         required under the RIBM Management Agreements. These advances are
         included in "Other long-term liabilities" in the accompanying combined
         balance sheets. Percentage Lease expense due to the Company, which
         remains unpaid at March 31, 1999 and 1998, is included in "Due to
         Partnership" in the accompanying combined balance sheets. The Company
         has also guaranteed certain of the IH Lessee's obligations under its
         franchise licenses (and is secondarily liable for certain of the IH
         Lessee's obligations under the RIBM Management Agreements), generally
         in exchange for certain rights to substitute a replacement lessee as
         the franchisee (or as the party to the RIBM Management Agreement) if
         the Company terminates the related Percentage Lease.





                                       15

<PAGE>   18


                              INNKEEPERS USA TRUST
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS





The following discussion and analysis should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and related notes thereto
of Innkeepers USA Trust included in its Annual Report on Form 10-K for the year
ending December 31, 1998.

GENERAL

For background information relating to the Company and the IH Lessee and the
definitions of certain capitalized terms used herein, reference is made to the
notes to the Consolidated Financial Statements of Innkeepers USA Trust and the
Combined Financial Statements of Innkeepers Hospitality appearing elsewhere
herein, and in the Company's Annual Report on Form 10-K for the year ending
December 31, 1998.

The Company acquired the following hotel properties during the three months
ended March 31, 1999:

<TABLE>
<CAPTION>
                                                   Number of              Date               Purchase
Hotel                                            Suites/Rooms           Acquired               Price     
-----                                            ------------        ---------------        -----------
<S>                                              <C>                 <C>                    <C>  
Residence Inn-Richmond (Northwest), VA               104             January 8, 1999             (a)
Residence Inn-Chicago (Rosemont), IL                 192             January 8, 1999             (a)
Residence Inn-Detroit (Livonia), MI                  112              March 12, 1999        $10,200,000
</TABLE>

(a) Aggregate purchase price of $31,268,000



                                       16

<PAGE>   19

                              INNKEEPERS USA TRUST
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED




THE HOTELS

The following chart summarizes information regarding the Hotels at March 31,
1999.


<TABLE>
<CAPTION>
                                           Number of                  Number of
Franchise Affiliation                  Hotel Properties             Rooms/Suites
---------------------                  ----------------             ------------
<S>                                    <C>                          <C>
Upscale extended-stay hotels:
   Residence Inn                             44                        5,194
   Summerfield Suites                         6                          759*
   Sunrise Suites                             1                           96
                                            ---                        -----
                                             51                        6,049

Limited service hotels:
   Hampton Inn                               12                        1,527
   Courtyard by Marriott                      1                          136
   Comfort Inn                                1                          127
   Holiday Inn Express                        1                          204
                                             --                        -----
                                             15                        1,994

  Total                                      66                        8,043
                                             ==                        =====
</TABLE>

* includes 298 two-bedroom suites



                                       17

<PAGE>   20


                              INNKEEPERS USA TRUST
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED



Average daily rate ("ADR"), occupancy and revenue per available room ("RevPAR")
for 58 of the Hotels are presented in the following table. Results were excluded
for such comparison for two hotels which were under substantial renovation
during the first quarter of 1999 and six hotels which were not open during the
first quarter of 1998. Management believes that growth in RevPAR at certain of
the Hotels reflects the results of the Company's focused acquisition strategy,
the continued implementation of professional management techniques by the
Lessees and third party management and stable industry conditions. No assurance
can be given that the trends reflected in the following table will continue or
that occupancy, ADR and RevPAR will not decrease due to changes in national or
local economic, hospitality or other industry conditions.

<TABLE>
<CAPTION>
                                              Three Months ended
                                                  March 31,                      %
                                           1999               1998            inc (dec)
                                           ----               ----            ---------
<S>                                      <C>                 <C>              <C>
Portfolio (1)                           
--------------------------------
Average Daily Rate                       $ 99.58             $ 99.93            (0.3)
Occupancy                                   77.6%               77.4%            0.3
RevPAR                                   $ 77.26             $ 77.29             0.0


By Type                                 
--------------------------------
Upscale Extended Stay Hotels (2)
   Average Daily Rate                    $104.97             $106.76            (1.7)
   Occupancy                                81.8%               81.4%            0.4
   RevPAR                                $ 85.81             $ 86.93            (1.3)

Limited Service Hotels (3)
   Average Daily Rate                    $ 81.34             $ 76.93             5.7
   Occupancy                                66.2%               66.2%            0.1
   RevPAR                                $ 53.85             $ 50.90             5.8
</TABLE>

 

(1)  58 hotels
(2)  44 hotels
(3)  14 hotels




                                       18

<PAGE>   21


                              INNKEEPERS USA TRUST
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED


RESULTS OF OPERATIONS

The following is a discussion of the results of operations for the Company.

Comparison of the Three Months Ended March 31, 1999 ("1999") to the Three Months
Ended March 31, 1998 ("1998")

The Company had revenues for 1999 of $26,015,000, consisting of $25,806,000 of
Percentage Lease revenue from the Lessees and $209,000 of other revenue,
compared with $23,856,000, $23,680,000 and $176,000, respectively, for 1998. The
increase in Percentage Lease revenue is due, primarily, to the number of hotels
owned increasing from 56 at January 1, 1998, to 62 at March 31, 1998, to 63 at
January 1, 1999 and to 66 at March 31, 1999.

Depreciation, amortization of franchise costs, amortization of loan origination
fees, and amortization of unearned compensation ("Depreciation and
Amortization") were $9,325,000 in the aggregate for 1999 compared with
$7,876,000 for 1998. The increase in Depreciation and Amortization was primarily
due to the increase in the number of hotels owned as discussed previously. Also
contributing to the increase in Depreciation and Amortization was the
depreciation of renovations completed at the Hotels and amortization of
restricted share awards granted in 1998.

Real estate and personal property taxes and property insurance were $2,977,000
for 1999 compared with $2,355,000 for 1998. This increase was primarily due to
the increase in the number of hotels owned as discussed previously and increases
in assessed values of certain hotels for real estate tax purposes.

Interest expense for 1999 was $3,960,000 compared with $4,805,000 for 1998. This
decrease is due to the reduction in borrowings outstanding under the Line of
Credit from the Company's May 1998 preferred share offering, offset by
additional borrowings for hotel acquisitions subsequent to March 31, 1998.

General and administrative expenses remained relatively constant in 1999 both in
absolute dollars and as a percentage of total revenue.

Net income for 1999 was $7,106,000, or $0.13 per diluted share, compared with
$3,357,000, or $0.10 per diluted share, for 1998. This increase was due
primarily to the extraordinary loss in 1998 related to the extinguishment of the
Company's previous line of credit.


                                       19

<PAGE>   22


                              INNKEEPERS USA TRUST
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED


LIQUIDITY AND CAPITAL RESOURCES

The Company's principal source of liquidity is rent payments from the Lessees
under the Percentage Leases, and the Company is dependent on the Lessees to make
such payments to provide cash for debt service, distributions, capital
expenditures at its Hotels, and working capital. The Company believes that its
cash provided by operating activities will be adequate to meet some of its
liquidity needs. The Company currently expects to fund its growth objectives,
and any other additional liquidity needs, primarily by borrowing on its Line of
Credit or other facilities, and exchanging equity for hotel properties or
possibly accessing the capital markets if market conditions permit.

Cash and cash equivalents (including restricted cash and cash equivalents) at
March 31, 1999 and 1998 were $12,437,000 and $12,424,000, including
approximately $3,427,000 and $1,535,000, respectively, which the Company is
required, under the Percentage Leases, to make available to the Lessees for the
replacement and refurbishment of furniture and equipment and certain other
capital expenditures. Additionally, cash and cash equivalents include
approximately $3,562,000 and $5,247,000, respectively, that is held in escrow to
pay for insurance, taxes, and capital expenditures for certain Hotels.

Net cash provided by operating activities for the three months ended March 31,
1999 and 1998 was $17,192,000 and $9,193,000, respectively.

Net cash used in investing activities was $46,995,000 for the three months ended
March 31, 1999. This was comprised primarily of the Company (a) acquiring three
Residence Inn by Marriott hotels located in Richmond (Northwest), Virginia,
Chicago (Rosemont), Illinois and Detroit (Livonia), Michigan for an aggregate of
approximately $41,468,000 and (b) renovations at certain hotels of approximately
$5,330,000.

Net cash used in investing activities was $99,444,000 for the three months ended
March 31, 1998. This was comprised primarily of the Company (a) acquiring a
Residence Inn by Marriott hotel in Bothell, Washington, for approximately
$11,750,000, and (b) acquiring a portfolio of six Residence Inn by Marriott
hotels in Washington and Oregon for approximately $83,000,000.

Net cash provided by financing activities was $32,609,000 for the three months
ended March 31, 1999, consisting primarily of borrowings under the Line of 
Credit of $47,000,000 offset by distributions paid of $13,772,000.




                                       20

<PAGE>   23


                              INNKEEPERS USA TRUST
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED


Net cash provided by financing activities was $91,665,000 for the three months
ended March 31, 1998, consisting primarily of net proceeds from long-term debt
of $104,664,000 and distributions paid of $10,502,000.

In May 1998 the Company issued an aggregate of 4,630,000 8.625% Series A
cumulative convertible preferred shares of beneficial interest (the "Series A
Preferred Shares"). The Series A Preferred Shares are convertible into 1.4811
common shares at any time. The Series A Preferred Shares may be redeemed by the
Company after May 18, 2003 and have no stated maturity or sinking fund
requirements. The Series A Preferred Shares have a liquidation preference of $25
per share and are entitled to annual dividends equal to the greater of (i)
$2.15624 per share ($0.53906 per share payable quarterly) or (ii) the cash
dividend paid or payable on the number of common shares into which a Series A
Preferred Share is then convertible. The net proceeds of the Series A Preferred
Share offering of approximately $111,500,000 were used to repay borrowings
outstanding under the Line of Credit.

The Company pays regular distributions on its common shares and Common Units and
the current quarterly distribution is $0.28 per share or unit. Quarterly
preferred distributions of $0.28875 are payable on each Class B Preferred Unit.
The holders of the Common Units and Class B Preferred Units may redeem their
units for cash or, at the election of Innkeepers, common shares on a one-for-one
basis. Under federal income tax law provisions applicable to REITs, the Company
is required to distribute at least 95% of its taxable income to maintain its
REIT status.

The Company's consolidated indebtedness was 29.3% of its investment in hotels,
at cost, at March 31, 1999. At March 31, 1999, the Company had outstanding
indebtedness of approximately $237,874,000, of which approximately 56% bore
interest at a weighted average fixed rate of approximately 7.6%. At March 31,
1999, 26 of the Company's hotel properties collateralized its long-term debt and
40 of the Company's hotel properties were unencumbered. In making future
investments in hotel properties, the Company may incur additional indebtedness.
The Company may also incur indebtedness to meet distribution requirements
imposed on a REIT under the Internal Revenue Code to the extent that working
capital and cash flow from the Company's investments are insufficient to make
such distributions. The Company's Declaration of Trust limits aggregate
indebtedness to 50% of the Company's investment in hotel properties, at cost,
after giving effect to the Company's use of proceeds from any indebtedness. The
Company has additional borrowing capacity under its Line of Credit of
approximately $140,000,000 at March 31, 1999.

Certain debt coverage ratios for the Company are as follows for the twelve
months ended March 31, 1999: (a) interest coverage ratio of 6.4x, (b) fixed
charged coverage ratio of 2.8x, and (c) total debt to EBITDA of 2.6x.



                                       21

<PAGE>   24


                              INNKEEPERS USA TRUST
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED


The Company's Line of Credit bears interest based on the LIBOR rate and
increases or decreases in the LIBOR rate will increase or decrease the Company's
cost of borrowings outstanding under the Line of Credit. Based on the borrowings
outstanding under the Line of Credit at March 31, 1999, a one percent increase
in the LIBOR rate would increase annual interest charges $955,000. In March
1999, the Company entered into an interest rate cap agreement with a notional
amount of $100,000,000 and a term of one year. The agreement effectively caps
the interest rate on $100,000,000 of borrowings on the Line of Credit at 7.625%.

In the future, the Company may seek to increase the amount of its credit
facilities, negotiate additional credit facilities, or issue corporate debt
instruments, all in compliance with the Company's debt limitation. Any debt
incurred or issued by the Company may be secured or unsecured, short-term or
long-term, fixed or variable interest rate and may be subject to such other
terms as management or the Board of Trustees of the Company deems prudent. The
Company has no interest rate hedging instrument exposure or forward equity
commitments.

The Company has a shelf registration statement for $250,000,000 of common
shares, preferred shares or warrants to purchase shares of the Company. The
shelf registration statement was declared effective by the Securities and
Exchange Commission on April 11, 1997. The terms and conditions of the
securities issued thereunder are determined by the Company based on market
conditions at the time of issuance. Approximately $106,000,000 remains available
for issuance under the shelf registration statement.

The Percentage Leases require the Company to make available to the Lessees an
amount equal to 4.0% of room revenues from the Hotels, on a monthly basis, for
the periodic replacement or refurbishment of furniture and equipment and certain
other capital expenditures at the Hotels. The Second and Third Term Loans
require that the Company make available for such purposes, at the Hotels
collateralizing those loans, an additional 1.0% (for a total of 5.0%) of room
revenues from such Hotels. The Company intends to cause the expenditure of
amounts in excess of such obligated amounts if necessary to comply with the
reasonable requirements of any franchise agreement and otherwise to the extent
that the Company deems such expenditures to be in the best interests of the
Company.

Management believes that the amounts required to be made available by the
Company under the Percentage Lease agreements will be sufficient to meet most of
the routine expenditures for furniture and equipment at the Hotels. It is
currently estimated that the Company will spend between $20,000,000 and
$25,000,000 in capital expenditures at the Hotels in 1999. The Company currently
intends to pay for the cost of capital improvements and any additional furniture
and equipment requirements from undistributed cash or, to the extent that
undistributed cash is insufficient to pay such costs, the Line of Credit.



                                       22

<PAGE>   25


                              INNKEEPERS USA TRUST
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED

Management has become aware of certain financial difficulties at the Summerfield
Lessee. While the full extent of the financial difficulties of the Summerfield
Lessee is not known, management of the Company believes that near term liquidity
problems exist at the Summerfield Lessee. However, the Summerfield Lessee has
paid to the Company all amounts owed to the Company at March 31, 1999. The
Summerfield Lessee also has a $5,533,484 irrevocable Letter of Credit pledged as
collateral for amounts owed to the Company under the Percentage Leases.

SEASONALITY OF HOTEL BUSINESS

The hotel industry is seasonal in nature. Historically, the Hotels' operations
have generally reflected higher occupancy rates and ADR during the second and
third quarters. To the extent that cash flow from the Percentage Leases for a
quarter is insufficient to fund all of the distributions for such quarter due to
seasonal and other factors, the Company may maintain the annual distribution
rate by funding quarterly distributions with available cash or borrowings under
the Line of Credit.

INFLATION

Operators of hotels, including the Lessees and any third-party managers retained
by the Lessees, in general possess the ability to adjust room rates quickly.
However, competitive pressures have limited and may in the future limit the
ability of the Lessees and any third-party managers retained by the Lessees to
raise room rates in response to inflation.

YEAR 2000 ISSUE

The Year 2000 issue is the result of computer programs being written using two
digits rather then four to define the applicable year. Any systems that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failures or
miscalculations. The Company and the Lessees have initiated programs to address
the challenges the Year 2000 may present to their systems and applications. This
program includes or will include computer systems and applications operated by
the Company or the Lessees, systems of third parties upon whose data or
functionality the Company or the Lessees rely (for example: Marriott, Promus,
banks, credit card companies, utilities and Patriot American Hospitality, Inc.),
and certain other systems or assets which contain date sensitive technology.

Based upon its investigation to date, neither the Company nor the Lessees have
yet identified any material Year 2000 issues with respect to their systems. By
the end of the second quarter of 1999, management expects to have substantially
completed (i) the assessment phase of the program and (ii) any necessary
modifications to their own systems, and necessary conversions to new software



                                       23

<PAGE>   26


                              INNKEEPERS USA TRUST
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED


and related testing. As part of the compliance program, the Company has
initiated or will initiate communications with those third parties whose failure
to timely convert their systems could reasonably be expected to have an impact
on the Company's operations.

Although the Company does not believe the Year 2000 issue will have a material
impact on the Company's operations, there can be no guarantee that the
Company's, the Lessees' or any third party's Year 2000 remediation efforts will
be fully compliant. If noncompliance is extensive, this could have a material
effect on the Company's or the Lessees' business, financial conditions, results
of operation and liquidity. The Company has not hired any external consultants
or incurred any additional costs to address possible remedial efforts in
connection with computer software that could be affected by the Year 2000
problem; although it may retain such consultants or incur additional costs in
the future as circumstances warrant. The use of the Company's own information
system personnel to address the Year 2000 problem has not delayed other
information systems projects or affected normal operations. Conflicts regarding
the time demands on its and its Lessees' information systems' personnel of Year
2000 remediation efforts and maintaining/supporting normal operations may cause
delays or create issues in one or both functions. Management does not consider
the incurred or estimated costs of its compliance program to be material. This
assessment could differ materially if either the scope or schedule progress with
its compliance program is significantly altered.

The Company and the Lessees intend to establish contingency plans to handle any
unknown or potential material issues that may arise from the Year 2000 issue.
The Company expects any contingency plans to be completed in the third quarter
of 1999. The Company's and the Lessees' critical applications include its
reservations systems, credit card transmission, security systems, payment
systems, credit card transmission, utilities, payroll, accounts payable and
receivable and other financial applications. Should any or all of the critical
applications fail to perform properly subsequent to January 1, 2000, other than
utilities, the Company intends that it and its Lessees will resort to temporary
manual processing, which will slow operations but is not expected to have a
material adverse impact on its operations in the long-term.

This discussion includes forward-looking statements of the Company's efforts and
managements expectations relating to Year 2000 readiness. The Company's ability
to achieve Year 2000 readiness and the level of incremental costs associated
therewith, could be adversely impacted by, among other things, the availability
and costs of programming and testing resources, vendors' ability to install or
modify proprietary hardware and software, unanticipated problems identified in
the ongoing Year 2000 readiness review and problems that may not be identifiable
despite reasonable efforts.



                                       24

<PAGE>   27


                              INNKEEPERS USA TRUST
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED


FUNDS FROM OPERATIONS

Funds From Operations ("FFO") is a widely used measure of performance for an
equity REIT. FFO, as defined by the National Association of Real Estate
Investment Trusts ("NAREIT"), is income (loss) before minority interest
(determined in accordance with generally accepted accounting principles),
excluding gains (losses) from debt restructuring and sales of property, plus
real estate related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. FFO is presented to assist
investors in analyzing the performance of the Company. The Company's method of
calculating FFO may be different from methods used by other REITs and,
accordingly, may not be comparable to such other REITs. FFO (i) does not
represent cash flows from operating activities as defined by generally accepted
accounting principles, (ii) is not indicative of cash available to fund all cash
flow and liquidity needs, including its ability to make distributions, and (iii)
should not be considered as an alternative to net income (as determined in
accordance with generally accepted accounting principles) for purposes of
evaluating the Company's operating performance.

The following presents the Company's calculation of FFO and FFO per share:

<TABLE>
<CAPTION>
                                                       Three Months
                                                      ended March 31,
                                                      ---------------  
                                                   1999             1998
                                                   ----             ---- 
<S>                                             <C>              <C>
          Net income applicable to
              common shareholders               $ 4,610,000      $ 3,357,000
          Minority interest, common                 205,000          292,000
          Minority interest, preferred            1,173,000        1,173,000
          Extraordinary loss                             --        2,760,000
          Depreciation                            8,712,000        7,441,000
          Preferred share dividends               2,496,000               -- 
                                                -----------      -----------
          FFO                                   $17,196,000      $15,023,000
                                                ===========      ===========

          Denominator for diluted
              earnings per share                 34,169,139       33,195,277
          Weighted average:
              Common Units                        1,540,096        2,947,316
              Preferred Units                     4,063,329        4,063,329
              Convertible Preferred shares        6,857,493               -- 
                                                -----------      -----------
          Denominator for
              FFO per share                      46,630,057       40,205,922
                                                ===========      ===========
          FFO per share                         $      0.37      $      0.37
                                                ===========      ===========
</TABLE>


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<PAGE>   28


                              INNKEEPERS USA TRUST
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED


FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including, without limitation, statements
containing the words "believes", "anticipates", "expects" and words of similar
import. Such forward-looking statements relate to future events and the future
financial performance of the Company, and involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from the results or
achievements expressed or implied by such forward-looking statements. The
Company is not obligated to update any such factors or to reflect the impact of
actual future events or developments on such forward-looking statements.



                                       26

<PAGE>   29



                              INNKEEPERS USA TRUST
                          QUANTITATIVE AND QUALITATIVE
                          DISCLOSURES ABOUT MARKET RISK




         Pursuant to the General Instructions to Rule 305 of the Securities and
         Exchange Commission's Regulation S-K, the quantitative and qualitative
         disclosures called for by Rule 305 are inapplicable to the Company at
         this time.



                                       27

<PAGE>   30



                              INNKEEPERS USA TRUST

                           PART II - OTHER INFORMATION

ITEM 6   Exhibits and Reports on Form 8-K

         (a)      Exhibits - 27 - Financial Data Schedule

         (b)      Reports on Form 8-K - None







                                       28

<PAGE>   31




                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.



                                            INNKEEPERS USA TRUST



May 13, 1999                                /s/ Gregory M. Fay                  
------------                                ------------------------------------
                                            Gregory M. Fay
                                            Vice-President of Accounting
                                            (Principal Accounting Officer)
















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