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 26, 1999

                                       OR

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

             FOR TRANSITION PERIOD FROM ___________ TO ___________

                          COMMISSION FILE NO. 1-14040

                       HOST MARRIOTT SERVICES CORPORATION
------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          DELAWARE                                      52-1938672
--------------------------------        ----------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)


         6600 ROCKLEDGE DRIVE
          BETHESDA, MARYLAND                              20817
----------------------------------------               ----------
(Address of principal executive offices)               (Zip Code)

                                 (301) 380-7000
              (Registrant's telephone number, including area code)


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 __

The total number of shares of common stock  issued and  outstanding  as of April
30, 1999, was 33,647,523.


<PAGE>





               HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES


                                      INDEX

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

         Condensed Consolidated Statements of Operations -
           For the Twelve Weeks Ended March 26, 1999 and 
           March 27, 1998                                                    2

         Condensed Consolidated Balance Sheets -
           As of March 26, 1999 and January 1, 1999                          3

         Condensed Consolidated Statements of Cash Flows -
           For the Twelve Weeks Ended March 26, 1999 and 
           March 27, 1998                                                    4

         Condensed Consolidated Statement of Shareholders' 
           Deficit - For the Twelve Weeks Ended March 26, 1999               5

         Notes to Condensed Consolidated Financial Statements              6-7

         Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                       8-16

         Quantitative and Qualitative Disclosure about Market Risk           17

PART II. OTHER INFORMATION AND SIGNATURE:

         Legal Proceedings                                                   18

         Changes in Securities and Use of Proceeds                           18

         Defaults Upon Senior Securities                                     18

         Submission of Matters to a Vote of Security Holders                 18

         Other Information                                                   18

         Exhibits and Reports on Form 8-K                                    18

         Signature                                                           19

         Computations of Loss Per Common Share                               20



                                       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
                                                                                      -------------------------------
                                                                                        MARCH 26,      MARCH 27,
                                                                                           1999           1998
---------------------------------------------------------------------------------------------------------------------

<S>                                                                                         <C>             <C>    
REVENUES                                                                                    $308.9          $277.3 
---------------------------------------------------------------------------------------------------------------------

OPERATING COSTS AND EXPENSES
    Cost of sales                                                                             90.3            82.5 
    Payroll and benefits                                                                     102.0            89.9 
    Rent                                                                                      47.8            44.4 
    Royalties                                                                                  6.8             5.9 
    Depreciation and amortization                                                             15.1            12.0 
    General and administrative                                                                14.3            13.6 
    Other                                                                                     30.1            27.0 
---------------------------------------------------------------------------------------------------------------------

       Total operating costs and expenses                                                    306.4           275.3 
---------------------------------------------------------------------------------------------------------------------

OPERATING PROFIT                                                                               2.5             2.0 

    Interest expense                                                                          (9.4)           (9.2)
    Interest income                                                                            0.2             0.7 
---------------------------------------------------------------------------------------------------------------------

LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN
   ACCOUNTING PRINCIPLE                                                                       (6.7)           (6.5)

Benefit for income taxes                                                                      (2.6)           (2.6)
---------------------------------------------------------------------------------------------------------------------

Loss before cumulative effect of change in accounting principle
                                                                                              (4.1)           (3.9)
Cumulative effect of change in accounting for start-up activities,
   net of tax benefit of $0.5 million                                                         (0.7)            --- 
---------------------------------------------------------------------------------------------------------------------

NET LOSS                                                                                    $ (4.8)         $ (3.9)
---------------------------------------------------------------------------------------------------------------------

LOSS PER COMMON SHARE:
   Loss before cumulative effect of change in accounting principle                          $(0.12)         $(0.11)
   Cumulative effect of change in accounting for start-up activities                         (0.02)            --- 
---------------------------------------------------------------------------------------------------------------------

   Net loss                                                                                 $(0.14)         $(0.11)
---------------------------------------------------------------------------------------------------------------------

Weighted Average Common Shares Outstanding                                                    33.8            34.4 
</TABLE>



            See notes to condensed consolidated financial statements.

                                       2

<PAGE>


HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN MILLIONS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                                    MARCH 26,          JANUARY 1,
                                                                                      1999                1999
-------------------------------------------------------------------------------- ---------------- -- ----------------
<S>                                                                                   <C>                  <C>

                                    ASSETS

Current assets:
   Cash and cash equivalents                                                           $  27.5              $  44.4 
   Accounts receivable, net                                                               30.8                 28.9 
   Inventories                                                                            39.3                 41.1 
   Deferred income taxes                                                                  17.4                 17.4 
   Prepaid rent                                                                            9.3                  7.4 
   Other current assets                                                                   13.7                  7.9 
-------------------------------------------------------------------------------- ---------------- -- ----------------

   Total current assets                                                                  138.0                147.1 

Property and equipment, net                                                              330.0                314.2 
Intangible assets                                                                         21.8                 22.1 
Deferred income taxes                                                                     62.8                 62.2 
Other assets                                                                              21.8                 21.4 
-------------------------------------------------------------------------------- ---------------  -- ----------------

   Total assets                                                                        $ 574.4              $ 567.0 
-------------------------------------------------------------------------------- ---------------- -- ----------------


                     LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
   Accounts payable                                                                    $  80.8              $  79.7 
   Accrued payroll and benefits                                                           40.1                 44.5 
   Accrued interest payable                                                               13.6                  4.8 
   Current portion of long-term debt                                                       1.2                  1.1 
   Borrowings under line-of-credit agreement                                              15.0                 11.6 
   Other current liabilities                                                              43.0                 40.4 
-------------------------------------------------------------------------------- ---------------- -- ----------------

   Total current liabilities                                                             193.7                182.1 

Long-term debt                                                                           406.1                405.9 
Other liabilities                                                                         53.0                 51.6 
-------------------------------------------------------------------------------- ---------------- -- ----------------

   Total liabilities                                                                     652.8                639.6 

Common stock, no par value,  100 million shares  authorized,  35,909,393  shares
   issued as of March 26, 1999 and
   35,739,180 shares issued as of January 1, 1999                                          ---                  --- 
Contributed deficit                                                                     (106.2)              (105.8)
Retained earnings                                                                         54.4                 59.2 
Accumulated other comprehensive income                                                     ---                  0.1 
Treasury stock - 2,179,110 shares at March 26, 1999
   and 2,104,110 shares at January 1, 1999                                               (26.6)               (26.1)
-------------------------------------------------------------------------------- ---------------- -- ----------------

   Total shareholders' deficit                                                           (78.4)               (72.6)
-------------------------------------------------------------------------------- ---------------- -- ----------------

   Total liabilities and shareholders' deficit                                         $ 574.4              $ 567.0 
-------------------------------------------------------------------------------- ---------------- -- ----------------
</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>

                                                                                          TWELVE WEEKS ENDED
                                                                                 -------------------------------------
                                                                                   MARCH 26,            MARCH 27,
                                                                                      1999                1998
-------------------------------------------------------------------------------- ---------------- -- -----------------

<S>                                                                                     <C>                <C>  
OPERATING ACTIVITIES
   Net loss                                                                             $ (4.8)              $ (3.9)
   Cumulative effect of change in accounting principle, net of taxes                       0.7                  --- 
-------------------------------------------------------------------------------- ---------------- -- -----------------

   Net loss before cumulative effect of change in accounting principle                    (4.1)                (3.9)

   Adjustments to reconcile net income to cash from operations:
     Depreciation and amortization                                                        15.4                 12.5 
     Amortization of deferred financing costs                                              0.3                  0.3 
     Deferred income taxes                                                                (0.6)                 0.1 
     Other                                                                                 0.2                  1.8 
     Working capital changes:
       (Increase) decrease in accounts receivable                                         (1.0)                 4.3 
       Decrease in inventories                                                             1.6                  0.9 
       Increase in other current assets                                                   (8.9)                (4.2)
       Increase (decrease) in accounts payable and accruals                                8.2                 (6.3)
-------------------------------------------------------------------------------- ---------------- -- -----------------

   Cash provided by operations                                                            11.1                  5.5 

INVESTING ACTIVITIES
   Capital expenditures                                                                  (31.5)               (15.1)
   Other, net                                                                              0.6                 (2.0)
-------------------------------------------------------------------------------- ---------------- -- -----------------

   Cash used in investing activities                                                     (30.9)               (17.1)

FINANCING ACTIVITIES
   Repayments of long-term debt                                                           (0.5)                (0.4)
   Issuance of long-term debt                                                              0.8                  0.9 
   Net borrowings under line-of-credit agreement                                           3.4                  --- 
   Proceeds from stock issuances                                                           1.5                  2.1 
   Payment to Host Marriott Corporation for Marriott International
       options and deferred shares                                                        (1.7)                 --- 
   Purchases of treasury stock                                                            (0.5)                (9.8)
   Other                                                                                  (0.1)                 0.2 
-------------------------------------------------------------------------------- ---------------- -- -----------------

   Cash provided by (used in) financing activities                                         2.9                 (7.0)

DECREASE IN CASH AND CASH EQUIVALENTS                                                    (16.9)               (18.6)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                            44.4                 78.1 
-------------------------------------------------------------------------------- ---------------- -- -----------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                                $ 27.5               $ 59.5 
-------------------------------------------------------------------------------- ---------------- -- -----------------

</TABLE>


            See notes to condensed consolidated financial statements.

                                       4

<PAGE>


HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT (UNAUDITED)
TWELVE WEEKS ENDED MARCH 26, 1999
(IN MILLIONS)

<TABLE>
<CAPTION>

                                                                                    ACCUMULATED
     COMMON                                                                            OTHER
     SHARES                                             CONTRIBUTED    RETAINED    COMPREHENSIVE    TREASURY
  OUTSTANDING                                             DEFICIT      EARNINGS       INCOME         STOCK        TOTAL
----------------- ------------------------------------ -------------- ----------- ---------------- ----------- ------------

        <C>       <S>                                        <C>          <C>           <C>           <C>         <C>    

           33.6   Balance, January 1, 1999                 $(105.8)      $59.2            $ 0.1     $ (26.1)      $(72.6)
----------------- ------------------------------------ -------------- ----------- ---------------- ----------- ------------

                    Comprehensive loss:
            ---        Net loss                                ---        (4.8)             ---         ---         (4.8)
                       Foreign currency translation
            ---         adjustments                            ---         ---             (0.1)        ---         (0.1)
----------------- -------------------------------------- ------------ ----------- ---------------- ----------- ------------
            ---     Total comprehensive loss                   ---        (4.8)            (0.1)        ---         (4.9)

                    Common stock issued for
            0.2        employee stock and option plans         1.5         ---              ---         ---          1.5 
                    Payment to Host Marriott
                       Corporation for Marriott
                       International options
            ---        and deferred shares                    (1.7)        ---              ---         ---         (1.7)
           (0.1)    Treasury stock purchases                   ---         ---              ---        (0.5)        (0.5)
            ---     Deferred compensation                     (0.2)        ---              ---         ---         (0.2)
----------------- -------------------------------------- ------------  ----------- ---------------- ----------- ------------

           33.7   BALANCE, MARCH 26, 1999                  $(106.2)    $  54.4          $   ---     $ (26.6)     $ (78.4)
----------------- -------------------------------------- ------------ ----------- ---------------- ----------- ------------

</TABLE>









            See notes to condensed consolidated financial statements.

                                       5

<PAGE>



HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO 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  1, 1999  ("Form
     10-K").  Capitalized  terms not otherwise  defined herein have the meanings
     specified in the 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 March 26, 1999 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 1999 presentation.

2.   Loss per common  share for the twelve  weeks ended March 26, 1999 and March
     27, 1998 were computed by dividing net loss by the weighted  average number
     of outstanding  common shares.  Potentially  dilutive  securities have been
     excluded  from the diluted  loss per share  calculations  because they were
     antidilutive.

3.   Restricted  shares are awarded to certain key  executives.  As of March 26,
     1999,  there were 823,000  restricted  share awards  outstanding,  of which
     approximately 751,000 were restricted shares issued in 1998 and 72,000 were
     shares  issued  in prior  years and will be  released  upon  retirement  of
     certain executives.

     Compensation expense related to the 751,000 shares awarded in 1998 consists
     of  256,000  shares in an annual  time-based  component  as well as 495,000
     shares in a performance-based  component.  Compensation  expense under both
     components is calculated  using the fair value of the shares on the date of
     issuance and is  contingent  on  continued  employment.  The  vesting,  and
     corresponding  compensation expense, of the 256,000 shares under the annual
     time-based  component occurs ratably over a three-year  period beginning on
     the grant date. The vesting, and corresponding compensation expense, of the
     495,000  shares under the  performance-based  component can be  accelerated
     from a maximum  seven-year  period to a  minimum  three-year  period by the
     attainment of certain performance  criteria as the average stock price must
     meet or exceed the 75th percentile total shareholder returns of the Russell
     2000 index during fiscal years 2001 through 2005.

     Restricted  share awards  outstanding  from prior grants totaled 256,000 at
     the end of fiscal  year  1998.  During the first  quarter of 1999,  131,000
     shares were released, 53,000 shares were forfeited and the remaining 72,000
     shares will be released upon retirement of certain executives.

4.   During the first quarter of 1999, the Company adopted Statement of Position
     ("SOP") 98-1,  "Accounting for the Costs of Computer Software  Developed or
     Obtained  for  Internal  Use"  and SOP  98-5,  "Reporting  on the  Costs of
     Start-Up  Activities." As a result of the adoption of SOP 98-1, the Company
     capitalized  $0.1 million of internal payroll and benefits costs during the
     first  quarter  of 1999  that  previously  would  have been  expensed.  The
     adoption  of SOP  98-5 in the  first  quarter  of 1999  resulted  in a $0.7
     million  charge,  net of tax of $0.5  million,  for a change in  accounting
     principle.  Additionally, the Company expects to expense approximately $2.6
     million of anticipated  pre-opening costs in 1999 that otherwise would have
     been   capitalized  and  amortized  in  2000  under  the  Company's  former
     accounting  policy.  The Company adopted Statement of Financial  Accounting
     Standards ("SFAS") No. 130, "Reporting  Comprehensive  Income," during 


                                       6

<PAGE>
HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED



     1998 and the adoption did not have a material  effect on the Company's 1998
     consolidated financial statements.

5.   The Company's  principal  business is providing  food,  beverage and retail
     concessions  at  airports,  in travel  plazas and at  shopping  malls.  The
     Company's management evaluates  performance of each segment based on profit
     or loss from  operations  before  allocation of general and  administrative
     expenses,  interest,  income  taxes and  cumulative  effects  of changes in
     accounting principles. The accounting policies of the segments are the same
     as those described in the summary of significant accounting policies in the
     Company's Form 10-K. Financial information for the Company's three business
     segments are provided in the following tables.


<TABLE>
<CAPTION>
                                                                               TWELVE WEEKS ENDED
                                                                      -------------------------------------
                                                                         MARCH 26,           MARCH 27,
                (IN MILLIONS)                                               1999               1998
                -------------------------------------------------------------------------------------------

                  <S>                                                        <C>                 <C>
                REVENUES:
                  Airports                                                    $ 246.3             $ 217.5 
                  Travel plazas                                                  57.5                55.2 
                  Shopping malls                                                  5.1                 4.6 
                -------------------------------------------------------------------------------------------
                Total segment revenues                                        $ 308.9             $ 277.3 
                -------------------------------------------------------------------------------------------

                OPERATING PROFIT (LOSS):(1)
                  Airports                                                    $  20.2             $  19.5 
                  Travel plazas                                                  (2.7)               (3.7)
                  Shopping malls                                                 (0.7)               (0.2)
                -------------------------------------------------------------------------------------------
                Total segment operating profit                                $  16.8             $  15.6 
                -------------------------------------------------------------------------------------------
<FN>

                (1)   Before general and administrative expenses.
</FN>
</TABLE>



<TABLE>
<CAPTION>

                                                                         MARCH 26,           JANUARY 1,
                (IN MILLIONS)                                               1999                1999
                ----------------------------------------------------------------------------------------------
               <S>                                                            <C>                  <C>

                ASSETS:
                  Airports                                                     $ 352.5              $ 347.2
                  Travel plazas                                                   80.5                 85.2
                  Shopping malls                                                  14.2                 12.8
                ----------------------------------------------------------------------------------------------
                Total segment assets                                           $ 447.2              $ 445.2
                ----------------------------------------------------------------------------------------------
</TABLE>


     Reconciliations of segment data to the Company's  consolidated data follow:

<TABLE>
<CAPTION>
                                                                               TWELVE WEEKS ENDED
                                                                      -------------------------------------
                                                                         MARCH 26,           MARCH 27,
                (IN MILLIONS)                                               1999               1998
                -------------------------------------------------------------------------------------------
                  <S>                                                        <C>                   <C>    

                OPERATING PROFIT:
                  Segments                                                     $ 16.8              $ 15.6 
                  General and administrative expenses                           (14.3)              (13.6)
                -------------------------------------------------------------------------------------------
                Total operating profit                                         $  2.5              $  2.0 
                -------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                                          MARCH 26,          JANUARY 1,
                (IN MILLIONS)                                               1999                1999
                --------------------------------------------------------------------------------------------
                  <S>                                                        <C>                  <C>  

                ASSETS:
                  Segments                                                     $ 447.2              $ 445.2
                  Corporate and other                                            127.2                121.8
                --------------------------------------------------------------------------------------------
                Total assets                                                   $ 574.4              $ 567.0
                --------------------------------------------------------------------------------------------
</TABLE>

                                       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  March 26,  1999
increased by 11.4% to $308.9 million from the same period in 1998,  with revenue
growth in all  business  segments.  The increase in revenues was driven by solid
performance  in  comparable   domestic  airport  concessions   operations,   the
conversion  of the  Miami  International  Airport  contract  from  a  management
agreement to an operating  agreement  during the second  quarter of 1998,  solid
growth in tollroad  operations and the opening of one new mall food court in the
first  quarter  of 1999 and two new mall food  courts in the  fourth  quarter of
1998.

<TABLE>
<CAPTION>
                                                                          TWELVE WEEKS ENDED
                                                                     -----------------------------
                                                                       MARCH 26,     MARCH 27,
      (IN MILLIONS)                                                       1999          1998          CHANGE
      ----------------------------------------------------------------------------------------------------------
      <S>                                                               <C>              <C>            <C> 
      REVENUES BY BUSINESS LINE
          AIRPORTS:
             Domestic                                                       $219.9        $193.7         13.5%
             International                                                    16.5          14.0         17.9 
             Off-airports                                                      9.9           9.8          1.0 
      ----------------------------------------------------------------------------------------------------------
                Total airports                                               246.3         217.5         13.2 
      ----------------------------------------------------------------------------------------------------------
          TRAVEL PLAZAS                                                       57.5          55.2          4.2 
          SHOPPING MALLS                                                       5.1           4.6         10.9 
      ----------------------------------------------------------------------------------------------------------
          Total revenues                                                    $308.9        $277.3         11.4%
      ----------------------------------------------------------------------------------------------------------
</TABLE>


The Company's diversified branded concept portfolio,  which consists of over 100
franchised,  licensed or internally  developed brands,  is a unique  competitive
advantage in the marketplace. Brand awareness, customer familiarity with product
offerings,  and the perception of superior value and consistency are all factors
contributing  to higher  revenue  per  enplaned  passenger  ("RPE")  in  branded
facilities.  Branded revenues in all of the Company's venues increased 13.5% for
the first  quarter  of 1999  compared  to a year ago and  accounted  for  $126.3
million of the Company's total revenues.  The majority of this increase  related
to the Company's  continued  transformation  of airport  locations  from generic
offerings to  internationally  known brands and unique local  concepts.  Branded
concept  revenues in all of the Company's venues have grown at a compound annual
growth rate of 13.2% over the last three fiscal years. The Company's exposure to
any one brand is limited  given the  diversity of brands that are  offered.  The
Company's  largest branded concept,  Burger King, is an  international  favorite
among consumers and accounted for 9.7% of total revenues in the first quarter of
1999.

AIRPORTS
Airport  segment  revenues were up 13.2% to $246.3 million for the first quarter
of 1999  compared  to a year ago  with the  majority  of the  increase  from the
Company's domestic airport concessions.

Domestic and international airport concession revenues were up $28.7 million, or
13.8%,  to $236.4  million for the first quarter of 1999 compared to a year ago,
driven by new contracts,  strong growth in RPE and moderate  growth in passenger
enplanements.   Airport  revenues  benefited  from  the  opening  of  concession
facilities  at two of the  Company's  newest  contracts,  Miami and Palm  Beach.
Domestic airport concession  revenues grew 13.5%, to $219.9 million.  Comparable
domestic  airport  revenues  grew by 8.6% for the first  quarter of 1999 from an
estimated 2.3% growth in domestic passenger enplanements and 6.3% growth in RPE.
The passenger  enplanement growth is estimated by the Air Transport  Association
whose  member  airlines  represent  95% of all  passenger  traffic in the United
States.  RPE is the primary measure of how effective the Company is at capturing
potential customers and increasing customer spending. Moderate increases in menu
prices,  increased revenue from recently renovated  facilities in the Las Vegas,
Minneapolis,  Tampa and Charlotte airports and various real estate  maximization
efforts contributed to the growth in RPE. International airport revenues were up
17.9% to $16.5 million with  benefits  from new contracts at Shenzhen  Huangtian
International  Airport  and Kuala  Lumpur  International  Airport as well as the
addition of new concepts and overall enplanement increases.


                                       8

<PAGE>

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



During the first  quarter of 1999,  the  Company  extended  over $55  million of
revenues from six airport  contracts  that were expiring  before 2002.  The most
significant  was the  five-year  contract  extension  for food and  beverage  at
Terminal IV at the Phoenix Sky Harbor International Airport.

Off-airport  revenues  increased  1.0% to $9.9  million in the first  quarter of
1999.  The  closing of two hotel gift shop  locations  in 1998  offset the solid
performance of two tourist attraction  locations and one entertainment  location
in the first quarter of 1999.

TRAVEL PLAZAS
Travel plaza  concession  revenues for the first quarter of 1999 were up 4.2% to
$57.5 million when compared to the same period in 1998 with solid growth on most
of the Company's major tollroads. This growth was the result of the introduction
of several new  branded  concepts to  selected  locations,  including  Starbucks
Coffee and Pizza Hut Express, as well as moderate increases in menu prices.

Subsequent to the end of the first quarter of 1999,  the Company won a five-year
contract for two newly built travel  plazas on the Ohio  Turnpike  with expected
annualized revenue of $8.0 million. The Company's four existing locations on the
turnpike are expected to be closed for  renovation by the Authority in late 1999
and re-bid in early 2000.

SHOPPING MALLS
Shopping malls  concession  revenues  increased by 10.9% to $5.1 million for the
first  quarter  of 1999 when  compared  with the  first  quarter  of 1998.  This
increase can be attributed  to the opening of the  MacArthur  Center Mall in the
first quarter of 1999 and the openings of the  Independence  Center Mall and the
Leesburg Corner Premium Outlets in the fourth quarter of 1998.

 OPERATING COSTS AND EXPENSES.  The Company's total operating costs and expenses
were $306.4  million for the first quarter of 1999, or 99.2% of total  revenues,
compared  with $275.3  million for the first  quarter of 1998, or 99.3% of total
revenues.  The improved  operating  profit  margin of 10 basis  points  reflects
improvements in the cost of sales, rent and general and  administrative  expense
margins, offset by higher payroll and depreciation expense margins. The improved
operating  profit  margin  reflects  operating  leverage  benefits  derived from
revenue growth,  moderate price increases and reduced operating expenses due, in
part, to the increased  initiation and utilization of loss  prevention  programs
and the use of internally created programs to effectively manage and monitor the
Company's labor force.

Cost of sales for the first quarter of 1999 increased 9.5% to $90.3 million when
compared to the first  quarter of 1998.  Cost of sales as a percentage  of total
revenues improved 60 basis points during the first quarter of 1999 with benefits
from the  re-emphasis of product cost  management.  The margin  improvement  was
attained  despite  a mix  shift to  higher  cost of  product  concepts,  such as
Starbucks,  as well as start-up inefficiencies at new food and beverage concepts
that result in temporarily high product waste.

Payroll and benefits  totaled $102.0 million during the first quarter of 1999, a
13.5%  increase  over the first  quarter  of 1998.  Payroll  and  benefits  as a
percentage of total  revenues for the first  quarter of 1999  increased 60 basis
points to 33.0% as a result of tight labor markets and training costs related to
new concessions at several  airports.  The Company is addressing the tight labor
markets with  increased  emphasis on  recruitment  and retention as well as with
training  in and  regular use of  technology  previously  put in place for labor
productivity and scheduling.

Rent expense totaled $47.8 million for the first quarter of 1999, an increase of
7.7% above the first  quarter of 1998.  Rent  expense as a  percentage  of total
revenues  improved 50 basis points and can be attributed  to sales  increases on
contracts  with fixed rental rates and new or renewed  contracts  with favorable
rent margins.


                                       9

<PAGE>

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



Royalties  expense  for the first  quarter  of 1999  increased  by 15.3% to $6.8
million when  compared  with the first quarter of 1998. As a percentage of total
revenues,  royalties  expense increased by 10 basis points for the first quarter
of 1999.  The increase in royalties  expense  reflects the  Company's  continued
introduction of branded concepts to its airport  concessions  operations and the
continued   expansion  into  the  heavily  branded   shopping  mall  food  court
concessions  business.  Royalties  expense  as a  percentage  of  branded  sales
averaged 5.9% and 6.0% in the first quarter of 1999 and 1998, respectively. This
margin  improvement was  attributable  to the addition of branded  concepts with
lower-than-average royalty percentages. Branded facilities generate higher sales
per square foot, contribute toward increased RPE and position the Company to win
and retain concessions contracts.

Depreciation  and  amortization  expense,  excluding  $0.3  million of corporate
depreciation  on property  and  equipment,  which is included as a component  of
general and administrative  expenses, was $15.1 million for the first quarter of
1999,   compared  to  $12.0   million,   excluding  $0.5  million  of  corporate
depreciation  on property and  equipment,  for the first quarter of 1998. The 60
basis  point  increase  in the  depreciation  expense  margin is  attributed  to
increased capital  investments to win new contracts,  extend existing  contracts
and introduce new branded  restaurants.  For fiscal year 1998,  depreciation was
4.2% of  revenues.  The  Company  expects  the  depreciation  expense  margin to
increase by 20 to 30 basis points in 1999 and anticipatesthe margin to remain in
this range over the next several years.

General and administrative  expenses were $14.3 million for the first quarter of
1999,  an  increase  of  5.1%  from a year  ago.  This  increase  was  primarily
attributable  to an incremental  $0.8 million of external Year 2000 costs in the
first quarter of 1999 compared to a year ago.

Other operating expenses, which include utilities, casualty insurance, equipment
maintenance,  trash removal and other miscellaneous expenses, increased 11.5% to
$30.1  million for the first  quarter of 1999 when compared to the first quarter
of 1998.  Despite this  increase,  other  operating  expenses as a percentage of
total revenues remained  unchanged at 9.7% when compared to the first quarter of
1998.

OPERATING PROFIT. As a result of the changes in revenues and operating costs and
expenses discussed above, operating profit increased to $2.5 million, or 0.8% of
revenues,  for the first quarter of 1999 from $2.0 million, or 0.7% of revenues,
for the first  quarter of 1998.  Excluding  $1.0  million of Year 2000 costs and
$0.4 million pre-opening  expenses in the first quarter of 1999 and $0.2 million
of Year 2000 costs and $0.4 million of pre-opening expenses in the first quarter
of 1998,  operating  profit would have increased by 50.0% to $3.9 million in the
first quarter of 1999 compared with $2.6 million a year ago.

<TABLE>
<CAPTION>
                                                                                 TWELVE WEEKS ENDED
                                                                             ---------------------------
                                                                               MARCH 2,     MARCH 27,
        (IN MILLIONS)                                                            1999         1998
        ------------------------------------------------------------------------------------------------
        <S>                                                                       <C>          <C>

        OPERATING PROFIT (LOSS) BY BUSINESS LINE (1)
            AIRPORTS:
               Domestic                                                           $ 19.0       $ 18.5 
               International                                                         0.6          0.2 
               Off-airports                                                          0.6          0.8 
        ------------------------------------------------------------------------------------------------
                                                                                         
                  Total airports                                                    20.2         19.5 
        ------------------------------------------------------------------------------------------------
            TRAVEL PLAZAS                                                           (2.7)        (3.7)
            SHOPPING MALLS                                                          (0.7)        (0.2)
        ------------------------------------------------------------------------------------------------
            Total operating profit                                                $ 16.8       $ 15.6 
        ------------------------------------------------------------------------------------------------
<FN>

        (1)  Before general and administrative expenses.
</FN>
</TABLE>

                                       10


<PAGE>

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



The  airport  segment  operating  profit,   before  general  and  administrative
expenses, was 8.2% of airport revenues for the first quarter of 1999 as compared
with 9.0% of airport  revenues for the first quarter of 1998. The 80 basis point
decline in the airport segment  operating  profit margin  primarily  reflects an
increase  in  depreciation  (in a  seasonally  low  quarter)  related to capital
investments and higher payroll cost margins due to tight labor markets offset by
improved cost of sales margins.  For the entire fiscal year of 1999, the Company
is  forecasting  higher  airport  operating  profit  margins  and  is  targeting
improvements in operating costs.

The  travel  plaza   segment   operating   loss  margin,   before   general  and
administrative expenses, improved significantly to 4.7% for the first quarter of
1999  compared to 6.7% in the first  quarter of 1998,  reflecting  solid revenue
growth coupled with active management of operating costs.

The operating loss margin for the shopping mall segment,  excluding  general and
administrative  expenses,  increased to 13.7% for the first quarter of 1999 from
4.3% in the  first  quarter  of 1998 due to  seasonably  low  customer  traffic,
start-up inefficiencies at the Company's three most recently opened malls.

INTEREST  EXPENSE.  Interest  expense  increased  to $9.4  million for the first
quarter of 1999  compared  to $9.2  million for the first  quarter of 1998,  and
reflects  additional  interest incurred on borrowings under the revolving credit
facility to fund capital expenditures and share repurchases.

INTEREST INCOME. Interest income decreased to $0.2 million for the first quarter
of 1999 compared to $0.7 million for the first quarter of 1998, reflecting lower
cash balances during the first quarter of 1999 compared to a year ago.

INCOME  TAXES.  The benefit for income taxes for the first  quarters of 1999 and
1998 was $2.6  million  with an  effective  tax rate of 39.5% for both quarters.

CUMULATIVE  EFFECT OF CHANGE IN ACCOUNTING  PRINCIPLE.  The Company  adopted SOP
98-5 during the first  quarter of 1999 which  resulted in a one-time,  after-tax
write-off of deferred  pre-opening  costs  totaling  $0.7  million.  The new SOP
requires pre-opening costs to be expensed as incurred in 1999 and beyond.

NET LOSS AND LOSS PER COMMON SHARE. The Company's net loss for the first quarter
of 1999 increased to $4.8 million, or $(0.12) per common share before the change
in  accounting  principle  and  $(0.14)  per  common  share  after the change in
accounting  principle.  Net loss for the first quarter of 1998 was $3.9 million,
or $(0.11) per common  share.  The increase in net loss for the first quarter of
1999 was due to the  increase  in  spending  for Year 2000 costs  combined  with
higher  net  interest  expense  due  to  increased   revolving  credit  facility
borrowings.  Excluding  Year 2000 costs and  pre-opening  expenses  in the first
quarter of 1999 and 1998,  loss per common  share before the  accounting  change
would have  improved  $0.01 per share to $(0.09) per common  share.  The Company
estimates net income per diluted  common share between $0.56 per share and $0.59
per share for fiscal year 1999.

WEIGHTED-AVERAGE  SHARES  OUTSTANDING.  The  weighted-average  number  of common
shares outstanding for the first quarter of 1999 and 1998 used to calculate loss
per  common  share  was 33.8  million  and 34.4  million,  respectively.  Common
equivalent shares were excluded from the diluted  calculations because they were
antidilutive.

During the first quarter of 1999, common shares issued and outstanding increased
by approximately 0.1 million and totaled 33.7 million,  primarily reflecting the
issuance of shares under the Company's employee stock and option plans offset by
shares  purchased  under the Company's  share  repurchase  program and forfeited
restricted stock shares.


                                       11

<PAGE>

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



LIQUIDITY AND CAPITAL RESOURCES

Historically,   the  Company  has  funded  its  ongoing  capital   expenditures,
debt-service  requirements and treasury  purchases from cash flow generated from
ongoing  operations  and current cash  balances.  The Company has more  recently
drawn on existing credit facilities to fund increased  capital  spending.  Given
the  Company's  expected  capital  requirements  in 1999 and 2000,  the  current
favorable  interest  rate  environment,  the  benefits  of  increased  financial
flexibility and the Company's  interest in  repurchasing  shares it is currently
considering  alternative long-term financing arrangements including the issuance
of  unsecured  debt and the early  tendering of the $400 million in Senior Notes
along  with  the  recapitalization  of the  Company.  The  Company  has  not yet
determined the preferred  course of action and there can be no assurance that if
the Company  chooses one of these  alternatives  that it will be  successful  in
obtaining new debt, in tendering for the Senior Notes or in  recapitalizing  the
Company.

The Company's  Senior Notes,  which will mature in May 2005,  were issued at par
and have a fixed coupon rate of 9.5%.  The Senior Notes can be called  beginning
in May 2000 at a price of  103.56%,  declining  to par in May 2003.  The Company
would have to pay a premium in addition to the call price of 103.56% in order to
tender for the notes prior to May 2000.

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.

The  Senior  Notes  are  secured  by  a  pledge  of  stock  and  are  fully  and
unconditionally  guaranteed  (limited only to the extent necessary to avoid such
guarantees being considered a fraudulent  conveyance under applicable law), on a
joint and  several  basis by certain  subsidiaries  (the  "Guarantors")  of Host
International,  Inc. ("Host  International").  Host International is the primary
operating  subsidiary  of the  Company.  The  Senior  Notes  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.

The  First  National  Bank of  Chicago,  as agent  for a group of  participating
lenders,  has provided credit facilities  ("Facilities")  to Host  International
consisting  of a $75.0  million  revolving  credit  facility and a $25.0 million
letter of credit facility.  The revolving  credit facility  provides for working
capital  and can be used for  general  corporate  purposes  other  than  hostile
acquisitions.  At the end of the first  quarter of 1999,  the  Company had drawn
$15.0 million of outstanding indebtedness under the revolving credit facility at
an average  interest rate of 6.71%.  All  borrowings  under the  Facilities  are
senior  obligations  of Host  International  and are  secured  by the  Company's
capital stock of Host International and certain of its subsidiaries. The Company
forecasts  borrowings under this facility to be approximately $40 million by the
end of 1999.

The loan  agreements  relating  to the  Facilities  contain  dividend  and stock
retirement  covenants that are  substantially  similar to those set forth in the
Senior Notes  Indenture,  and provide that dividends  payable to the Company are
limited to 25% of Host  International's  consolidated net income,  as defined in
the loan agreements. During the first quarter of 1998 and in compliance with the
Facilities,  Host  International  paid $4.7 million of dividends to the Company.
Host  International did not pay dividends to the Company in the first quarter of
1999; however, $6.5 million of dividends can be paid to the Company prior to the
end of the 1999 fiscal year. The loan agreements also contain certain  financial
ratio and capital expenditure covenants.  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 


                                       12

<PAGE>

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



default under the Senior Notes  Indenture.  As of March 26, 1999 and  throughout
the twelve  weeks ended March 26,  1999,  the Company was in compliance with the
covenants  described above.

During the first quarter of 1999, an international subsidiary of the Company was
granted a $7.5 million  credit  facility by ABN AMRO Bank N.V.  consisting  of a
$6.1 million overdraft  facility with a variable interest rate until February 1,
2002 and a five-year loan of $1.4 million to fund business activities, including
planned  capital  expenditures.  As of the end of the first  quarter of 1999, no
funds had been drawn on the facility.

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 and deferred  income taxes,  totaled $11.8 million for the first
quarter of 1999 as compared with $10.8 million for the same period in 1998.

The  primary  use  of  cash  in   investing   activities   consists  of  capital
expenditures.   The  Company  incurs  capital  expenditures  to  build  out  new
facilities,  including  growth  initiatives,  to expand or  reposition  existing
facilities  and to maintain the quality and  operations of existing  facilities.
The Company's capital expenditures in the first quarter of 1999 and 1998 totaled
$31.5  million and $16.1  million,  respectively.  For the entire fiscal year of
1999,  the  Company  expects to make  capital  expenditure  investments  between
approximately  $125.0  million to $135.0  million,  with $90.0 million to $100.0
million related to core markets (domestic airport and travel plaza segments) and
$35.0 million related to growth markets (international  airports and food courts
in shopping malls). Since 1990, capital expenditures in core markets have ranged
from below 4% to nearly 9% of  revenues,  with an average of  approximately  5%.
Capital  expenditures  are now at the upper end of the historic range due to the
Company's  recent  success in winning new contracts and renewing  existing ones,
which has also extended the Company's overall  weighted-average  contract lives.
Multi-year construction projects at these recently renewed and new contracts are
expected to result in capital  expenditures in core markets of  approximately 7%
of revenues in 1999. In the year 2000, the Company expects capital  expenditures
in its core markets to begin to  decline--reaching  approximately 4% of revenues
by 2001.  The timing of capital  expenditures  is subject to the  variability in
contract  renewals,  the timing of new  contract  wins and the timing of related
construction.

The Company's cash provided by financing activities in the first quarter of 1999
was $2.9  million,  compared  with cash  used in  financing  activities  of $7.0
million  for the same  period in 1998.  During the first  quarter  of 1999,  the
Company had cash inflows from  line-of-credit  borrowings totaling $3.4 million,
proceeds from stock  issuances of $1.5 million and proceeds from the issuance of
debt of $0.8 million.  Offsetting  these cash inflows were cash outflows of $1.7
million  for  the  Company's   obligation  to  pay  for  the  1998  exercise  of
nonqualified  stock  options and the 1998  release of deferred  stock  incentive
shares held by certain  former  employees  of Host  Marriott  Corporation,  $0.5
million of debt repayments and $0.5 million of treasury stock repurchases. As of
the end of the first  quarter  of 1999,  approximately  0.8  million  additional
shares can be purchased under the existing treasury stock program.  Cash used in
financing activities in the first quarter of 1998 can be primarily attributed to
$9.8 million in treasury stock  repurchases  offset by proceeds received for the
issuance of common shares  relating to the Company's  employee  stock and option
plans totaling $2.1 million.

The  Company's  consolidated  earnings  before  interest,  taxes,  depreciation,
amortization  and  other  non-cash  items  ("EBITDA")  increased  13.1% to $17.3
million in the first  quarter of 1999  compared  with $15.3 million in the first
quarter of 1998. The EBITDA margin improved 10 basis points to 5.6% of revenues.
Excluding  external  Year 2000  costs and  pre-opening  costs in both  quarters,
EBITDA would have  increased by 20.7% and the EBITDA  margin would have improved
an additional  50 basis points to 6.1%.  The  Company's  cash interest  coverage
ratio  (defined  as EBITDA to interest  expense  less  amortization  of deferred
financing  costs for the last four quarters) was 3.3 to 1.0 as of the end of the
first quarter of 1999 and 3.4 to 1.0 as of the end of the first quarter of 1998.
The Company considers EBITDA to be a meaningful measure for assessing  operating
performance.  EBITDA can be used to  measure  the  Company's  ability to service
debt,  fund capital  investments  and expand its  business.  EBITDA  information
should not be considered an alternative to net income,  operating  profit,  cash
flows from 

                                       13


<PAGE>

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



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 net loss to EBITDA:

<TABLE>
<CAPTION>
                                                                                    TWELVE WEEKS ENDED
                                                                                ---------------------------
                                                                                  MARCH 26,     MARCH 27,
         (IN MILLIONS)                                                              1999          1998
         ---------------------------------------------------- -- -- ----------- -------------- ------------
         <S>                                                                        <C>            <C>  
 
         NET LOSS                                                                    $ (4.8)      $ (3.9)
         Interest, net (1) (2)                                                          9.2          8.5 
         Benefit for income taxes                                                      (2.6)        (2.6)
         Depreciation and amortization                                                 15.4         12.5 
         Cumulative effect of change in accounting principle                            0.7          --- 
         Other non-cash items                                                          (0.6)         0.8 
         ---------------------------------------------------- -- -- ----------- -------------- ------------
         EBITDA                                                                      $ 17.3       $ 15.3 
         ---------------------------------------------------- -- -- ----------- -------------- ------------
<FN>

(1)      Amortization  of deferred financing costs of $0.3 million for the first
         quarter of 1999 and 1998 is included as a component of interest expense.
(2)      In fiscal year 1998, the Company changed the calculation of EBITDA
         to exclude interest income, which is more consistent with industry
         standards.  The 1998  EBITDA has been  restated  to conform to the
         1999 presentation.
</FN>
</TABLE>


DEFERRED INCOME TAXES

The Company has  recognized  net deferred tax assets of $80.3  million and $67.8
million at March 26,  1999 and March 27,  1998,  respectively,  which  generally
represent  tax  credit   carryforwards  and  tax  effects  of  future  available
deductions from taxable income.

Realization  of the net  deferred  tax assets  are  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 March 26,  1999.  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
the ongoing  restructuring of the Company's business processes.  The anticipated
improvement in operating results is expected to increase the taxable income base
to a level that would allow  realization of the existing net deferred tax assets
within eight 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 and demand for development of concepts and other
factors beyond the Company's control.  No assurance can be given that sufficient
taxable  income will be generated  to realize the  benefits of future  available
deductions from taxable  income.  Management has considered the above factors in
reaching its conclusion  that it is more likely than not that  operating  income
will be sufficient to utilize these 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.  Conversely,  the amount of
the net  deferred  tax  assets  considered  realizable  could  be  increased  if
estimates of future taxable income are achieved,  weighing positive and negative
evidence judgmentally.


                                       14

<PAGE>

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



YEAR 2000

The Company is currently  addressing Year 2000 issues with action plans for its:
(1) information  systems,  (2) embedded chip systems,  including  equipment that
operates  such items as the Company's  freezers,  air  conditioning  and cooling
systems,  fryers and security  systems,  (3)  third-party  (vendor and supplier)
relationships and (4) contingency planning.

The  Company  has  established  a Year 2000  Project  Team,  headed by the Chief
Information  Officer,  who reports to the Chief  Financial  Officer,  to resolve
significant  Year 2000  issues in a timely  manner as they are  identified.  The
project steering team includes executive management and employees with expertise
from various disciplines including  information  technology,  finance,  internal
audit, legal and operations.  In addition, the Company has retained the services
of consulting firms with particular expertise in the Year 2000 problem.

INFORMATION  SYSTEMS.  To date, the Company has  identified 20 internal  systems
that will require correction.  The Company is resolving Year 2000 issues through
replacement of equipment,  modification  of software and  replacement of certain
software  systems.  For mission critical  systems,  third-party  experts will be
engaged to verify Year 2000 compliance testing. All mission critical information
technology systems at corporate headquarters, which perform financial management
processes,  are Year 2000 compliant.  The Company anticipates that other systems
will be compliant by the third quarter of 1999.

EMBEDDED  SYSTEMS.  As of the end of  1998,  a  comprehensive  inventory  of the
Company's  mission  critical  and  date-sensitive   embedded  systems  had  been
completed  for  approximately  half of the  Company's  locations.  The remaining
locations are expected to be fully inventoried by mid-1999. All manufacturers of
inventoried  components  utilized in the operations have been contacted in order
to determine whether the components are Year 2000 compliant. The Company intends
to remediate or replace,  as applicable,  any identified  non-compliant  mission
critical  systems and  expects to  complete  this  process by August  1999.  The
quality of the responses  received from  manufacturers,  the estimated impact of
the individual system on the Company,  and the ability of the Company to perform
meaningful  tests  will  influence  its  decision  regarding  whether to conduct
independent testing of embedded systems.

THIRD-PARTY RELATIONSHIPS. Formal communications with all critical third parties
have been initiated to determine  potential exposure which would result in their
failure to  remediate  their own Year 2000  issues.  These  third  parties  have
included the Company's supply chain, airport authorities, financial institutions
and utility companies.  New business  relationships with alternate  providers of
products and services will be considered if deemed necessary.

RISKS/CONTINGENCY  PLANS. As part of the Company's normal business practice,  it
maintains plans to follow during  emergency  circumstances,  some of which could
arise from Year 2000-related  problems.  The Company's  contingency planning for
the Year 2000 will address  various  alternatives  and will include  assessing a
variety of scenarios to which the Company may be required to react.  The Company
continues  to  develop  its  contingency  plans for Year 2000  issues,  and each
individual  location will develop a contingency plan for the impact of Year 2000
business  interruptions.  The Company's operations are geographically  dispersed
and it has a large  supplier  base,  which should  mitigate  any adverse  impact
resulting from supplier problems.

POTENTIAL  RISKS.  Potential  sources of risk  include  operational  disruptions
caused by equipment failure and the inability of principal  suppliers to be Year
2000  compliant,  which could result in delays in product  deliveries  from such
suppliers.  Utility  services,  including  electric,  telephone  and water,  are
necessary  for the  Company's  basic  operations.  Should any of these  critical
vendors  fail,  the  impact  of any such  failure  could  become  a  significant
challenge  to the  Company's  ability to operate its  facilities  at  individual
locations.  Based on the information  supplied to date by the Company's critical
vendors and suppliers,  the Company believes the probability of such failures to
be low. However,  the Company's action plan emphasizes  continued  monitoring of
the  progress of these  critical  vendors and  suppliers  toward their Year 2000
compliance.  

                                       15

<PAGE>

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



In addition,  the Company's operations may also be affected by Year
2000 issues facing the Federal Aviation  Administration and the airlines related
to air traffic control systems,  aircraft equipment and security systems used in
airports.  These  issues  could  potentially  lead to  degraded  flight  safety,
grounded or delayed flights, selected airport closures,  increased airline costs
and customer inconvenience.  Since the Company is not responsible for addressing
these issues,  it cannot  control or predict the impact on future  operations of
the Year 2000 problem as it pertains to air traffic control and airport security
systems.  If airline passenger  traffic declines  significantly in late 1999 and
the year  2000 as a  result  of Year  2000  problems  experienced  by the FAA or
individual airlines or the public's fear of such problems, the Company's results
of operations may be materially adversely affected.

FINANCIAL  IMPLICATIONS.  The Company  currently  estimates that external costs,
such as consulting  experts,  for its Year 2000 systems  compliance program will
total  approximately  $4.0 million in 1999 and $0.5 million in 2000. The Company
currently  estimates that internal costs, such as remediation  coding and system
support,  for Year 2000 compliance will total approximately $1.1 million in 1999
and $0.3 million in 2000.  Additionally,  final  remediation may require further
capital investments to replace equipment and software.  During the first quarter
of 1999,  approximately  $1.0 million in external costs and  approximately  $0.3
million in internal  costs were  incurred  relating to Year 2000  implementation
compared with  approximately  $0.2 million in external  costs and  approximately
$0.1 in  internal  costs in the first  quarter of 1998.  The  anticipated  costs
associated with the Company's Year 2000  compliance  program do not include time
and costs that may be expensed as a result of the failure of any third  parties,
including  suppliers,  to become Year 2000  compliant or costs to implement  any
contingency plans.

The discussion of the Company's  efforts and expectations  relating to Year 2000
compliance are forward-looking statements. The Company's ability to achieve Year
2000 compliance and the level of costs associated therewith,  could be adversely
impacted by, among other things,  the  availability  and cost of programming and
testing  resources,   vendors'  ability  to  modify  proprietary  software,  and
anticipated problems identified in the ongoing compliance review.

The statements  contained in this section are "Year 2000  Readiness Disclosures"
as provided  for in the Year 2000  Information  and Readiness Disclosure Act.

FORWARD-LOOKING STATEMENTS

This report,  the Company's other reports filed with the Securities and Exchange
Commission  or furnished to  shareholders  and its public  statements  and press
releases contain "forward-looking  statements" within the meaning of the federal
securities  laws,  including,  but not limited  to,  statements  concerning  the
Company's  outlook  for 1999 and  beyond;  the  growth in  revenues  in 1999 and
subsequent years;  earnings per share in 1999; the amount of additional revenues
expected from new shopping mall food court and airport contracts that were added
in 1999 or that  are  expected  to be added or  renewed  in 1999 and  subsequent
years;  efforts and expectations  relating to Year 2000 compliance;  anticipated
retention rates of existing  contracts in core business lines;  capital spending
plans;  projected cash flows from certain operating units;  business  strategies
and their anticipated results;  and similar statements  concerning future events
and expectations that are not historical facts.

These   forward-looking   statements   are   subject  to   numerous   risks  and
uncertainties,  including  the  effects of  seasonality;  airline  and  tollroad
industry  fundamentals  and general economic  conditions  (including the current
economic  downturn in Asia);  competitive  forces within the food,  beverage and
retail  concessions  industries;  the  availability  of cash flow to fund future
capital expenditures;  government regulation and the potential adverse impact of
union  labor  strikes  and the  Year  2000  issue  on  operations.  For  further
information  concerning risks  applicable to operations,  see the Company's Form
10-K.  Forward-looking  statements are inherently uncertain,  and investors must
recognize that actual results could differ  materially  from those  expressed or
implied by the statements.

                                       16

<PAGE>


QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed to market risk from  changes in interest  rates,  foreign
currency  exchange  rates and commodity  prices,  which could impact  results of
operations and financial  condition.  Changes in market  interest rates over the
next year would not  materially  impact  earnings or cash flow as the  Company's
cash  investments  are  short-term,  interest  rates under the revolving  credit
facility are  short-term and the interest rates on the long-term debt are fixed.
The  Company's  exposure to changes in foreign  currency  exchange  rates is not
material to earnings or cash flows. Due to the Company's wide variety of product
offerings and diverse brand portfolio, the Company would not expect fluctuations
in commodity prices to be material to earnings or cash flows.

The fair value of fixed rate  long-term debt is sensitive to changes in interest
rates,  which would result in  gains/losses in the market value of this debt due
to differences  between the market  interest rates and rates at the inception of
the debt obligation.  Based on a hypothetical immediate 150 basis point increase
in interest  rates at the end of the first quarters of 1999 and 1998, the market
value of fixed rate  long-term  debt  would  result in a net  decrease  of $26.9
million and $31.8 million, respectively.  Conversely, a 150 basis point decrease
in interest  rates would  result in a net  increase in the market value of fixed
rate  long-term  debt  outstanding  at the end of first quarter 1999 and 1998 of
$34.1  million  and $37.4  million,  respectively.  Changes in fair value of the
Company's long-term debt does not impact earnings or cash flows.

The Company has the  ability to borrow up to $75.0  million  against a revolving
credit  facility.  As of the  end of  the  first  quarter  of  1999,  borrowings
outstanding  under the  revolving  credit  facility  totaled $15.0 million at an
average  interest  rate of  6.71%  with  average  outstanding  balance  of $15.6
million.  A  hypothetical  10% increase or decrease in interest  rates would not
have a material effect on earnings for the first quarter of 1999.

An international  subsidiary of the Company has the ability to borrow up to $6.1
million  against an overdraft  facility.  As of the end of the first  quarter of
1999, no funds had been drawn on the facility.

Significant  changes in commodity  prices could impact future  operating  profit
margins  and cash  flows.  The  Company  has the  ability to recover  from sharp
increases in commodity  prices by increasing its menu prices.  However,  in some
instances, increases in menu prices require prior landlord approval.


                                       17


<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 AND USE OF PROCEEDS

     None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     None.

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

     None.

ITEM 5.  OTHER INFORMATION

     None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

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

(b) Reports on Form 8-K:

     Form 8-K dated  January 27, 1999  announcing  fiscal year 1998  results and
     containing forward-looking statements.


                                       18


<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



    MAY 7, 1999                             /S/  BRIAN W. BETHERS
------------------                    -------------------------------------
       Date                                     Brian W. Bethers
                                      Executive  Vice   President and Chief 
                                      Financial Officer (duly  authorized
                                      officer and chief financial officer)




                                       19