<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                ______________

                                   FORM 10-Q

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

     For the Quarterly Period Ended March 31, 2001

                                       OR

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

     For the Transition Period from __________ to __________

                         Commission File Number 0-27360

                                 _____________

                          EXTENDED STAY AMERICA, INC.
             (Exact name of Registrant as specified in its charter)

                Delaware                              36-3996573
    (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)             Identification Number)

450 EAST LAS OLAS BOULEVARD, FORT LAUDERDALE, FL          33301
    (Address of Principal Executive Offices)            (Zip Code)

      Registrant's telephone number, including area code: (954) 713-1600

                                 _____________


  Indicate by check mark whether the registrant: (1) 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 shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes    x    No
    -------    ------

  At May 9, 2001, the registrant had issued and outstanding an aggregate of
94,835,023 shares of Common Stock.
<PAGE>

                                    PART I

                             FINANCIAL INFORMATION

Item 1.   Financial Statements

                          EXTENDED STAY AMERICA, INC.

               Condensed Consolidated Balance Sheets (Unaudited)
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                          ASSETS
                                          ------
                                                                                                 March 31,      December 31,
                                                                                                   2001           2000(1)
                                                                                                ----------      ------------
<S>                                                                                            <C>             <C>
Current assets:
   Cash and cash equivalents...............................................................     $    8,737       $   13,386
   Accounts receivable.....................................................................          7,183            9,152
   Prepaid expenses........................................................................          7,032            8,246
   Deferred income taxes...................................................................         38,069           37,487
   Other current assets....................................................................                              27
                                                                                                ----------       ----------
Total current assets.......................................................................         61,021           68,298
Property and equipment, net................................................................      2,090,646        2,035,492
Deferred loan costs, net...................................................................         15,810           17,086
Other assets...............................................................................            698              726
                                                                                                ----------       ----------
                                                                                                $2,168,175       $2,121,602
                                                                                                ==========       ==========

                           LIABILITIES AND STOCKHOLDERS' EQUITY
                           ------------------------------------
Current liabilities:
   Accounts payable........................................................................     $   32,356      $   32,587
   Accrued retainage.......................................................................         10,664          10,076
   Accrued property taxes..................................................................         10,756          12,246
   Accrued salaries and related expenses...................................................          1,898           3,644
   Accrued interest........................................................................          1,821           6,590
   Other accrued expenses..................................................................         20,327          18,602
   Current portion of long-term debt.......................................................          5,000           5,000
                                                                                                ----------      ----------
    Total current liabilities..............................................................         82,822          88,745
                                                                                                ----------      ----------
Deferred income taxes......................................................................        107,884         103,224
                                                                                                ----------      ----------
Long-term debt.............................................................................        993,000         947,000
                                                                                                ----------      ----------

Commitments

Stockholders' equity:
   Preferred stock, $.01 par value, 10,000,000 shares authorized, no shares issued and
     outstanding
   Common stock, $.01 par value, 500,000,000 shares authorized, 94,496,823 and
     95,468,972 shares issued and outstanding, respectively................................            945             955
   Additional paid-in capital..............................................................        811,043         825,755
   Retained earnings.......................................................................        172,481         155,923
                                                                                                ----------      ----------
      Total stockholders' equity...........................................................        984,469         982,633
                                                                                                ----------      ----------
                                                                                                $2,168,175      $2,121,602
                                                                                                ==========      ==========
</TABLE>
--------------
(1)  Derived from audited financial statements

    See notes to the unaudited condensed consolidated financial statements

                                       1
<PAGE>

                          EXTENDED STAY AMERICA, INC.

            Condensed Consolidated Statements of Income (Unaudited)
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                           ---------------------
                                                                           March 31,   March 31,
                                                                             2001        2000
                                                                           ---------   ---------
<S>                                                                        <C>         <C>
Revenue ................................................................   $134,414    $113,940
                                                                           --------    --------
Property operating expenses ............................................     56,839      50,931
Corporate operating and property management expenses ...................     11,626      10,913
Depreciation and amortization ..........................................     17,542      16,149
                                                                           --------    --------
        Total costs and expenses .......................................     86,007      77,993
                                                                           --------    --------
Income from operations before interest, income taxes and cumulative
  effect of accounting change ..........................................     48,407      35,947
Interest expense, net ..................................................     19,697      17,144
                                                                           --------    --------
Income before income taxes and cumulative effect of accounting change ..     28,710      18,803
Provision for income taxes .............................................     11,483       7,521
                                                                           --------    --------
Net income before cumulative effect of accounting change ...............     17,227      11,282
Cumulative effect of change in accounting for derivatives, net of
  income tax benefit of $446 ...........................................       (669)
                                                                           --------    --------
Net income .............................................................   $ 16,558    $ 11,282
                                                                           ========    ========
Net income per common share--Basic:
    Net income before cumulative effect of accounting change ...........   $   0.18    $   0.12
    Cumulative effect of accounting change .............................       (.01)
                                                                           --------    --------
Net income .............................................................   $   0.17    $   0.12
                                                                           ========    ========

Net income per common share--Diluted:
    Net income before cumulative effect of accounting change ...........   $   0.17    $   0.12
    Cumulative effect of accounting change .............................
                                                                           --------    --------
Net income .............................................................   $   0.17    $   0.12
                                                                           ========    ========
Weighted average shares:
    Basic ..............................................................     95,745      95,632
    Effect of dilutive options .........................................      3,129         446
                                                                           --------    --------
    Diluted ............................................................     98,874      96,078
                                                                           ========    ========
</TABLE>

    See notes to the unaudited condensed consolidated financial statements

                                       2
<PAGE>

                          EXTENDED STAY AMERICA, INC.

          Condensed Consolidated Statements of Cash Flows (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                 Three Months Ended
                                                                               ----------------------
                                                                               March 31,    March 31,
                                                                                 2001         2000
                                                                               ---------    ---------
<S>                                                                            <C>          <C>
Cash flows from operating activities:
    Net income ............................................................    $ 16,558     $ 11,282
    Adjustments to reconcile net income to net cash provided by operating
      activities:
        Depreciation and amortization .....................................      17,542       16,149
        Amortization of deferred loan costs included in interest expense ..       1,292          965
        Deferred income taxes..............................................       4,078        7,182
        Cumulative effect of accounting change, net........................         669
        Changes in operating assets and liabilities........................      (1,455)      (4,971)
                                                                               --------     --------
            Net cash provided by operating activities .....................      38,684       30,607
                                                                               --------     --------
Cash flows from investing activities:
    Additions to property and equipment ...................................     (71,770)     (56,402)
    Other assets ..........................................................          27         (161)
                                                                               --------     --------
            Net cash used in investing activities .........................     (71,743)     (56,563)
                                                                               --------     --------
Cash flows from financing activities:
    Proceeds from long-term debt ..........................................      46,000       29,000
    Proceeds from issuance of common stock ................................      10,091
    Repurchases of Company common stock ...................................     (27,666)      (4,026)
    Additions to deferred loan costs ......................................         (15)         (16)
                                                                               --------     --------
            Net cash provided by financing activities .....................      28,410       24,958
                                                                               --------     --------
Increase (decrease) in cash and cash equivalents ..........................      (4,649)        (998)
Cash and cash equivalents at beginning of period ..........................      13,386        6,449
                                                                               --------     --------
Cash and cash equivalents at end of period ................................    $  8,737     $  5,451
                                                                               ========     ========
Noncash investing and financing transactions:
    Capitalized or deferred items included in accounts payable and accrued
      liabilities .........................................................    $ 28,026     $ 20,752
                                                                               ========     ========
Supplemental cash flow disclosures:
    Cash paid for:
        Income taxes.......................................................    $  4,250     $  3,935
                                                                               ========     ========
        Interest expense, net of amounts capitalized.......................    $ 23,335     $ 21,968
                                                                               ========     ========
</TABLE>


     See notes to the unaudited condensed consolidated financial statements

                                       3
<PAGE>

                          EXTENDED STAY AMERICA, INC.

        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                March 31, 2001


NOTE 1 -- BASIS OF PRESENTATION

     The accompanying condensed consolidated financial statements are unaudited
and include the accounts of Extended Stay America, Inc. and subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.

     These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included.

     The condensed consolidated balance sheet data at December 31, 2000 was
derived from audited financial statements of the Company but does not include
all disclosures required by generally accepted accounting principles.

     Operating results for the three-month period ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. For further information, refer to the financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000.

     For the three months ended March 31, 2001 and 2000, the computation of
diluted earnings per share does not include approximately 2.3 million and 13.1
million weighted average shares, respectively, of common stock represented by
outstanding options because the exercise price of the options was greater than
the average market price of common stock during the period.

     Certain previously reported amounts have been reclassified to conform with
the current period's presentation.

  Revenue Recognition

     Effective December 31, 2000, we adopted the Securities and Exchange
Commission's Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition"
as amended. SAB No. 101 provides guidance on the recognition, presentation and
disclosure of revenue, including specifying basic criteria which must be met
before revenue can be recognized. The adoption of SAB No. 101 had no impact on
the Company's financial statements.

     Room revenue and other revenue are recognized when services are rendered.
Amounts paid in advance are deferred until earned. Room revenue on weekly guests
is recognized ratably. In the event a guest checks-out early, making them
ineligible for the weekly rate, they are re-assessed at the daily rate with any
resulting adjustment reflected in revenue on the date of check-out.

  Impairment of Long-Lived Assets

     In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", assets are generally evaluated on a market-by-market
basis in making a determination as to whether such assets are impaired. At each
year-end, the Company reviews long-lived assets for impairment based on
estimated future nondiscounted cash flows attributable to the assets. In the
event such cash flows are not expected to be sufficient to recover the recorded
value of the assets, the assets are written down to their estimated fair values.

                                       4
<PAGE>

     The Company performed a comprehensive review of long-lived assets as of the
end of December 31, 2000. Based on this review, no long-lived assets were deemed
to be impaired.

  Derivative Financial Instruments and Cumulative Effect of a Change in
  Accounting

     The Company does not enter into financial instruments for trading or
speculative purposes. The Company uses interest rate cap contracts to hedge its
exposure on variable rate debt. Through December 31, 2000, the cost of the caps
has been included in prepaid expenses and has been amortized to interest expense
over the life of the cap contract. The interest differential to be received
under the related cap is recognized as a reduction in interest expense in the
period earned. Changes in the fair value of cap contracts that do not qualify as
hedges are recognized in income when they occur.

     Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting
for Derivative Instruments and Hedging Activities", as amended, requires all
derivatives to be carried on the balance sheet at fair value. SFAS No. 133, as
amended, is effective for financial statements issued for periods beginning
after December 15, 2000. At December 31, 2000, the carrying value of our
interest rate cap contracts was $1,115,000 and their fair value was zero. The
Company adopted SFAS No. 133 on January 1, 2001 and designated its interest rate
cap contracts as cash-flow hedges of its variable rate debt. SFAS No. 133, as
interpreted by the Derivatives Implementation Group, required the transition
adjustment to be allocated between the cumulative-effect-type adjustment of
earnings and the cumulative-effect-type adjustment of other comprehensive income
based on our pre-SFAS No.133 accounting policy for the contracts. Since the fair
value of the interest rate cap contracts at adoption was zero, the entire
transition adjustment was recognized in earnings.


NOTE 2 -- PROPERTY AND EQUIPMENT

  Property and equipment consist of the following:
<TABLE>
<CAPTION>
                                                                        (000's Omitted)
                                                                    March 31,   December 31,
                                                                       2001           2000
                                                                   ----------     ----------
<S>                                                                <C>            <C>
  Operating Facilities:
       Land and improvements.....................................  $  528,582     $  499,999
       Buildings and improvements................................   1,392,900      1,348,604
       Furniture, fixtures, equipment and supplies...............     264,458        258,212
                                                                   ----------     ----------
         Total Operating Facilities..............................   2,185,940      2,106,815
  Office furniture, fixtures and equipment.......................       8,122          8,084
  Facilities under development, including land and improvements..     111,563        118,110
                                                                   ----------     ----------
                                                                    2,305,625      2,233,009
  Less:  Accumulated depreciation................................    (214,979)      (197,517)
                                                                   ----------     ----------
  Total property and equipment...................................  $2,090,646     $2,035,492
                                                                   ==========     ==========
</TABLE>

  The Company utilizes general contractors for the construction of its
properties. Pursuant to the terms of the Company's contractual agreements with
the general contractors, amounts are retained from payments made to them until
such time as the terms of the agreement have been satisfactorily completed.
Retained amounts are recorded as accrued retainage.

                                       5
<PAGE>

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

General

  We own and operate three brands in the extended stay lodging market--
StudioPLUSTM Deluxe Studios ("StudioPLUS"), EXTENDED STAYAMERICA Efficiency
Studios ("EXTENDED STAY"), and Crossland Economy StudiosSM ("Crossland").  Each
brand is designed to appeal to different price points generally below $500 per
week. All three brands offer the same core components: a living/sleeping area; a
fully-equipped kitchen or kitchenette; and a bathroom.  StudioPLUS facilities
serve the mid-price category and generally feature guest rooms that are larger
than those in our other brands, an exercise facility, and a swimming pool.
EXTENDED STAY rooms are designed to compete in the economy category. Crossland
rooms are typically smaller than EXTENDED STAY rooms and are targeted for the
budget category. In this Quarterly Report on Form 10-Q, the words "Extended Stay
America", "Company", "we", "our", "ours", and "us" refer to Extended Stay
America, Inc. and its subsidiaries unless the context suggests otherwise.

  The table below provides a summary of our selected development and operational
results for the three months ended March 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                               Three Months
                                             Ended March 31,
                                            ------------------
                                              2001        2000
                                             -----       -----
<S>                                         <C>          <C>
Total Facilities Open (at period end)..        400         372
Total Facilities Opened................          8          10
Average Occupancy Rate.................         76%         73%
Average Weekly Room Rate...............      $ 321       $ 299
</TABLE>

  Average occupancy rates are determined by dividing the rooms occupied on a
daily basis by the total number of rooms. Due to our rapid expansion, our
overall average occupancy rate has been negatively impacted by the lower
occupancy typically experienced during the pre-stabilization period for newly-
opened facilities. We expect the negative impact on overall average occupancy to
decline as the ratio of newly-opened properties to total properties in operation
declines. Average weekly room rates are determined by dividing room revenue by
the number of rooms occupied on a daily basis for the applicable period and
multiplying by seven. The average weekly room rates generally will be greater
than standard room rates because of (1) stays of less than one week, which are
charged at a higher nightly rate, (2) higher weekly rates for rooms that are
larger than the standard rooms, and (3) additional charges for more than one
person per room. We expect that our future occupancy and room rates will be
impacted by a number of factors, including the number and geographic location of
new facilities as well as the season in which we open those facilities. We also
cannot assure you that we can maintain our occupancy and room rates.

  At March 31, 2001, we had 400 operating facilities (39 Crossland, 267 EXTENDED
STAY, and 94 StudioPLUS ) and had 28 facilities under construction (27 EXTENDED
STAY and 1 StudioPLUS). We expect to complete the construction of the facilities
currently under construction generally within the next twelve months, however,
we cannot assure you that we will complete construction within the time periods
we have historically experienced. Our ability to complete construction may be
materially impacted by various factors including final permitting and obtaining
certificates of occupancy, as well as weather-induced construction delays.

                                       6
<PAGE>

Results of Operations

 Property Operations

  The following is a summary of the number of properties in operation at the end
of each period along with the related average occupancy rates and average weekly
room rates during each period:

<TABLE>
<CAPTION>
                                                           For the Three Months Ended
                             --------------------------------------------------------------------------------------
                                          March 31, 2001                                March 31, 2000
                             ----------------------------------------      ----------------------------------------
                                             Average        Average                        Average        Average
                             Facilities     Occupancy     Weekly Room      Facilities     Occupancy     Weekly Room
                                Open          Rate           Rate             Open          Rate           Rate
                             ----------     ---------     -----------      ----------     ---------     -----------
<S>                          <C>            <C>           <C>              <C>            <C>              <C>
Crossland...............         39           78%            $223               39            74%          $213
EXTENDED STAY...........        267           76              333              242            73            305
StudioPLUS..............         94           74              346               91            73            340
                                ---           --             ----              ---            --           ----
  Total.................        400           76%            $321              372            73%          $299
                                ===           ==             ====              ===            ==           ====
</TABLE>

  The increase in overall average occupancy rates for the first quarter of 2001
compared to the first quarter of 2000 reflects, primarily, general changes in
the overall supply and demand for lodging products in various markets in which
we operate. The increase in overall average weekly room rates for the first
quarter of 2001 compared to the first quarter of 2000 is due to increases in
rates charged in previously opened properties and, particularly for the EXTENDED
STAY brand, the geographic dispersion of properties opened since March 31, 2000
and the higher standard weekly room rates in certain of those markets.

  Comparable hotels, consisting of the 305 properties opened for at least one
year at the beginning of the first quarter of 2000, realized the following
percentage changes in the components of REVPAR (revenue per available room) for
the first quarter of 2001 as compared with the first quarter of 2000:

<TABLE>
<CAPTION>
                                Crossland     EXTENDED STAY     StudioPLUS      Total
                                ---------     -------------     ----------      -----
<S>                             <C>           <C>               <C>             <C>
Comparable Hotels                   33            195               77           305
Occupancy                          5.2%           2.4%             0.1%         2.3%
Average Weekly Rate                5.2%           4.2%            (0.1)%        3.3%
REVPAR                            10.6%           6.7%             0.0%         5.7%
</TABLE>

  We believe that the percentage changes in the components of REVPAR for the
Crossland and StudioPLUS brands differ significantly from the EXTENDED STAY
brand primarily as a result of the number and geographic dispersion of the
comparable hotels.

  We recognized total revenue of $134.4 million for the first quarter of 2001
and $113.9 million for the first quarter of 2000. This is an increase of $20.5
million, or 18%. Approximately $13.3 million of the increased revenue was
attributable to properties opened subsequent to December 31, 1999 and
approximately $7.2 million was attributable to an increase in revenue for the
362 properties that we owned and operated throughout both periods.

  Property operating expenses, consisting of all expenses directly allocable to
the operation of the facilities but excluding any allocation of corporate
operating and property management expenses, depreciation, or interest were $56.8
million (42% of total revenue) for the first quarter of 2001, compared to $50.9
million (45% of total revenue) for the first quarter of 2000. We expect the
ratio of property operating expenses to total revenue to generally fluctuate
inversely relative to occupancy rate increases or decreases because the majority
of these expenses do not vary based on occupancy. Our overall occupancy rates
were 76% for the first quarter of 2001 and 73% for the first quarter of 2000 and
our property operating margins were 58% for the first quarter of 2001 and 55%
for the first quarter of 2000.

  The provisions for depreciation and amortization for our lodging facilities
were $17.3 million and $15.8 million for the first quarter of 2001 and 2000,
respectively. These provisions were computed using the straight-line method over
the estimated useful lives of the assets. These provisions reflect a pro rata
allocation of the annual depreciation

                                       7
<PAGE>

and amortization charge for the periods for which the facilities were in
operation. Depreciation and amortization for the first quarter of 2001 increased
as compared to the first quarter of 2000 because we operated 28 additional
facilities in 2001 and we operated for a full quarter the 10 properties that
were opened in the first quarter of 2000.

 Corporate Operations

  Corporate operating and property management expenses include all expenses not
directly related to the development or operation of lodging facilities. These
expenses consist primarily of personnel and certain marketing costs, as well as
development costs that are not directly related to a site that we will develop.
We incurred corporate operating and property management expenses of $11.6
million (9% of total revenue) in the first quarter of 2001 and $10.9 million
(10% of total revenue) in the first quarter of 2000. The increase in the amount
of these expenses for the first quarter of 2001 as compared to the same period
in 2000 reflects the impact of additional personnel and related expenses in
connection with the increased number of facilities we operated. We expect these
expenses will continue to increase in total amount but decline moderately as a
percentage of revenue as we develop and operate additional facilities in the
future.

  Depreciation and amortization was $280,000 for the quarter ended March 31,
2001 and $326,000 for the comparable period in 2000. These provisions were
computed using the straight-line method over the estimated useful lives of the
assets for assets not directly related to the operation of our facilities. These
assets were primarily office furniture and equipment.

  We realized $161,000 of interest income in the first quarter of 2001 and
$197,000 in the first quarter of 2000. This interest income was primarily
attributable to the temporary investment of funds drawn under our credit
facilities. We incurred interest charges of $22.5 million during the first
quarter of 2001 and $19.5 million during the first quarter of 2000. Of these
amounts, $2.6 million in the first quarter of 2001 and $2.2 million in the first
quarter of 2000 were capitalized and included in the cost of buildings and
improvements.

  We recognized income tax expense of $11.5 million and $7.5 million (40% of
income before income taxes and the cumulative effect of an accounting change in
both periods) for the first quarter of 2001 and 2000, respectively. Our income
tax expense differs from the federal income tax rate of 35% primarily due to
state and local income taxes. We expect our annualized effective income tax rate
for 2001 will be approximately 40%.

 Cumulative Effect of a Change in Accounting

  Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities", as amended, requires all
derivatives to be carried on the balance sheet at fair value. SFAS No. 133, as
amended, is effective for financial statements issued for periods beginning
after December 15, 2000. At December 31, 2000, the carrying value of our
interest rate cap contracts was $1,115,000 and their fair value was zero. The
Company adopted SFAS No. 133 on January 1, 2001 and designated its interest rate
cap contracts as cash-flow hedges of its variable rate debt. SFAS No. 133, as
interpreted by the Derivatives Implementation Group, required the transition
adjustment to be allocated between the cumulative-effect-type adjustment of
earnings and the cumulative-effect-type adjustment of other comprehensive income
based on our pre-SFAS No. 133 accounting policy for the contracts. Since the
fair value of the interest rate cap contracts at adoption was zero, the entire
transition adjustment was recognized in earnings.

Liquidity and Capital Resources

  We had net cash and cash equivalents of $8.7 million as of March 31, 2001 and
$13.4 million as of December 31, 2000. At March 31, 2001 we had approximately
$4.0 million invested and at December 31, 2000 we had approximately $14.0
million invested in short-term demand notes having credit ratings of A1/P1 or
the equivalent using domestic commercial banks and other financial institutions.
We also deposited excess funds during these periods in an overnight sweep
account with a commercial bank which in turn invested these funds in short-term,
interest-bearing reverse repurchase agreements. Due to the short-term nature of
these investments, we did not take possession of the securities, which were
instead held by the financial institutions. The market value of the securities
held pursuant to these arrangements approximates the carrying amount. Deposits
in excess of $100,000 are not insured by the Federal Deposit Insurance
Corporation.

                                       8
<PAGE>

  Our operating activities generated cash of $38.7 million during the three
months ended March 31, 2001 and $30.6 million during the three months ended
March 31, 2000.

  We used $71.8 million to acquire land and develop and furnish a total of 36
sites opened or under construction in the three months ended March 31, 2001 and
$56.4 million for 30 sites in the three months ended March 31, 2000.

  Our cost to develop a property varies significantly by brand and by geographic
location due to differences in land and labor costs. Similarly, the average
weekly rate charged and the resultant cash flow from these properties will vary
significantly but generally are expected to be in proportion to the development
costs. For the 359 properties we opened from January 1, 1996 through December
31, 2000, the average development cost was approximately $5.5 million with an
average of 107 rooms. In 2001, we expect to open a number of properties in the
Northeast and West where average development costs are higher. Accordingly, we
expect our average development cost for 2001 to increase to approximately $9.0
million per property.

  We made open market repurchases of 567,800 shares of common stock for
approximately $4.0 million in the three months ended March 31, 2000 and
1,987,4000 shares of common stock for approximately $27.7 million in the three
months ended March 31, 2001. We received net proceeds from the exercise of
options to purchase common stock totaling $10.1 million in the three months
ended March 31, 2001.

  In addition to our $200 million 9.15% Senior Subordinated Notes due 2008 (the
"Notes"), we have a $1.0 billion credit facility (the "Credit Facility") which
provides for revolving loans and term loans on a senior collateralized basis.
Loans under the Credit Facility bear interest, at our option, at either a
variable prime-based rate or a variable LIBOR-based rate, plus an applicable
margin. As of March 31, 2001, we had outstanding under the Credit Facility
revolving loans of $153 million and terms loans of $645 million, net of
scheduled principal repayments, leaving $197 million available and committed
under the Credit Facility. Availability of the revolving loans under the Credit
Facility is dependent, however, upon us satisfying certain financial ratios of
debt and interest compared to earnings before interest, taxes, depreciation, and
amortization, with these amounts being calculated pursuant to definitions
contained in the Credit Facility.

  Our primary market risk exposures result from the variable nature of the
interest rates on borrowings under the Credit Facility. We entered into the
Credit Facility for purposes other than trading. Based on the levels of
borrowings under the Credit Facility at March 31, 2001, if interest rates
changed by 1.0%, our annual cash flow and net income would change by $4.8
million. We manage our market risk exposures by periodic evaluation of such
exposures relative to the costs of reducing the exposures by entering into
interest rate swaps or by refinancing the underlying obligations with longer
term fixed rate debt obligations. We do not own derivative financial instruments
or derivative commodity instruments other than interest rate cap contracts on a
total of $800 million that limit our exposure to LIBOR increases to a maximum
LIBOR rate of 7.88% from June 16, 2000 through June 16, 2001 and to a maximum
LIBOR rate of 8.88% from June 17, 2001 through June 16, 2002.

  We plan to develop approximately 28 properties with total costs of
approximately $250 million in 2001. We will seek to increase our annual
investment in extended stay properties to $350 million for 2002. We had
commitments not reflected in our financial statements at March 31, 2001 totaling
approximately $140 million to complete construction of extended stay properties.
We believe that the remaining availability under the Credit Facility, together
with cash on hand and cash flows from operations, will provide sufficient funds
to continue our expansion as presently planned and to fund our operating
expenses through 2002. We may need additional capital depending on a number of
factors, including the number of properties we construct or acquire, the timing
of that development, the cash flow generated by our properties, and the amount
of open market repurchases we make of our Common Stock. Also, if capital markets
provide favorable opportunities, our plans or assumptions change or prove to be
inaccurate, our existing sources of funds prove to be insufficient to fund our
growth and operations, or if we consummate acquisitions, we may seek additional
capital sooner than currently anticipated. In the event we obtain additional
capital, we may seek to increase property openings in future years. Sources of
capital may include public or private debt or equity financing. We cannot assure
you that we will be able to obtain additional financing on acceptable terms, if
at all. Our failure to raise additional capital could result in the delay or
abandonment of some or all of our development and expansion plans, and could
have a material adverse effect on us.

                                       9
<PAGE>

Seasonality and Inflation

  Based upon the operating history of our facilities, we believe that extended
stay lodging facilities are not as seasonal in nature as the overall lodging
industry. We do expect, however, that our occupancy rates and revenues will be
lower than average during the first and fourth quarters of each calendar year.
Because many of our expenses do not fluctuate with changes in occupancy rates,
declines in occupancy rates may cause fluctuations or decreases in our quarterly
earnings.

  The rate of inflation as measured by changes in the average consumer price
index has not had a material effect on our revenue or operating results during
any of the periods presented. We cannot assure you, however, that inflation will
not affect our future operating or construction costs.

Special Note on Forward-Looking Statements

  This Quarterly Report on Form 10-Q includes forward-looking statements. Words
such as "expects", "intends", "plans", "projects", "believes", "estimates", and
similar expressions are used to identify these forward-looking statements. We
have based these forward-looking statements on our current expectations and
projections about future events. However, these forward-looking statements are
subject to risks, uncertainties, assumptions, and other factors which may cause
our actual results, performance, or achievements to be materially different.
These factors include, among other things:

     .  uncertainty as to changes in economic activity and the impact of such
        changes on the consumer demand for lodging products in general and for
        extended stay lodging products in particular;

     .  increasing competition in the extended stay lodging market;

     .  our limited operating history and uncertainty as to our future
        profitability;

     .  our ability to meet construction and development schedules and budgets;

     .  our ability to develop and implement the operational and financial
        systems needed to manage rapidly growing operations;

     .  our ability to integrate and successfully operate acquired properties
        and the risks associated with such properties;

     .  our ability to increase or maintain revenue and profitability in our new
        and mature properties;

     .  our ability to obtain financing on acceptable terms to finance our
        growth; and

     .  our ability to operate within the limitations imposed by financing
        arrangements.

  Other matters set forth in this Quarterly Report may also cause our actual
future results to differ materially from these forward-looking statements. We
cannot assure you that our expectations will prove to be correct. In addition,
all subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements mentioned above. You should not place undue reliance on
these forward-looking statements. All of these forward-looking statements are
based on our expectations as of the date of this Quarterly Report. We do not
intend to update or revise any forward-looking statements, whether as a result
of new information, future events, or otherwise.

Item 3.   Quantitative and qualitative disclosures about market risk

  See Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

                                       10
<PAGE>

                                    PART II

                               OTHER INFORMATION



Item 6.   Exhibits and Reports on Form 8-k



(a)  Exhibits

     Exhibit
     Number                         Description of Exhibit
     ------                         ----------------------

      10.1       Time Sharing Agreement, dated as of January 19, 2001, by and
                 between Advance America Cash Advance Centers, Inc. and ESA
                 Services, Inc. for the Learjet 31 (Serial No. 99) N1932K

      10.2       Time Sharing Agreement, dated as of January 19, 2001, by and
                 between Advance America Cash Advance Centers, Inc. and ESA
                 Services, Inc. for the Learjet 35; (Serial No. 332) N543WW

(b)  Reports on Form 8-K

     None

                                       11
<PAGE>

                                   SIGNATURES

  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, thereunto duly authorized, on May 15, 2001.

                                       EXTENDED STAY AMERICA, INC.


                                       /s/ GREGORY R. MOXLEY
                                       ----------------------------------------
                                           Gregory R. Moxley
                                           Chief Financial Officer
                                           (Principal Financial Officer)

                                       /s/ PATRICIA K. TATHAM
                                       ----------------------------------------
                                           Patricia K. Tatham
                                           Vice President - Corporate Controller
                                           (Principal Accounting Officer)

                                       12