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

                                    OR

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

           QUARTER ENDED JUNE 20, 1997 COMMISSION FILE NO. 1-14040

                      HOST MARRIOTT SERVICES CORPORATION


                DELAWARE                               52-1938672
       ------------------------          --------------------------------------
       (State of Incorporation)          (I.R.S. Employer Identification Number)


                             6600 ROCKLEDGE DRIVE
                           BETHESDA, MARYLAND 20817
                                (301) 380-7000

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT

     TITLE OF EACH CLASS          NAME OF EACH  EXCHANGE  ON WHICH  REGISTERED
-------------------------------   --------------------------------------------
 Common Stock,  no par value              Chicago Stock Exchange  
 (34,678,649  shares outstanding          New York Stock Exchange 
 as of June 20, 1997)                     Pacific Stock Exchange
                                          Philadelphia Stock Exchange

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,  and (2) has been subject to such filing  requirements
for the past 90 days. Yes X No __

The total number of shares of common stock  outstanding as of July 22, 1997, was
34,694,951.




<PAGE>


              HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES


                                  INDEX

                                                                       PAGE NO.
PART I.  FINANCIAL INFORMATION (UNAUDITED):

         Condensed Consolidated Statements of Operations -
            For the Twelve Weeks and Twenty-Four Weeks Ended
            June 20, 1997 and June 14, 1996                                   2

         Condensed Consolidated Balance Sheets -
            As of June 20, 1997 and January 3, 1997                           3

         Condensed Consolidated Statements of Cash Flows -
            For the Twenty-Four Weeks Ended June 20, 1997 
            and June 14, 1996                                                 4

         Condensed Consolidated Statement of Shareholders' Deficit -
            For the Twenty-Four Weeks Ended June 20, 1997                     5

         Notes to Condensed Consolidated Financial Statements               6-7

         Management's Discussion and Analysis of  Financial Condition
            and Results of Operations                                      8-15

PART II. OTHER INFORMATION AND SIGNATURE:

         Legal Proceedings                                                   16

         Changes in Securities                                               16

         Defaults Upon Senior Securities                                     16

         Submission of Matters to a Vote of Security Holders                 16

         Other Information                                                   16

         Exhibits and Reports on Form 8-K                                    16

         Signature                                                           17

         Computations of Earnings (Loss) Per Common Share                 18-19



                                   1

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                              TWELVE WEEKS ENDED           TWENTY-FOUR WEEKS ENDED
                                                      ------------------------------- -------------------------------
                                                            JUNE 20,       JUNE 14,         JUNE 20,       JUNE 14,
                                                              1997           1996             1997           1996
---------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>             <C>              <C>            <C> 

REVENUES                                                     $292.6         $290.0          $555.7          $549.8 
---------------------------------------------------------------------------------------------------------------------

OPERATING COSTS AND EXPENSES
    Cost of sales                                              85.4           86.2           160.3           164.2 
    Payroll and benefits                                       87.4           85.2           171.3           167.9 
    Occupancy costs                                            64.3           64.7           125.6           124.0 
    General and administrative                                 12.0           11.8            24.5            24.0 
    Other                                                      26.9           27.1            56.1            54.4 
---------------------------------------------------------------------------------------------------------------------

       Total operating costs and expenses                     276.0          275.0           537.8           534.5 
---------------------------------------------------------------------------------------------------------------------

OPERATING PROFIT                                               16.6           15.0            17.9            15.3 

    Interest expense                                           (9.2)          (9.3)          (18.4)          (18.5)
    Interest income                                             1.0            0.1             1.8             0.4 
---------------------------------------------------------------------------------------------------------------------

INCOME (LOSS) BEFORE INCOME TAXES                               8.4            5.8             1.3            (2.8)
Provision (benefit) for income taxes                            3.3            2.5             0.5            (1.2)
---------------------------------------------------------------------------------------------------------------------

NET INCOME (LOSS)                                            $  5.1         $  3.3          $  0.8          $ (1.6)
---------------------------------------------------------------------------------------------------------------------

EARNINGS (LOSS) PER COMMON SHARE:
    Primary                                                  $ 0.14         $ 0.09          $ 0.02          $(0.05)
    Fully-Diluted                                            $ 0.14         $ 0.09          $ 0.02          $(0.05)

Weighted Average Common Shares Outstanding:
    Primary                                                    36.2           35.3            36.2             32.9
    Fully-Diluted                                              36.3           35.3            36.3             32.9


</TABLE>









      See  notes  to  condensed   consolidated  financial statements.


                                   2


<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN MILLIONS)

<TABLE>
<CAPTION>
                                                                                   JUNE 20,           JANUARY 3,
                                                                                     1997                1997
------------------------------------------------------------------------------ ----------------- -- ----------------
<S>                                                                                    <C>               <C>  

                                   ASSETS

Current assets:
   Cash and cash equivalents                                                           $  67.9           $  104.2 
   Accounts receivable, net                                                               27.5               27.4 
   Inventories                                                                            44.4               43.3 
   Deferred income taxes                                                                  27.6               25.4 
   Prepaid rent                                                                            4.1                5.9 
   Other current assets                                                                    2.7                3.3 
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total current assets                                                                  174.2              209.5 

Property and equipment, net                                                              278.9              274.2 
Intangible assets                                                                         24.0               23.4 
Deferred income taxes                                                                     52.8               53.3 
Other assets                                                                              20.3               20.1 
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total assets                                                                        $ 550.2            $ 580.5 
------------------------------------------------------------------------------ ----------------- -- ----------------


                    LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
   Accounts payable                                                                    $  71.6            $  97.3 
   Accrued payroll and benefits                                                           37.7               45.7 
   Accrued interest payable                                                                3.3                4.8 
   Current portion of long-term debt                                                       0.8                0.8 
   Other current liabilities                                                              64.1               62.7 
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total current liabilities                                                             177.5              211.3 

Long-term debt                                                                           406.8              407.4 
Other liabilities                                                                         61.3               57.3 
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total liabilities                                                                     645.6              676.0 

Common stock, no par value,  100 million shares  authorized,  
   34,678,649  shares issued and outstanding as of June 20, 1997 and
   34,445,197 shares issued and outstanding as of January 3, 1997                         ---                 --- 
Contributed deficit                                                                    (110.5)             (109.8)
Retained earnings                                                                        15.1                14.3 
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total shareholders' deficit                                                          (95.4)              (95.5)
------------------------------------------------------------------------------ ----------------- -- ----------------

   Total liabilities and shareholders' deficit                                         $ 550.2            $ 580.5 
------------------------------------------------------------------------------ ----------------- -- ----------------
</TABLE>



        See  notes  to  condensed   consolidated  financial statements.


                                   3

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)

<TABLE>
<CAPTION>
                                                                                      TWENTY-FOUR WEEKS ENDED
                                                                               --------------------------------------
                                                                                  JUNE 20,             JUNE 14,
                                                                                    1997                 1996
------------------------------------------------------------------------------ ----------------- -- -----------------
<S>                                                                                   <C>                   <C>  
 
OPERATING ACTIVITIES
   Net income (loss)                                                                   $  0.8               $ (1.6)

   Adjustments to reconcile net income to cash from operations:
     Depreciation and amortization                                                       24.9                 24.2 
     Amortization of deferred financing costs                                             0.6                  0.6 
     Income taxes                                                                        (1.7)                (4.7)
     Other                                                                                2.0                  0.7 
     Working capital changes:
       Increase in accounts receivable                                                   (0.1)                (4.4)
       Increase in inventories                                                           (1.5)                (0.4)
       Decrease in other current assets                                                   1.6                  2.4 
       Increase (decrease) in accounts payable and accruals                             (34.8)                 9.2 
------------------------------------------------------------------------------ ----------------- -- -----------------

   Cash provided by (used in) operations                                                 (8.2)                26.0 

INVESTING ACTIVITIES
   Capital expenditures                                                                 (27.4)               (24.7)
   Net proceeds from the sale of assets                                                   ---                  0.7 
   Other, net                                                                             1.0                  1.1 
------------------------------------------------------------------------------ ----------------- -- -----------------

   Cash used in investing activities                                                    (26.4)               (22.9)

FINANCING ACTIVITIES
   Repayments of long-term debt                                                          (0.7)                (0.6)
   Proceeds from stock issuances                                                          1.6                  0.1 
   Reimbursement obligation to HMC for MI options and deferred shares                    (2.2)                 --- 
   Foreign exchange translation adjustments                                              (0.4)                 --- 
------------------------------------------------------------------------------ ----------------- -- -----------------

   Cash used in financing activities                                                     (1.7)                (0.5)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        (36.3)                 2.6 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                          104.2                 47.2 
------------------------------------------------------------------------------ ----------------- -- -----------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                               $ 67.9               $ 49.8 
------------------------------------------------------------------------------ ----------------- -- -----------------

</TABLE>





        See  notes  to  condensed   consolidated  financial statements.


                                   4


<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT (UNAUDITED)
TWENTY-FOUR WEEKS ENDED JUNE 20, 1997
(IN MILLIONS)

<TABLE>
<CAPTION>
                                                  COMMON         CONTRIBUTED        RETAINED
                                                  STOCK            DEFICIT          EARNINGS           TOTAL
-------------------------------------------- ----------------- ---------------- ----------------- -----------------
<S>                                                 <C>               <C>               <C>              <C> 

Balance, January 3, 1997                           $    ---          $(109.8)          $  14.3           $ (95.5)
   Common stock issued for employee
     stock plans                                        ---              1.6               ---               1.6 
   Reimbursement obligation to HMC for
     MI options and deferred shares                     ---             (2.2)              ---              (2.2)
   Deferred compensation and other                      ---             (0.1)              ---              (0.1)
   Net income                                           ---              ---               0.8               0.8 
-------------------------------------------- ----------------- ---------------- ----------------- -----------------

BALANCE, JUNE 20, 1997                             $    ---          $(110.5)          $  15.1           $ (95.4)
-------------------------------------------- ----------------- ---------------- ----------------- -----------------

</TABLE>









         See  notes  to  condensed   consolidated  financial statements.



                                   5


<PAGE>


HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.   The  accompanying  condensed  consolidated  financial  statements of Host 
     Marriott  Services  Corporation and subsidiaries  (the "Company") have been
     prepared  without  audit.  Certain  information  and  footnote  disclosures
     normally  included in financial  statements  presented in  accordance  with
     generally  accepted  accounting  principles have been condensed or omitted.
     The  Company  believes  the  disclosures  made  are  adequate  to make  the
     information presented not misleading.  However, the condensed  consolidated
     financial  statements  should be read in conjunction  with the consolidated
     financial  statements  and notes thereto  included in the Company's  Annual
     Report on Form 10-K for the fiscal year ended January 3, 1997.  Capitalized
     terms not  otherwise  defined  herein have the  meanings  specified  in the
     Annual Report on Form 10-K.

     In the  opinion  of  the  Company,  the  accompanying  unaudited  condensed
     consolidated  financial  statements  reflect all adjustments (which include
     only  normal  recurring   adjustments)  necessary  to  present  fairly  the
     consolidated  financial position of the Company as of June 20, 1997 and the
     results of  operations  and cash flows for the interim  periods  presented.
     Interim results are not necessarily  indicative of fiscal year  performance
     because of the impact of seasonal and short-term variations.

     The consolidated  financial  statements include the accounts of the Company
     and its subsidiaries and controlled affiliates.  Investments in 50% or less
     owned  affiliates  over  which the  Company  has the  ability  to  exercise
     significant  influence  are  accounted  for using the  equity  method.  All
     material intercompany transactions and balances between the Company and its
     subsidiaries have been eliminated.  Certain  reclassifications were made to
     the prior year financial statements to conform to the 1997 presentation.

2.   Primary and fully-diluted  income per common share for the twelve weeks and
     twenty-four  weeks ended June 20, 1997 and the twelve  weeks ended June 14,
     1996 were computed by dividing net income by the weighted average number of
     outstanding common shares adjusted for common equivalent  shares.  Loss per
     common share for the twenty-four  weeks ended June 14, 1996 was computed by
     dividing  net loss by the weighted  average  number of  outstanding  common
     shares.  Common equivalent shares and other potentially dilutive securities
     have been excluded from the  weighted-average  number of outstanding shares
     for  the   twenty-four   weeks  ended  June  14,  1996  because  they  were
     antidilutive.

3.   Restricted shares are issued to certain officers and key  executives.  All 
     current  restricted  share  awards  expire at the end of fiscal  year 1998.
     Compensation  expense is  recognized  over the award period and consists of
     time and performance based components. The time-based expense is calculated
     using  the  fair  value  of the  shares  on the  date  of  issuance  and is
     contingent  on  continued  employment.  The  performance-based  expense  is
     calculated  using the fair value of the  Company's  common stock during the
     award  period  and is  contingent  on  attainment  of  certain  performance
     criteria.  During  the first  twelve  weeks of 1996,  all of the  Company's
     executive officers who held restricted shares of Host Marriott  Corporation
     stock elected to convert those restricted  shares into restricted shares of
     the Company's  stock in a manner that preserved the intrinsic  value of the
     restricted  shares to their  holders,  except that the intrinsic  value was
     adjusted to provide a 15% conversion incentive. The Company awarded 445,362
     shares of new  restricted  stock to key  executives  of the  Company in the
     first quarter of 1996.

4. The Company is required to adopt SFAS No. 128, "Earnings Per Share," SFAS No.
129,  "Disclosure  of  Information  about  Capital  Structure,"  SFAS  No.  130,
"Reporting  Comprehensive  Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related  Information," no later than its fiscal year ending
January 2, 1998.  The  adoption of SFAS No. 128 and SFAS No. 129 will not have a
material effect on the Company's consolidated financial statements.  As a result
of the adoption of SFAS No. 128, the Company's  reported  earnings per share for
prior  periods  will be  restated  with an  impact  of less  than  one  cent per
fully-diluted share. The Company is currently evaluating the financial statement
impact of  adopting  SFAS No. 130 and SFAS No.  131.  The  Company  adopted  the
disclosure-only   provisions  of  SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation," during 1996.

5.   Management  approved a formal  restructuring  plan in October  1995 and the
     Company recorded a pretax restructuring charge to earnings of $14.5 million
     in the  fourth  quarter of 1995.  The  restructuring  charge was


                                   6

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued


     primarily comprised of involuntary  employee  termination benefits (related
     to its realignment of operational  responsibilities) and lease cancellation
     penalty fees and related costs  resulting  from the Company's  plan to exit
     certain activities in its entertainment venues.

     The employee  termination  benefits  included in the  restructuring  charge
     reflect the immediate  elimination of approximately 100 corporate and field
     operations  positions and the elimination of  approximately  200 additional
     field operations  positions,  all of which were specifically  identified in
     the restructuring  plan. Certain initiatives of the restructuring plan were
     scheduled to be implemented  throughout the duration of the plan, resulting
     in an  extended  period  over  which the 200  additional  field  operations
     positions  would be eliminated.  Although the Company  expected to complete
     its plan to  involuntarily  terminate  employees  by the end of the  second
     quarter of 1997, the delay in implementation of system  initiatives  caused
     the  terminations to extend beyond the second quarter.  Severance  payments
     are expected to continue beyond the end of the third quarter of 1997 due to
     the provisions of the program that allow for extended  severance  payments.
     As of the end of the second quarter of 1997, the Company had terminated 207
     positions in connection with the restructuring plan.

     Also as a part of the restructuring,  the Company committed to exit certain
     operating   units  in   entertainment   venues  which  were  deemed  to  be
     inconsistent with the Company's core operating strategies. As of the end of
     the first  quarter  of 1997,  this  portion of the  restructuring  plan was
     essentially complete.

     The  following  table  sets forth the  restructuring  reserve  and  related
     activity as of June 20, 1997:


<TABLE>
<CAPTION>
-------------------------------------- --------------- -- -------------------------------------- -- -----------------
                                                                    ACTIVITY TO DATE
                                                          --------------------------------------
                                                                                   CHANGES              RESERVE
                                         PROVISION             COSTS                  IN                 AS OF
(IN MILLIONS)                             RECORDED            INCURRED             ESTIMATE             6/20/97
-------------------------------------- --------------- -- ----------------- -- ----------------- -- -----------------
<S>                                          <C>                    <C>                <C>                   <C>

Employee termination benefits                   $11.6                $ 6.6              $ ---                  $ 5.0
Asset write-downs                                 0.5                  0.8                0.3                    ---
Lease cancellation penalty fees
    and related costs                             2.4                  1.9               (0.3)                   0.2
-------------------------------------- --------------- -- ----------------- -- ----------------- -- -----------------

Total                                           $14.5                $ 9.3              $ ---                  $ 5.2
-------------------------------------- --------------- -- ----------------- -- ----------------- -- -----------------
</TABLE>


6.   Cash and cash equivalents  generally include all highly liquid  investments
     with a  maturity  of three  months or less at the date of  purchase.  These
     investments include money market assets and commercial paper used as a part
     of the Company's cash management activities.

7.   In March 1993,  Host Marriott  Corporation  settled a class action  lawsuit
     involving  certain  bondholders  by originally  issuing to the  bondholders
     warrants to purchase up to 7.7 million shares of Host Marriott  Corporation
     common  stock,  approximately  7.3 million of which were unissued as of the
     Distribution  Date.  As a result of the  Distribution,  such  warrants  are
     exercisable for one share of Host Marriott  Corporation's  common stock and
     one fifth of one share of the Company's common stock.

     As of June 20, 1997, the Company had issued  1,371,533 common shares of the
     Company resulting from the exercise of Host Marriott Corporation  warrants.
     Proceeds  received  from the  issuance  of these  common  shares  were $5.8
     million. As of June 20, 1997, the Company remains obligated to issue 66,652
     shares  of  common  stock  for  the  remaining  unexercised  Host  Marriott
     Corporation  warrants at a price of $5.33 per Company  share.  The warrants
     expire on October 8, 1998.


                                   7

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

REVENUES.  Revenues  for the  twelve  weeks  ("quarter")  ended  June  20,  1997
increased by $2.6 million,  or 0.9%, to $292.6 million compared with revenues of
$290.0 million in the second quarter of 1996. Revenues for the twenty-four weeks
("first half") ended June 20, 1997 totaled $555.7  million,  an increase of $5.9
million,  or 1.1%,  from $549.8  million  during the same period in 1996.  These
increases  were  driven by solid  performance  in  comparable  domestic  airport
concessions operations, minor increases in customer traffic on tollroads and the
opening of the Ontario Mills food court in the fourth quarter of 1996.

AIRPORTS Airport  concession  revenues were up $1.2 million,  or 0.6%, to $206.8
million for the second quarter of 1997 compared with $205.6 million for the same
period in 1996.  Domestic airport concession revenues totaled $191.9 million for
the second  quarter of 1997  compared  to $192.3  million for the same period in
1996.  International  airport revenues were $14.9 million for the second quarter
of 1997  compared  with $13.3  million for the second  quarter of last year,  an
increase  of  $1.6  million,  or  12.0%.  International  airport  revenues  were
negatively impacted by exchange rate fluctuations in the second quarter of 1997.
Comparable contracts, which comprise over 90% of total airport revenues, exclude
the negative impact of contracts with significant  changes in scope of operation
and contracts undergoing significant construction of new facilities, as well as,
the positive  impact of new  contracts.  Revenue  growth at comparable  domestic
airport  locations,  which excludes Chicago and Dallas Fort Worth,  grew a solid
6.0% and can be attributed to strong fundamentals in the airport business,  with
passenger  enplanements  at comparable  airports up an estimated  4.7% over last
year's second quarter.  In February 1997, the FAA forecast has projected  annual
passenger enplanement growth of 4.1% through the year 2008. Revenue per enplaned
passenger  ("RPE")  grew  1.2%  at the  Company's  comparable  domestic  airport
locations in the second  quarter of 1997. The growth in RPE can be attributed to
the continued addition of branded locations,  moderate increases in menu prices,
various real estate  maximization  efforts and benefits  from other  operational
initiatives.  RPE  growth  was  constrained  in the  second  quarter  of 1997 by
construction  projects  (not  considered   significant)  in  several  comparable
domestic  airport  locations,  including  Cleveland,  San Francisco and Phoenix,
where the Company is introducing branded concepts.

Growth in revenues for the first half of 1997 was also due to strong performance
in the airport  concessions  business line with airport revenues totaling $404.7
million during the period,  an increase of $3.7 million,  or 0.9%, from the same
period in 1996. Domestic airport concessions  revenues increased by $1.1 million
to $376.8  million for the first half of 1997 compared  with $375.7  million for
the first half of 1996. International airport revenues totaled $27.9 million and
$25.3 million for the first half of 1997 and 1996, respectively.  Revenue growth
at comparable  domestic airport locations grew 6.4%.  Increased  revenues during
the first half of 1997 reflect growth in passenger  enplanements of 5.0% and RPE
of 1.2%.  Airport revenue growth in the first half of 1997 was achieved  despite
the aforementioned  construction  projects; the benefit of severe winter weather
in 1996 which caused air traffic  delays;  and the calendar shift (first quarter
1997 began January 4, after the holiday travel season,
while first quarter 1996 began December 30, 1995).

TRAVEL PLAZAS
Travel  plaza  concession  revenues  for the  second  quarter of 1997 were $72.8
million,  an increase of $1.5  million or 2.1%,  compared to the same  quarter a
year ago.  This growth was the result of minimal  increases in tollroad  traffic
and moderate price increases.

Travel  plaza  concession  revenues  for the first half of 1997 and 1996 totaled
$125.5 million and $123.2  million,  respectively,  an increase of $2.3 million.
The calendar  shift referred to above  negatively  impacted sales when comparing
the first half of 1997 and 1996.

SHOPPING MALLS AND ENTERTAINMENT
Shopping malls and entertainment  concession  revenues,  primarily consisting of
merchandise, food and beverage sales at food courts in shopping malls, stadiums,
arenas,  and other  tourist  attractions,  decreased by $0.1 million or   

                                   8

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued


0.8%,  to $13.0 million for the second  quarter of 1997,  from $13.1 million for
the same period in 1996.  Shopping malls and entertainment  concession  revenues
totaled  $25.5  million and $25.6  million  for the first half of 1997  and1996,
respectively, a decrease of $0.1 million, or 0.4%. The strong performance of the
new mall food court was offset by an expired  contract at a stadium facility and
the Company's  planned exit from certain retail  operations in the business line
that were deemed to be inconsistent with the Company's core strategies.

Subsequent  to the end of the second  quarter of 1997,  the Company  announced a
third mega-mall food court agreement with The Mills Corporation.  This agreement
is for the  development  and  operation  of the food court at a new 1.4  million
square foot mega mall, opening in mid-1999, near Charlotte, North Carolina. This
mall will be similar in size and scope to the first two mall agreements with The
Mills  Corporation at Ontario Mills in Southern  California  (opened in November
1996) and at Grapevine Mills in Dallas,  Texas (scheduled to open in the Fall of
1997).  During the second quarter of 1997, the Company also announced a ten-year
agreement  with Simon  Debartolo  Group,  the  nation's  largest  shopping  mall
developer,  to operate and manage the 6,100  square foot food court and one food
kiosk at the  Independence  Center Mall in Kansas  City,  Missouri  beginning in
early 1998. Independence Center is an existing mall undergoing renovation.

OPERATING  COSTS AND EXPENSES.  The Company's total operating costs and expenses
were $276.0 million for the second quarter of 1997, or 94.3% of total  revenues,
compared with $275.0  million for the second  quarter of 1996, or 94.8% of total
revenues. Operating costs and expenses totaled $537.8 million for the first half
of 1997, or 96.8% of total revenues,  compared with $534.5 million,  or 97.2% of
total  revenues  for the same  period in 1996.  The  improved  operating  profit
margins  quarter-to-quarter  and  year-to-date  of 50 basis  points and 40 basis
points, respectively,  reflect operating leverage benefits derived from revenue
growth  and an  improvement  in the  cost-of-sales  margin  resulting  from  the
implementation of several operating initiatives.

Cost of sales for the second  quarter of 1997 was $85.4  million,  a decrease of
$0.8 million, or 0.9%, below the second quarter of last year. Cost of sales as a
percentage of total revenues decreased 50 basis points during the second quarter
of 1997.  Cost of sales for the first half of 1997  decreased  $3.9 million,  or
2.4%,  below  the first  half of 1996.  Cost of sales as a  percentage  of total
revenues  decreased  110 basis  points  during the first half of 1997.  The most
notable  cause of these  decreases  were  various cost  controlling  initiatives
implemented during the year. These initiatives include the roll out of the Store
Manager concept  intended to move  management  closer to the customer to improve
customer  satisfaction;  the creation of the Store Card  reporting  system where
emphasis  is  placed  on  tracking  and  measuring   store  level   performance;
implementation  of  Labor  Pro  software  which  provides  managers  with  a new
automated labor scheduling report to manage service standards and control labor;
the  renegotiation  of  distributor  agreements  for books and  magazines in the
Company's  airports and travel plazas to improve in-stock  availability and cost
margins;  as well as a program under which brand experts ("Brand Champions") are
assigned to certain of the Company's largest selling branded concepts. The Brand
Champions'  function is to promote  operational  excellence and create operating
efficiencies  across all of the Company's  locations of a particular  brand.  To
date,  the Company has assigned  brand  champions to each of the Burger King, PS
Airpub, Sbarro, Roy Rogers and Starbucks brands.

Payroll and benefits  totaled $87.4 million during the second quarter of 1997, a
2.6%, or $2.2 million,  increase  over the second  quarter of 1996.  Payroll and
benefits  as a  percentage  of total  revenues  for the  second  quarter of 1997
increased to 29.9% from the 29.4% reported for the same period in 1996.  Payroll
and benefits  totaled  $171.3 million for the first half of 1997, an increase of
$3.4 million,  or 2.0% when compared to the same period in 1996. The payroll and
benefits margin increased by 30 basis points for the first half of 1997 to 30.8%
as a result of initiatives put in place to increase  revenues and decrease other
cost areas.

Occupancy costs consist of rent,  royalties and  depreciation  and  amortization
expenses.  Occupancy  costs were $64.3  million for the second  quarter of 1997,
down  $0.4  million  or 0.6%  compared  to the  second  quarter  of  1996.  As a
percentage of total revenues,  occupancy costs decreased to 22.0% for the second
quarter  of 1997  compared  to 22.3% for the second  quarter of 1996.  Occupancy
costs for the first  half of 1997 and 1996  totaled  $125.6  million and

                                   9

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued



$124.0 million, respectively. As a percentage of total revenues, occupancy costs
remained flat at 22.6% for the first half of 1997 compared to the same period in
1996.

Rent  expense  totaled  $46.2  million for the second  quarter of
1997, a decrease of $1.0  million,  or 2.1%,  below the second  quarter of 1996.
Rent expense for the first half of 1997 decreased $0.3 million, or 0.3% to $90.1
million from $90.4  million for the same period in 1996.  Contract  rent expense
determined as a percentage of revenues  decreased during the first half of 1997,
offset by increased rent from equipment rentals. Increased equipment rent is due
to a new point of sale and back  office  computer  system  that the  Company  is
rolling out to each of its operating units.

Royalties  expense  for the second  quarter of 1997  increased  by 10.9% to $6.1
million from $5.5 million for the second  quarter of last year.  As a percentage
of total revenues, royalties expense increased to 2.1% for the second quarter of
1997 compared to 1.9% for the second quarter of 1996.  Royalties expense totaled
$11.4  million  and  $10.1  million  for  the  first  half  of  1997  and  1996,
respectively,  an increase of $1.3 million, or 12.9%.  Royalties as a percentage
of total revenues  increased 30 basis points for the first half of 1997 to 2.1%.
These increases reflect the Company's continued introduction of branded concepts
to its airport  concessions  operations.  Royalties  expense as a percentage  of
branded  sales  totaled  6.6% and 6.6% in the second  quarter  and first half of
1997,  down  from  the  7.0% and 6.9%  reported  for the same  periods  in 1996,
respectively. These margin decreases are attributable to the addition of branded
concepts  with  lower-than-average   royalty  percentages.   Branded  facilities
generate higher sales per square foot and contribute toward increased RPE, which
offset royalty  payments  required to operate the concepts.  Branded concepts in
all of the Company's venues have grown at a compound annual growth rate of 12.2%
over the last five fiscal years.  No single  branded  concept  accounts for more
than 10% of total revenues.  Branded food and beverage revenues  increased 13.2%
and 14.6% for the  second  quarter  and first half of 1997,  respectively,  when
compared with the same periods in 1996, the majority of which related to branded
sales at airports.

Branded food and beverage revenues in airports have increased 18.0% and 20.2% in
the second  quarter and first half of 1997,  respectively,  compared to the same
periods in 1996.  These increases can be attributed to large new branded concept
developments in Dulles International Airport (just outside of Washington, D.C.),
San  Diego  International   Airport,  Los  Angeles   International  Airport  and
Hartsfield Atlanta  International  Airport, as well as, development  projects at
Cleveland, San Francisco and Phoenix. Airport branded food and beverage sales in
the  second  quarter  increased  to $55.0  million,  or  26.6% of total  airport
revenues,  compared with $46.6 million,  or 22.7% of total airport revenues,  in
the  second  quarter  of 1996.  Branded  food  and  beverage  sales in  airports
increased to $108.1 million, or 26.7% of total airport revenues during the first
half of 1997,  compared with $89.9 million, or 22.4% of totaled airport revenues
for the same period in 1996.

Depreciation  and  amortization  expense,  excluding  $0.4  million of corporate
depreciation  on property  and  equipment  which is  included as a component  of
general and administrative expenses, was $12.0 million for the second quarter of
1997,   compared  to  $12.0   million,   excluding  $0.4  million  of  corporate
depreciation  on  property  and  equipment,  for the  second  quarter  of  1996.
Depreciation  and  amortization  expense,  excluding  $0.8  million of corporate
depreciation on property and equipment,  was $24.1 million for the first half of
1997,  an  increase  of $0.6  million,  or 2.6%,  compared  with $23.5  million,
excluding $0.6 million of corporate depreciation on property and equipment,  for
the same period in 1996.  These  increases in  depreciation  were largely due to
developments at the Ontario Mills Mall food court and Los Angeles  International
Airport.

General and administrative expenses were $12.0 million for the second quarter of
1997,  an  increase of $0.2  million,  or 1.7%,  over the $11.8  million for the
second  quarter of 1996.  General  and  administrative  expenses  totaled  $24.5
million and $24.0 million for the first half of 1997 and 1996, respectively,  an
increase of $0.5 million, or 2.1%. These increases are primarily attributable to
higher corporate  depreciation  expense associated with the new headquarters and
financial system,  which was partially offset by a decrease in corporate payroll
and benefits  expense. 

Other  operating  expenses,   which  includes  utilities,   casualty  insurance,
equipment  maintenance,  trash removal and other  miscellaneous  expenses,  were
$26.9 million for the second  quarter of 1997, a $0.2 million,  or 0.7% decrease
from the

 

                                   10

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued


$27.1 million  reported in the second  quarter of 1996. As a percentage of total
revenues,  other  operating  expenses  decreased  10 basis points for the second
quarter of 1997 when  compared  with the same  period in 1996.  Other  operating
expenses  increased  3.1% to $56.1 million for the first half of 1997 from $54.4
million for the first half of 1996.  As a percentage  of total  revenues,  other
operating  expenses  increased  20 basis  points for the first half of 1997 when
compared with the same period in 1996.

OPERATING PROFIT. As a result of the changes in revenues and operating costs and
expenses discussed above,  operating profit increased to $16.6 million,  or 5.7%
of revenues,  for the second  quarter of 1997,  from $15.0  million,  or 5.2% of
revenues,  for the second  quarter of 1996.  The second  quarter of 1997 was the
Company's  sixth   consecutive   quarter  since  it  became  a  publicly  traded
corporation  with an increase in the  year-over-year  operating  profit  margin.
Airport  operating  profit,  prior to the  allocation  of corporate  general and
administrative  expenses,  was $21.2 million, or 10.3% of airport revenues,  for
the second  quarter of 1997 as compared with $19.9  million,  or 9.7% of airport
revenues,  for the  second  quarter  of 1996.  Travel  plaza  operating  profit,
excluding general and  administrative  expenses,  increased $0.7 million to $5.9
million,  or 8.1% of travel  plaza  revenues,  for the  second  quarter  of 1997
compared with 7.3% of travel plaza revenues for the same period in 1996. Several
strategic initiatives,  including the Store Manager concept, Store Card concept,
Labor Pro  software  and the Brand  Champion  program in the  Company's  largest
selling branded concepts have contributed toward the improved margins. Operating
profit  for   shopping   malls  and   entertainment,   excluding   general   and
administrative  expenses,  was $1.5  million  and $1.7  million  for the  second
quarter of 1997 and 1996,  respectively.  The  shopping  mall and  entertainment
operating profit margin was 11.5%,  down slightly from the comparable  period in
1996, partially  constrained by the amortization of pre-opening costs related to
the opening of the Ontario Mills Mall food court.

Operating profit increased to $17.9 million, or 3.2% of revenues,  for the first
half of 1997,  from $15.3 million,  or 2.8% of revenues,  for the same period in
1996.  Operating  profit for  airports,  prior to the  allocation  of  corporate
general  and  administrative  expenses,  was $38.0  million,  or 9.4% of airport
revenues,  for the first half of 1997 as compared with $35.6 million, or 8.9% of
airport  revenues,  for the first half of 1996.  Operating profit for the travel
plaza business line,  excluding general and administrative  expenses,  increased
$0.5 million to $2.3 million,  or 1.8% of travel plaza  revenues,  for the first
half of 1997 compared with 1.5% of travel plaza  revenues for the same period in
1996.  The  strategic  initiatives  referred to above  contributed  toward these
improved  margins during the first half of 1997.  Operating  profit for shopping
malls and entertainment,  excluding general and administrative expenses, totaled
$2.1 million and $1.9 million for the first half of 1997 and 1996, respectively.
The operating  profit margin for shopping malls and  entertainment  was 8.2% and
7.4% in the first half of 1997 and 1996,  respectively.  The  pre-opening  costs
referred  to  above  slightly  reduced  the  shopping  malls  and  entertainment
operating profit margin for the first half of 1997.

INTEREST  EXPENSE.  Interest expense  decreased $0.1 million to $9.2 million for
the second  quarter of 1997,  compared  with the same  period in 1996.  Interest
expense  totaled  $18.4 million and $18.5 million for the first half of 1997 and
1996,  respectively.  The slight  decrease  in  interest  expense  reflects  the
continuing principal reductions on the Company's other long-term debt.

INTEREST INCOME.  Interest income totaled $1.0 million for the second quarter of
1997, a $0.9 million  increase when compared with the $0.1 million  reported for
the same  period in 1996.  Interest  income  for the first half of 1997 and 1996
totaled $1.8 million and $0.4 million,  respectively.  Cash balances  during the
first  quarter  of 1997 were  temporarily  higher due to a  transition  to a new
financial  system at year-end 1996. This  transition  resulted in beginning cash
balances  being higher than the  Company's  normal  seasonal  level.  The second
quarter of 1997 includes $0.4 million of non-recurring  interest income relating
to a recently  negotiated  agreement with an Airport  Authority which reimburses
the  Company  for  the  cost  of  funding  certain  capital  improvements.  Also
contributing  to the increase in interest  income  during the first half of 1997
were slightly higher short-term interest rates and the Company's acceleration of
the  transfer of cash  balances  from local  depository  accounts  to  corporate
interest bearing consolidation accounts during 1997.



                                   11

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued


INCOME TAXES.  The provision for income taxes for the second quarter of 1997 and
1996 was $3.3 million and $2.5 million,  respectively.  The provision  (benefit)
for income taxes for the first half of 1997 totaled $0.5 million  compared  with
$(1.2) million for the first half of 1996. The Company's  overall  effective tax
rate  declined  in the second  quarter of 1997 to 39.5% from 43.0% in the second
quarter of 1996. This decrease  primarily  reflects a reduction in the estimated
state income tax provision.

NET INCOME (LOSS) AND EARNINGS (LOSS) PER COMMON SHARE. The Company's net income
for the second  quarter of 1997  increased  54.5% to $5.1 million,  or $0.14 per
common share, compared with net income of $3.3 million for the second quarter of
1996, or $0.09 per common  share.  Net income for the first half of 1997 totaled
$0.8  million,  or $0.02 per common  share,  compared  with a net loss of $(1.6)
million,  or $(0.05) per common share for the first half of 1996.  The increases
in net income for the second  quarter  and first half of 1997  reflect  improved
operating  performance,  a  substantial  increase  in  interest  income  and the
reduction in the Company's effective state income tax rate.

WEIGHTED  AVERAGE  SHARES  OUTSTANDING.  The weighted  average  number of common
shares  outstanding  for the second  quarters of 1997 and 1996 used to calculate
primary   earnings  per  common  share  was  36.2  million  and  35.3   million,
respectively,  including  1.5 million and 2.1 million,  respectively,  of common
equivalent  shares. The weighted average number of common shares outstanding for
the second  quarters of 1997 and 1996 used to calculate  fully-diluted  earnings
per common share was 36.3 million and 35.3 million, respectively,  including 1.6
million and 2.1 million, respectively, of common equivalent shares. The weighted
average  number of common  shares  outstanding  used to  calculated  primary and
fully-diluted  earnings per common share for the first half of 1997 equaled 36.2
million and 36.3  million,  respectively,  including 1.5 million and 1.6 million
common equivalent  shares,  respectively.  The weighted average number of common
shares  outstanding  equaled  32.9  million  for the first  half of 1996,  which
excluded common equivalent shares because there were  anti-dilutive.  During the
first half of 1997,  common  shares  outstanding  increased  by 0.3  million and
totaled 34.7 million as of June 20, 1997,  primarily  reflecting the issuance of
shares under the Company's Employee Stock Purchase Plan during the first quarter
of 1997.


LIQUIDITY AND CAPITAL RESOURCES

The Company funds its capital  requirements  with a combination of existing cash
balances,  operating  cash  flow and  debt and  equity  financing.  The  Company
believes  that cash flow  generated  from  ongoing  operations  and current cash
balances are more than adequate to finance ongoing capital expenditures, as well
as, meet debt service requirements. The Company also has the ability to fund its
planned growth  initiatives from existing credit facilities and from the sources
identified above;  however,  should significant growth opportunities arise, such
as  business  combinations  or  contract  acquisitions,   alternative  financing
arrangements will be evaluated and considered.

The Company is required to make semi-annual cash interest payments on the Senior
Notes at a fixed  interest  rate of 9.5%.  The  Company is not  required to make
principal payments on the Senior Notes until maturity except in the event of (i)
certain changes in control or (ii) certain asset sales in which the proceeds are
not invested in other properties  within a specified period of time.  Management
does  not  expect  either  of  these  events  to occur  and  therefore  does not
anticipate  that the  principal  payments on the Senior Notes will be due before
maturity.

The Senior Notes mature in 2005 and are fully and unconditionally  guaranteed on
a joint and several basis by certain  subsidiaries  (the  "Guarantors")  of Host
International, Inc. ("Host International"). The Senior Notes are also secured by
a pledge of the capital stock of the  Guarantors.  The  indenture  governing the
Senior Notes (the  "Indenture")  contains  covenants  that,  among other things,
limit the ability of Host International and certain of its subsidiaries to incur
additional  indebtedness  and issue preferred stock, pay dividends or make other
distributions,  repurchase  capital stock or subordinated  indebtedness,  create
certain liens,  enter into certain  transactions  with affiliates,  sell certain
assets,  issue or sell capital stock of the  Guarantors,  and enter into certain
mergers and consolidations.

Subsequent  to the end of the second  quarter of 1997,  the Company  announced a
share  repurchase  program of up to $15.0 million of the Company's  stock on the
open market over the next two years.  The shares may be used in 

                                   12

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued


connection  with  employee  stock  ownership  plans  or  for  general  corporate
purposes. The Company expects to fund the repurchase program with available cash
and does not anticipate any change in its expansion plan.

The  First  National  Bank of  Chicago,  as agent  for a group of  participating
lenders,   has  provided   credit   facilities   (the   "Facilities")   to  Host
International.  During the first quarter of 1997 the Company  negotiated several
enhancements  to  the  Facilities.  The  enhancements  increased  the  aggregate
principal  amount and extended the maturity of the Facilities from $75.0 million
through 2001 to $100.0 million through April 2002 (the "Total Commitment").  The
Total  Commitment  consists of (i) a letter of credit  facility in the amount of
$25.0 million for the issuance of financial and non-financial  letters of credit
and (ii) a  revolving  credit  facility  in the  amount  of $75.0  million  (the
"Revolver  Facility") for working capital and general  corporate  purposes other
than  hostile  acquisitions.  All  borrowings  under the  Facilities  are senior
obligations of Host  International  and are secured by the Company's  pledge of,
and a first  perfected  security  interest in, all of the capital  stock of Host
International and certain of its subsidiaries.

The loan  agreements  relating  to the  Facilities  contain  dividend  and stock
retirement  covenants that are  substantially  similar to those set forth in the
Indenture,  provided that dividends payable to the Company are limited to 25% of
Host  International's  consolidated  net income and provided,  further,  that no
dividends can be declared by Host International prior to June 20, 1997. The loan
agreements  also  contain  certain  financial  ratio  and  capital   expenditure
covenants.  The  enhancements  to the Facility  during the first quarter of 1997
eliminated  the Revolver  Facility's  annual  30-day  repayment  provision.  Any
indebtedness  outstanding  under the  Facilities may be declared due and payable
upon the  occurrence  of certain  events of  default,  including  the  Company's
failure to comply with the several  covenants  noted above, or the occurrence of
certain  events  of  default  under  the  Indenture.  As of June  20,  1997  and
throughout the twelve weeks and twenty-four weeks ended June 20, 1997, there was
no outstanding  indebtedness  under the Revolver Facility and the Company was in
compliance with the covenants described above.

The Company's cash flows from operating  activities are affected by seasonality.
Cash from  operations  generally is the strongest in the summer  months  between
Memorial  Day and Labor Day.  Cash  provided by  operations,  before  changes in
working  capital,  totaled  $26.6 million for the first half of 1997 as compared
with $19.4 million for the same period in 1996.

The primary uses of cash in investing activities consist of capital expenditures
and  acquisitions.  The Company  incurs  capital  expenditures  to build out new
facilities,  expand or  re-concept  existing  facilities,  and to  maintain  the
quality and improve  operations of existing  facilities.  The Company's  capital
expenditures in the first half of 1997 and 1996, totaled $27.4 million and $24.7
million,  respectively.  For the entire fiscal year of 1997, the Company expects
to make capital expenditure  investments of approximately $55.0 million to $60.0
million  in its core  domestic  airport  and  travel  plaza  business  lines and
approximately $15.0 million in growth markets in international airports and food
courts in domestic shopping malls. The timing of actual capital expenditures can
vary from expected  timing due to project  scheduling and delays inherent in the
construction  and  approval  process.  The  Company  expects  to fund these 1997
expenditures with its operating cash flow.

The  Company's  cash used in financing  activities in the first half of 1997 was
$1.7 million,  compared  with cash used in financing  activities of $0.5 million
for the same period in 1996. In connection  with the  Distribution,  the Company
paid Host  Marriott  Corporation  $2.2 million in the second  quarter of 1997 in
settlement of the Company's  obligation to pay for the exercise of  nonqualified
stock options and the release of deferred stock incentive shares held by certain
former employees of Host Marriott  Corporation.  Offsetting the cash payment was
proceeds received in the first quarter of 1997 for the issuance of common shares
relating to the Company's Employee Stock Purchase Plan totaling $1.6 million.

Working  capital is managed  throughout  the year to  effectively  maximize  the
financial  returns to the Company.  If needed,  the Company's  Revolver Facility
provides  funds for  liquidity,  seasonal  borrowing  needs  and  other  general
corporate purposes. In the fourth quarter of 1996, the Company transitioned to a
new financial system,  which included the centralization of the accounts payable
function.  As a result of the transition,  the Company  experienced  temporarily
high balances in cash and cash  equivalents and current  liabilities at year-end
1996.  During the first half of 1997, the 

                                   13

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued


Company completed the accounts payable centralization,  resulting in a reduction
of the  temporarily  high  cash and cash  equivalents  and  current  liabilities
balances to seasonal levels.

The  Company's   consolidated   earnings   before   interest   expense,   taxes,
depreciation,  amortization and other non-cash items  ("EBITDA")  increased $2.6
million, or 9.3%, to $30.7 million in the second quarter of 1997. EBITDA totaled
$45.6  million  and  $40.7  million  for  the  first  half  of  1997  and  1996,
respectively,  an increase of $4.9 million,  or 12.0%. These increases in EBITDA
reflect the impact of improved  operating  results in 1997. The Company believes
that EBITDA is one meaningful  measure of its operating  performance and is used
by certain  investors  to estimate  the  Company's  ability to meet debt service
requirements  and fund capital  investments.  EBITDA  information  should not be
considered  an  alternative  to net income,  operating  profit,  cash flows from
operations,  or any other operating or liquidity  performance measure recognized
by Generally Accepted Accounting Principles ("GAAP").  The calculation of EBITDA
for the Company may not be comparable to the same calculation by other companies
because the definition of EBITDA varies throughout the industry.

The following is a reconciliation of EBITDA to net income (loss):
<TABLE>
<CAPTION>
                                                   TWELVE WEEKS ENDED                  TWENTY-FOUR WEEKS ENDED
                                            ----------------------------------     --------------------------------
                                                JUNE 20,         JUNE 14,             JUNE 20,        JUNE 14,
(IN MILLIONS)                                     1997             1996                 1997            1996
------------------------------------------- ----------------- ---------------- --- --------------- ----------------
<S>                                                 <C>               <C>                 <C>             <C>

EBITDA                                              $ 30.7           $ 28.1              $ 45.6           $ 40.7 
Interest expense (1)                                  (9.2)            (9.3)              (18.4)           (18.5)
Provision (benefit) for income taxes                  (3.3)            (2.5)               (0.5)             1.2 
Depreciation and amortization                        (12.4)           (12.5)              (24.9)           (24.2)
Other non-cash items                                  (0.7)            (0.5)               (1.0)            (0.8)
------------------------------------------- ----------------- ---------------- --- --------------- ----------------

NET INCOME (LOSS)                                   $  5.1           $  3.3              $  0.8           $ (1.6)
------------------------------------------- ----------------- ---------------- --- --------------- ----------------

<FN>

(1) Amortization of deferred financing costs of $0.4 million for both the second
    quarters of 1997 and 1996,  respectively,  is  included  as a  component  of
    interest  expense.  Amortization  of deferred  financing costs included as a
    component of interest  expense  totaled $0.6 million for both the first half
    of 1997 and 1996, respectively.
</FN>
</TABLE>

IMPAIRMENTS OF LONG-LIVED ASSETS

Effective  September 9, 1995,  the Company  adopted SFAS No. 121, which requires
that an  impairment  loss be  recognized  when the  carrying  amount of an asset
exceeds the sum of the estimated undiscounted future cash flows of the asset. In
adopting SFAS No. 121 (and thereby  changing its method of measuring  long-lived
asset  impairments  from a business-line  basis to an individual  operating-unit
basis), the Company wrote down the assets (primarily leasehold  improvements and
equipment) of 15 individual  operating units to the extent the carrying value of
the assets exceeded the fair value of the assets in 1995.  Twelve of the fifteen
units had projected cash flow  deficits,  and,  accordingly  the assets of these
units  were  written  off in their  entirety.  The  remaining  three  units  had
projected  positive  cash flows and the assets were  partially  written  down to
their estimated fair values.

During 1996, 5 of the original 15 impaired units were either  disposed of or the
lease term expired.  As of June 20, 1997, the total cash flow deficit (including
operating cash flows and necessary capital  expenditures)  from the remaining 10
operating  units was  projected to be  approximately  $23.8  million  during the
remaining  terms of the lease  agreements.  Substantially  all of the  remaining
deficit is  attributable  to three  operating  units,  which include two airport
units and one tollroad unit.


 

                                   14

<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS, continued


DEFERRED INCOME TAXES

Realization of the net deferred tax assets totaling $80.4 million as of June 20,
1997, is dependent on the Company's  ability to generate  future taxable income.
Management  believes that it is more likely than not that future  taxable income
will be sufficient  to realize the net deferred tax assets  recorded at June 20,
1997.  Management  anticipates  that  increases in taxable  income will arise in
future  periods  primarily as a result of the Company's  growth  strategies  and
reduced operating costs resulting from several strategic initiatives and ongoing
improvements to the Company's business processes. The anticipated improvement in
operating  results is expected to  increase  the taxable  income base to a level
which would allow  realization  of the existing  net deferred tax assets  within
nine to twelve years.

Future levels of operating  income and other  taxable  gains are dependent  upon
general  economic  and  industry  conditions,  including  airport  and  tollroad
traffic,  inflation,  competition,  demand for development of concepts and other
factors  beyond  the  Company's  control,  and no  assurance  can be given  that
sufficient  taxable  income will be generated  for full  utilization  of the tax
credits and deductible temporary differences giving rise to the net deferred tax
asset.  Management has considered  these factors in reaching its conclusion that
it is more likely than not that  operating  income will be sufficient to utilize
these tax credits and temporary deferred deductions fully. The amount of the net
deferred  tax  assets  considered  realizable,  however,  could  be  reduced  if
estimates of future taxable income are not achieved.


FORWARD LOOKING STATEMENTS

Certain  matters  discussed  and  statements  made  within  this  Form  10-Q are
forward-looking  statements within the meaning of the Private  Litigation Reform
Act of 1995 and as such may involve known and unknown risks, uncertainties,  and
other factors that may cause the actual results,  performance or achievements of
the Company to be different from any future results, performance or achievements
expressed or implied by such  forward-looking  statements.  Although the Company
believes the expectations reflected in such forward-looking statements are based
on reasonable  assumptions,  it can give no assurance that its expectations will
be attained. These risks are detailed from time to time in the Company's filings
with the Securities and Exchange Commission or other public statements.


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<PAGE>

HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
PART II.  OTHER INFORMATION AND SIGNATURE



ITEM 1.  LEGAL PROCEEDINGS

LITIGATION

     The Company and its subsidiaries  are involved in litigation  incidental to
     their  businesses.  Such  litigation is not  considered by management to be
     significant and its resolution  would not have a material adverse effect on
     the  financial  condition  or results of  operations  of the Company or its
     subsidiaries.

ITEM 2.  CHANGES IN SECURITIES

     None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Annual Meeting of  Shareholders  was held on May 13, 1997 in Marina Del
     Rey, CA. At the meeting,  Richard E. Marriott,  R. Michael McCullough,  and
     Gilbert T. Ray were  elected to the Board of  Directors  of the Company for
     three-year terms expiring at the 2000 Annual Meeting of  Shareholders.  The
     results of the election of Richard E.  Marriott were  29,660,019  votes for
     and  270,205  votes  withheld.  The results of the  election of R.  Michael
     McCullough  were  29,649,472  votes for and  280,752  votes  withheld.  The
     results of the  election  of Gilbert T. Ray were  29,640,998  votes for and
     289,226 votes  withheld.  Other members of the Company's Board of Directors
     are:

                           William W. McCarten
                           William J. Shaw
                           Rosemary M. Collyer
                           J.W. Marriott, Jr.
                           Andrew J. Young

     In addition to the election of Richard E. Marriott,  R. Michael  McCullough
     and Gilbert T. Ray, the  shareholders  ratified the  appointment  of Arthur
     Andersen  LLP as the  Company's  independent  auditors.  The results of the
     appointment of Arthur Andersen LLP were 29,771,582  votes for, 62,362 votes
     against and 96,280 votes withheld.

ITEM 5.  OTHER INFORMATION

     None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

     EXHIBIT NO.  DESCRIPTION
         11       Computations of Earnings (Loss) Per Common Share
         27       Financial Data Schedule (EDGAR Filing Only)

(b)  Reports on Form 8-K:

     Form 8-K dated July 15, 1997  announcing  second  quarter and first half of
        1997 results and containing forward-looking statements.
     Form 8-K dated July 15,  1997  announcing  a stock  repurchase  program and
        containing forward looking statements.


                                   16

<PAGE>
HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
PART II.  OTHER INFORMATION AND SIGNATURE, continued


                                 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 thereunto duly authorized.



                                    HOST MARRIOTT SERVICES CORPORATION



         8/1/97                           /S/  BRIAN W. BETHERS
-------------------------      -------------------------------------------------
          Date                 Brian W. Bethers
                               Senior Vice President and Chief Financial Officer






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