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 27, 1998

                                       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
17, 1998, was 33,965,113.



<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 27, 1998 and
              March 28, 1997                                             2

           Condensed Consolidated Balance Sheets -
              As of March 27, 1998 and January 2, 1998                   3

           Condensed Consolidated Statements of Cash Flows -
              For the Twelve Weeks Ended March 27, 1998 and 
              March 28, 1997                                             4

           Condensed Consolidated Statement of Shareholders' Deficit -
              For the Twelve Weeks Ended March 27, 1998                  5

           Notes to Condensed Consolidated Financial Statements          6-8

           Management's Discussion and Analysis of  Financial 
              Condition and Results of Operations                        9-16

           Quantitative and Qualitative Disclosure about Market Risk     n/a

PART II.   OTHER INFORMATION AND SIGNATURE:

           Legal Proceedings                                            17

           Changes in Securities and Use of Proceeds                    17

           Defaults Upon Senior Securities                              17

           Submission of Matters to a Vote of Security Holders          17

           Other Information                                            17

           Exhibits and Reports on Form 8-K                             17

           Signature                                                    18

           Computations of Loss Per Common Share                        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
                                                                                      -------------------------------
                                                                                        MARCH 27,      MARCH 28,
                                                                                           1998           1997
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>           <C>   

REVENUES                                                                                    $277.3          $263.1 
---------------------------------------------------------------------------------------------------------------------

OPERATING COSTS AND EXPENSES
    Cost of sales                                                                             82.5            75.0 
    Payroll and benefits                                                                      89.9            84.1 
    Rent                                                                                      44.4            44.0 
    Royalties                                                                                  5.9             5.3 
    Depreciation and amortization                                                             12.0            12.1 
    General and administrative                                                                13.6            12.5 
    Other                                                                                     27.0            28.8 
---------------------------------------------------------------------------------------------------------------------
       Total operating costs and expenses                                                    275.3           261.8 
---------------------------------------------------------------------------------------------------------------------

OPERATING PROFIT                                                                               2.0             1.3 

    Interest expense                                                                          (9.2)           (9.2)
    Interest income                                                                            0.7             0.8 
---------------------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES                                                                      (6.5)           (7.1)
Benefit for income taxes                                                                      (2.6)           (2.8)
---------------------------------------------------------------------------------------------------------------------
NET LOSS                                                                                    $ (3.9)         $ (4.3)
---------------------------------------------------------------------------------------------------------------------

LOSS PER COMMON SHARE:
    Basic                                                                                   $(0.11)         $(0.12)
    Diluted                                                                                 $(0.11)         $(0.12)

Weighted Average Common Shares Outstanding:
    Basic                                                                                     34.4            34.6 
    Diluted                                                                                   34.4            34.6 

</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 27,           JANUARY 2,
                                                                                     1998                1998
------------------------------------------------------------------------------ ----------------- -- ----------------
<S>                                                                                   <C>               <C>    

                                   ASSETS

Current assets:
   Cash and cash equivalents                                                           $  59.5           $   78.1 
   Accounts receivable, net                                                               20.2               24.5 
   Inventories                                                                            40.0               41.1 
   Deferred income taxes                                                                  11.6               11.5 
   Prepaid rent                                                                            8.2                7.0 
   Other current assets                                                                    9.7                7.0 
------------------------------------------------------------------------------ ----------------- -- ----------------
   Total current assets                                                                  149.2              169.2 

Property and equipment, net                                                              283.6              279.9 
Intangible assets                                                                         21.5               22.1 
Deferred income taxes                                                                     56.2               56.4 
Other assets                                                                              20.1               20.4 
------------------------------------------------------------------------------ ----------------- -- ----------------
   Total assets                                                                        $ 530.6            $ 548.0 
------------------------------------------------------------------------------ ----------------- -- ----------------


                    LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
   Accounts payable                                                                    $  69.7            $  72.2 
   Accrued payroll and benefits                                                           40.7               46.0 
   Accrued interest payable                                                               13.5                4.8 
   Current portion of long-term debt                                                       1.1                1.0 
   Other current liabilities                                                              36.4               41.5 
------------------------------------------------------------------------------ ----------------- -- ----------------
   Total current liabilities                                                             161.4              165.5 

Long-term debt                                                                           406.1              405.8 
Other liabilities                                                                         51.1               52.9 
------------------------------------------------------------------------------ ----------------- -- ----------------
   Total liabilities                                                                     618.6              624.2 

Common stock, no par value,  100 million shares  authorized,  34,918,156  shares
   issued as of March 27, 1998 and 34,733,815 shares issued as of January 2, 1998         ---                 --- 
Contributed deficit                                                                    (106.0)             (107.7)
Retained earnings                                                                        31.2                35.1 
Accumulated other comprehensive income                                                    0.1                (0.1)
Treasury stock - 975,700 shares at March 27, 1998
   and 253,100 shares at January 2, 1998                                                (13.3)               (3.5)
------------------------------------------------------------------------------ ----------------- -- ----------------
   Total shareholders' deficit                                                          (88.0)              (76.2)
------------------------------------------------------------------------------ ----------------- -- ----------------
   Total liabilities and shareholders' deficit                                        $ 530.6             $ 548.0 
------------------------------------------------------------------------------ ----------------- -- ----------------
</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 27,            MARCH 28,
                                                                                    1998                 1997
------------------------------------------------------------------------------ -------------------- -----------------
<S>                                                                                    <C>                  <C>

OPERATING ACTIVITIES
   Net loss                                                                            $ (3.9)              $ (4.3)

   Adjustments to reconcile net income to cash from operations:
     Depreciation and amortization                                                       12.5                 12.5 
     Amortization of deferred financing costs                                             0.3                  0.2 
     Income taxes                                                                         0.1                 (0.7)
     Other                                                                                1.8                  1.0 
     Working capital changes:
       Decrease (increase) in accounts receivable                                         4.3                 (4.4)
       Decrease in inventories                                                            0.9                  1.5 
       Increase in other current assets                                                  (4.2)                (1.7)
       Decrease in accounts payable and accruals                                         (5.3)               (13.2)
------------------------------------------------------------------------------ ----------------- -- -----------------
   Cash provided by (used in) operations                                                  6.5                 (9.1)

INVESTING ACTIVITIES
   Capital expenditures                                                                 (16.1)               (13.1)
   Other, net                                                                            (2.0)                 1.4 
------------------------------------------------------------------------------ ----------------- -- -----------------
   Cash used in investing activities                                                    (18.1)               (11.7)

FINANCING ACTIVITIES
   Repayments of long-term debt                                                          (0.4)                (0.2)
   Issuance of long-term debt                                                             0.9                  --- 
   Proceeds from stock issuances                                                          2.1                  1.9 
   Purchases of treasury stock                                                           (9.8)                 --- 
   Foreign currency translation adjustments                                               0.2                 (0.1)
------------------------------------------------------------------------------ ----------------- -- -----------------
   Cash (used in) provided by financing activities                                       (7.0)                 1.6 

DECREASE IN CASH AND CASH EQUIVALENTS                                                   (18.6)               (19.2)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                           78.1                104.2 
------------------------------------------------------------------------------ ----------------- -- -----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                               $ 59.5               $ 85.0 
------------------------------------------------------------------------------ ----------------- -- -----------------
</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 27, 1998
(IN MILLIONS)

<TABLE>
<CAPTION>
                                                                                          ACCUMULATED
  COMMON                                                                                     OTHER
  SHARES                                           COMMON     CONTRIBUTED    RETAINED    COMPREHENSIVE     TREASURY
OUTSTANDING                                         STOCK       DEFICIT      EARNINGS        INCOME         STOCK       TOTAL
----------- ------------------------------------- ---------- -------------- ----------- ----------------- ----------- -----------
<C>           <S>                                   <C>          <C>          <C>               <C>           <C>         <C>

     34.5   Balance, January 2, 1998              $   ---        $(107.7)    $  35.1           $  (0.1)   $   (3.5)    $ (76.2)
----------- ------------------------------------- ---------- -------------- ----------- ----------------- ----------- -----------

              Comprehensive loss:
     ---         Net loss                             ---            ---        (3.9)              ---         ---        (3.9)
                 Foreign currency translation
     ---          adjustments                         ---            ---         ---               0.2         ---         0.2 
----------- ------------------------------------- ---------- -------------- ----------- ----------------- ----------- -----------
     ---      Total comprehensive loss                ---            ---        (3.9)              0.2         ---        (3.7)

              Common stock issued for
      0.2        employee stock and option plans      ---            2.1         ---               ---         ---         2.1 
     (0.7)    Treasury stock purchases                ---            ---         ---               ---        (9.8)       (9.8)
     (0.1)    Deferred compensation                   ---           (0.4)        ---               ---         ---        (0.4)
----------- ------------------------------------- ---------- -------------- ----------- ----------------- ----------- ----------

      33.9  BALANCE, MARCH 27, 1998               $   ---        $(106.0)    $  31.2            $   0.1    $ (13.3)    $ (88.0)
----------- ------------------------------------- ---------- -------------- ----------- ----------------- ----------- -----------

</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  2, 1998  ("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 27, 1998 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 1998 presentation.

2.   Basic and diluted  loss per common  share for the twelve  weeks ended March
     27,  1998 and March 28, 1997 were  computed  by dividing  net income 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 issued to certain officers and key executives.  As of
     the end of the first quarter of 1998,  there were 409,142  restricted share
     awards  outstanding.  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.

4.   The Company  adopted  SFAS No. 130,  "Reporting  Comprehensive  Income," in
     the first  quarter of 1998 and the adoption did not have a material  effect
     on the Company's condensed consolidated  financial statements.  The Company
     adopted SFAS No. 128,  "Earnings Per Share," SFAS No. 129,  "Disclosure  of
     Information about Capital Structure," and SFAS No. 131,  "Disclosures about
     Segments  of an  Enterprise  and  Related  Information"  during  1997.  The
     adoption of these standards did not have a material effect on the Company's
     1997 consolidated financial statements. 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"
     were issued  subsequent  to the end of fiscal year 1997 and are required to
     be adopted in fiscal years  beginning after December 15, 1998, with earlier
     adoption  permitted.  The Company  will adopt SOP 98-1 and SOP 98-5 for its
     1999 fiscal year and is currently evaluating the financial statement impact
     of the adoptions.

5.   In March 1993, Host Marriott  Corporation,  the Company's  former parent
     corporation,  settled  a class  action  lawsuit  involving  certain  of its
     bondholders  by 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.


                                       6


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


     As of March 27, 1998, the Company had issued 1,381,668 common shares of the
     Company resulting from the exercise of Host Marriott Corporation  warrants.
     Proceeds  received  from the  issuance  of these  common  shares  were $5.9
     million.  As of March 27,  1998,  the Company  remains  obligated  to issue
     56,517 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.

6.   The Company  has three  reportable  operating  segments:  airports,  travel
     plazas and  shopping  malls and  entertainment.  The  Company's  management
     evaluates  performance  of each  segment  based  on  profit  or  loss  from
     operations  before  allocation  of  general  and  administrative  expenses,
     unusual and extraordinary items,  interest and income taxes. 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 operating  segments are provided in the
     following tables.

<TABLE>
<CAPTION>
                                                                             TWELVE WEEKS ENDED
                                                                  -----------------------------------------
                                                                       MARCH 27,            MARCH 28,
                 (IN MILLIONS)                                           1998                  1997
                 ------------------------------------------------------------------------------------------
                  <S>                                                     <C>                     <C>    

                 REVENUES:
                   Airports                                                  $ 207.7              $ 197.9 
                   Travel plazas                                                55.2                 52.7 
                   Shopping malls
                     and entertainment                                          14.4                 12.5 
                 ------------------------------------------------------------------------------------------
                 Total segment revenues                                      $ 277.3              $ 263.1 
                 ------------------------------------------------------------------------------------------

                 OPERATING PROFIT (LOSS):(1)
                   Airports                                                  $  18.7              $  16.9 
                   Travel plazas                                                (3.7)                (3.6)
                   Shopping malls
                     and entertainment                                           0.6                  0.5 
                 ------------------------------------------------------------------------------------------
                 Total segment operating profit                              $  15.6              $  13.8 
                 ------------------------------------------------------------------------------------------
                
                <FN> 
                (1)   Before general and administrative expenses.
                 </FN>
                 </TABLE>
 

                 <TABLE>
                 <CAPTION>


                                                                       MARCH 27,            JANUARY 2,
                 (IN MILLIONS)                                            1998                 1998
                 ---------------------------------------------------------------------------------------------
                  <S>                                                       <C>                   <C>  

                 ASSETS:
                   Airports                                                   $ 291.4               $ 272.9
                   Travel plazas                                                 91.6                  95.7
                   Shopping malls
                     and entertainment                                           28.7                  32.9
                 ---------------------------------------------------------------------------------------------
                 Total segment assets                                         $ 411.7               $ 401.5
                 ---------------------------------------------------------------------------------------------
                 </TABLE>


                                       7

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


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

                 <TABLE>
                 <CAPTION>
                                                                               TWELVE WEEKS ENDED
                                                                      -------------------------------------
                                                                         MARCH 27,           MARCH 28,
                 (IN MILLIONS)                                              1998               1997
                 ------------------------------------------------------------------------------------------
                  <S>                                                          <C>               <C>   

                 OPERATING PROFIT:
                   Segments                                                    $ 15.6              $ 13.8 
                   General and administrative expenses                          (13.6)              (12.5)
                 ------------------------------------------------------------------------------------------
                 Total operating profit                                        $  2.0              $  1.3 
                 ------------------------------------------------------------------------------------------
                 </TABLE>


                 <TABLE>
                 <CAPTION>
                                                                          MARCH 27,          JANUARY 2,
                 (IN MILLIONS)                                              1998                1998
                 -------------------------------------------------------------------------------------------
                  <S>                                                          <C>               <C>   

                 ASSETS:
                   Segments                                                    $ 411.7              $ 401.5
                   Corporate and other(1)                                        118.9                146.5
                 -------------------------------------------------------------------------------------------
                 Total assets                                                  $ 530.6              $ 548.0
                 -------------------------------------------------------------------------------------------
                 <FN>
                (1)The  majority  of the  decrease  in  corporate  and other was
                   related  to  a  decrease  in  corporate  cash   concentration
                   accounts with a significant amount related to $9.8 million of
                   treasury stock purchases during the quarter.
                   </FN>
                   </TABLE>

                                       8

<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 27,  1998
increased by 5.4% to $277.3  million from the same period in 1997,  with revenue
growth experienced in all business lines. The increase in revenues was driven by
solid  performance in comparable  domestic airport  concessions  operations,  an
increase  in  customer  traffic  on  tollroads  and the  opening of two new mall
contracts in the fourth  quarter of 1997.  The increase was partially  offset by
decreased revenues at noncomparable  domestic airport  contracts,  which include
Chicago, St. Louis and Columbus, as well as foreign currency translations.

          <TABLE>
          <CAPTION>
                                                                                   TWELVE WEEKS ENDED
                                                                               ----------------------------
                                                                                 MARCH 27,     MARCH 28,
         (IN MILLIONS)                                                              1998         1997
         --------------------------------------------------------------------------------------------------
          <S>                                                                       <C>           <C>

         REVENUES BY BUSINESS LINE
             AIRPORTS:
                Domestic                                                              $193.7       $184.9
                International                                                           14.0         13.0
         --------------------------------------------------------------------------------------------------
                   Total airports                                                      207.7        197.9
         --------------------------------------------------------------------------------------------------
             TRAVEL PLAZAS                                                              55.2         52.7
             SHOPPING MALLS AND ENTERTAINMENT                                           14.4         12.5
         --------------------------------------------------------------------------------------------------
             Total revenues                                                           $277.3       $263.1
         --------------------------------------------------------------------------------------------------
         </TABLE>


The Company's  diversified branded concept portfolio,  which consists of over 80
internationally  known  brands,  regional  specialty  concepts  and  proprietary
concepts, 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  increased
15.1% for the first  quarter of 1998  compared  to a year ago,  the  majority of
which  related to the  continued  expansion of branded  revenues at airports and
revenues from new shopping mall food courts,  which consist primarily of branded
food and beverage. Branded revenues in all of the Company's venues have grown at
a compound  annual  growth  rate of 8.1% over the last five  fiscal  years.  The
Company's  exposure to any one brand is limited  given the  diversity  of brands
that are offered and given that the Company's  largest branded  concept,  Burger
King,  accounts  for only 10% of total  revenues.  Half of the $27.6  million in
revenues  from  Burger  King  concepts  during  the first  quarter  of 1998 were
generated from concepts located on travel plazas,  with the remainder  primarily
generated from locations in airports.

AIRPORTS
Airport concession revenues were up 5.0% to $207.7 million for the first quarter
of 1998 compared to a year ago.  Domestic  airport  concession  revenues were up
4.8% and  international  airport  revenues were up 7.8% for the first quarter of
1998.  The  opening  of the  Montreal  International  Airport - Dorval in Canada
during the second quarter of 1997  contributed  significantly to the increase in
international  airport  revenues,  which was  partially  offset by the  negative
impact of exchange rate  fluctuations  and weak  enplanements  stemming from the
Asian economic situation in the first quarter of 1998.

Comparable  domestic  airport  contracts  exclude the negative  impact of exited
contracts,  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. During the first quarter of 1998, the Chicago,
St. Louis and Columbus airport contracts were considered noncomparable.  Revenue
growth at comparable domestic airport locations grew a solid 6.8% over the first
quarter of 1997. Revenue growth at comparable domestic airports,  which comprise
over 90% of total  airport  revenues,  was impacted  during the first quarter by
slower growth in airline traffic.  Passenger enplanements at comparable domestic
airports  were up an  estimated  1.2% over last year's first  quarter.  In March


                                       9

<PAGE>

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


1998,  the FAA  forecasted  annual  U.S.  passenger  enplanement  growth of U.S.
carriers of 3.7%  through the year 2009.  First  quarter 1998 results were below
the FAA's long range forecast.

RPE grew 5.6% at the  Company's  comparable  domestic  airport  locations in the
first quarter of 1998 over last year. The growth in RPE can be attributed to the
continued  addition of branded  locations,  some selective moderate increases in
menu prices and various real estate maximization  efforts.  Strong RPE growth of
5.6% was achieved  despite  disruption  to business  from  planned  construction
projects  in  several   comparable   domestic   airport   locations,   including
Minneapolis/St.   Paul,  Cleveland  and  Los  Angeles,   where  the  Company  is
introducing branded concepts. Branded revenues in airports showed an increase of
13.6%  when  comparing  the first  quarter  of 1998 to the same  period in 1997.
Airport  branded  revenues in the first quarter  increased to $62.0 million,  or
29.8% of total airport revenues,  compared with $54.6 million, or 27.6% of total
airport revenues, in the first quarter of 1997.

During the first quarter of 1998, the Company  announced a new domestic  airport
contract at the Southwest Florida  International Airport in Fort Myers. This ten
year contract is for the development and operation of 16,000 square feet of food
and beverage  concessions  space  throughout the airport's main terminal and its
two concourses.

Also  during  the  first  quarter  of  1998,  the  Company   announced   several
international  concession  facilities at Kuala Lumpur International  Airport and
Vancouver International Airport.

The new Kuala Lumpur  airport  complex is scheduled to open in the first half of
1998. The Company,  along with its 51% Malaysian joint venture  partner,  Dewina
Berhad,  was awarded several  facilities at the airport.  The joint venture will
operate over 8,000 square feet of food and beverage  concessions  space and will
feature a mixture of international  and local brand offerings.  This contract is
the Company's first Southeast  Asian  contract,  a key step in establishing  the
Company's presence in Southeast Asia.

The  Company  was  awarded  two  new  concession  facilities  at  the  Vancouver
International  Airport,  adding  to the  Company's  existing  operations  in the
domestic  terminal.  The new  facilities  include a Bar and Grill  concept and a
Starbucks Coffee location. This airport was the Company's first Canadian airport
contract,  and since its opening, the Company has received several awards on the
design of the food and beverage and retail operations at the airport.

Subsequent to the end of the first quarter of 1998,  the Company  announced that
it has been selected as the food and beverage master  developer/operator  at the
Miami  International  Airport,  until the year 2007. The new contract is for the
development  and  operation of more than 56,000 square feet of food and beverage
space located  throughout  nine concourses and the main terminal of the airport.
Prior to this award, the Company  operated the existing  generic  facilities for
Dade County  under a management  agreement  and recorded  management  fees.  The
Company will record revenues and operating profit under the new agreement.  When
the  facilities  are completed in 2000,  the estimated  annualized  revenues are
expected to be approximately $30.0 million.

TRAVEL PLAZAS
Travel plaza  concession  revenues for the first quarter of 1998 were up 4.7% to
$55.2  million  when  compared to the same  period in 1997.  This growth was the
result of increased  tollroad  traffic due to low gasoline  prices and favorable
winter weather in the northeast,  as well as moderate  increases in menu prices.
Low gasoline prices, higher household income and record-high consumer confidence
have led the Energy  Department  to  forecast  strong  growth in  vehicle  miles
traveled for this summer.

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,  increased by 15.2% to $14.4 million for
the first quarter of 1998 when  compared  with the first  quarter of 1997.  This
increase can be attributed  to the opening of the  Grapevine  Mills Mall and the
Vista Ridge Mall in the fourth quarter of 1997.

                                       10

<PAGE>

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


Subsequent  to the end of the first quarter of 1998,  the Company  announced its
first mall food court  project  with  Chelsea GCA Realty,  Inc. to master  lease
13,000 square feet of food and beverage facilities, including a food court and a
500 seat common area, at the Leesburg  Corner Premium  Outlets in Virginia.  The
upscale  outlet  center  will be built  in three  phases  with the  first  phase
scheduled to open in the fall of 1998.

OPERATING  COSTS AND EXPENSES.  The Company's total operating costs and expenses
were $275.3  million for the first quarter of 1998, or 99.3% of total  revenues,
compared  with $261.8  million for the first  quarter of 1997, or 99.5% of total
revenues.  The improved  operating  profit  margin of 20 basis  points  reflects
operating  leverage  benefits  derived  from revenue  growth and reduced  costs,
primarily in other operating expenses.

Cost of sales for the first  quarter of 1998  increased  10.0% to $82.5  million
when  compared to the first  quarter of 1997.  Cost of sales as a percentage  of
total revenues  increased 120 basis points during the first quarter of 1998. The
margin is  influenced by temporary changes in  merchandise  product mix from low
to higher margin goods at existing locations,  as well as start-up activities at
new food and beverage  concepts  that result in product waste.

Payroll and benefits  totaled $89.9 million  during the first quarter of 1998, a
6.9%  increase  over the  first  quarter  of 1997.  Payroll  and  benefits  as a
percentage of total  revenues for the first  quarter of 1998  increased 50 basis
points to 32.4% as a result of staffing  initiatives  (such as the Store Manager
Program) put in place to increase revenues and decrease other cost areas.

Rent expense totaled $44.4 million for the first quarter of 1998, an increase of
0.9% above the first  quarter of 1997.  Rent  expense as a  percentage  of total
revenues  improved 70 basis points and can be attributed  to sales  increases on
contracts  with fixed rental  rates,  as well as new or renewed  contracts  with
favorable rent margins.

Royalties  expense  for the first  quarter  of 1998  increased  by 11.3% to $5.9
million when  compared  with the first quarter of 1997. As a percentage of total
revenues,  royalties  expense increased by 10 basis points for the first quarter
of 1998.  The increase in royalties  expense  reflects the  Company's  continued
introduction  of  branded  concepts  to its  concessions  operations.  Royalties
expense as a  percentage  of branded  sales  totaled  6.0% and 6.4% in the first
quarter of 1998 and 1997, respectively. This margin decrease was 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.

Depreciation  and  amortization  expense,  excluding  $0.5  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 first quarter of
1998,   compared  to  $12.1   million,   excluding  $0.4  million  of  corporate
depreciation on property and equipment, for the first quarter of 1997. Increased
depreciation from new contracts was offset by lower depreciation  related to the
write-down  of one impaired  airport unit in the fourth  quarter of 1997 and the
amortization  of pre-opening  costs in the first quarter of 1997 related to mall
contracts.

General and administrative  expenses were $13.6 million for the first quarter of
1998,  an  increase  of  8.8%  from a year  ago.  This  increase  was  primarily
attributable  to the addition of corporate  resources  in  accounting,  systems,
business  development  and  strategic  planning and marketing to focus on growth
initiatives in the Company's  core markets and new venues,  as well as increased
consulting costs associated with systems initiatives.

Other  operating  expenses,   which  includes  utilities,   casualty  insurance,
equipment  maintenance,  trash removal and other  miscellaneous  expenses,  were
$27.0  million for the first  quarter of 1998,  a 6.3%  decrease  from the $28.8
million  reported  in the  first  quarter  of  1997.  As a  percentage  of total
revenues,  other  operating  expenses  improved  120 basis  points for the first
quarter of 1998 when compared with the same period in 1997. The majority of this
improvement was due to lower supplies, utilities and service contract expenses.


                                       11

<PAGE>

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


OPERATING PROFIT. As a result of the changes in revenues and operating costs and
expenses discussed above,  operating profit increased to $2.0 million or 0.7% of
revenues  for the first  quarter of 1998,  from $1.3 million or 0.5% of revenues
for the first quarter of 1997. Operating profit margins improved in all business
lines,  despite  international  airport  results  being  negatively  impacted by
exchange  rate  fluctuations  and weak  enplanements  stemming  from  the  Asian
economic situation.

         <TABLE>
         <CAPTION>
                                                                                 TWELVE WEEKS ENDED
                                                                             ---------------------------
                                                                               MARCH 27,    MARCH 28,
        (IN MILLIONS)                                                            1998         1997
        ------------------------------------------------------------------------------------------------
         <S>                                                                    <C>           <C> 

        OPERATING PROFIT (LOSS) BY BUSINESS LINE (1)
            AIRPORTS:
               Domestic                                                           $ 18.5       $ 16.5 
               International                                                         0.2          0.4 
        ------------------------------------------------------------------------------------------------
                  Total airports                                                    18.7         16.9 
        ------------------------------------------------------------------------------------------------
            TRAVEL PLAZAS                                                           (3.7)        (3.6)
            SHOPPING MALLS AND ENTERTAINMENT                                         0.6          0.5 
        ------------------------------------------------------------------------------------------------
            Total operating profit                                                $ 15.6       $ 13.8 
        ------------------------------------------------------------------------------------------------

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

Airport operating profit, before general and administrative  expenses,  was 9.0%
of  airport  revenues  for the first  quarter of 1998 as  compared  with 8.5% of
airport  revenues for the first quarter of 1997.  Travel plaza  operating  loss,
before general and administrative expenses, improved 10 basis points to 6.7% for
the  first   quarter  of  1998.   Operating   profit  for  shopping   malls  and
entertainment,  excluding general and administrative expenses, improved 20 basis
points to 4.2% for the first quarter of 1998.

INTEREST  EXPENSE.  Interest expense remained flat at $9.2 million for the first
quarter of 1998 and 1997, reflecting the 9.5% fixed rate of interest on the $400
million of Senior Notes.

INTEREST  INCOME.  Interest  income  decreased  slightly to $0.7 million for the
first  quarter of 1998.  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.

INCOME  TAXES.  The benefit for income  taxes for the first  quarter of 1998 and
1997 was $2.6 million and $2.8  million,  respectively,  reflecting an effective
tax rate of 39.5% for both quarters.

NET LOSS AND LOSS PER COMMON SHARE. The Company's net loss for the first quarter
of 1998 decreased 9.3% to $3.9 million, or $0.11 per common share, compared with
a net loss of $4.3  million for the first  quarter of 1997,  or $0.12 per common
share. The decrease in net loss for the first quarter of 1998 reflects  improved
operating performance.

WEIGHTED  AVERAGE  SHARES  OUTSTANDING.  The weighted  average  number of common
shares  outstanding  for the first  quarter  of 1998 and 1997 used to  calculate
basic and  diluted  loss per common  share was 34.4  million  and 34.6  million,
respectively.   Common   equivalent   shares  were  excluded  from  the  diluted
calculations because they were antidilutive.

During the first quarter of 1998, common shares issued and outstanding decreased
by approximately 0.6 million and totaled 33.9 million,  primarily reflecting 0.7
million shares purchased under the Company's share repurchase  program offset by
the issuance of shares under the Company's Employee Stock Purchase Plan.

                                       12

<PAGE>

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


LIQUIDITY AND CAPITAL RESOURCES

The Company funds its capital  requirements  with a combination of existing cash
balances and operating cash flow. 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'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 March 2003.

The Company is required to make semi-annual cash interest payments on its 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.

The  Senior  Notes  are  secured  by  a  pledge  of  stock  and  are  fully  and
unconditionally  guaranteed 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 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.

The  First  National  Bank of  Chicago,  as agent  for a group of  participating
lenders, has provided credit facilities (the "Facilities") to Host International
consisting  of  a  $75.0  million   revolving  credit  facility  (the  "Revolver
Facility")  and a $25.0  million  letter of credit  facility.  During 1997,  the
Company  negotiated  several  enhancements to the Facilities.  The  enhancements
increased the aggregate availability and extended the maturity of the Facilities
from $75.0 million through 2001 to $100.0 million through April 2002 (the "Total
Commitment").  The $75.0 million Revolver  Facility provides for working capital
and  general  corporate  purposes  other than  hostile  acquisitions.  The $25.0
million  letter of credit  facility  provides for the issuance of financial  and
nonfinancial  letters of credit.  Any borrowings under the Facilities are senior
obligations of Host  International  and are secured by 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
Senior Notes Indenture, except that dividends payable to the Company are limited
to 25% of Host  International's  consolidated net income, as defined in the loan
agreement.  During  the  first  quarter  of  1998  and in  compliance  with  the
Facilities,  Host  International  paid $4.7 million of dividends to the Company.
The  enhancements  to  the  Facilities   during  1997  eliminated  the  Revolver
Facility's annual 30-day repayment  provision.  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 default  under the Senior  Notes  Indenture.  As of March 27, 1998 and
throughout  the twelve  weeks ended  March 27,  1998,  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,  

                                       13


<PAGE>

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


before  changes in working  capital and income taxes,  totaled $10.7 million for
the first  quarter of 1998 as compared  with $9.4 million for the same period in
1997.

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 1998 and 1997 totaled
$16.1  million and $13.1  million,  respectively.  For the entire fiscal year of
1998, the Company presently expects to make capital  expenditure  investments of
approximately $60 million in its core markets (domestic airport and travel plaza
business  lines) and $15.0 million in growth  markets  (international  airports,
food  courts in U.S.  shopping  malls and other  venues).  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 1998 expenditures with its operating cash flow.

The Company's cash used in financing activities in the first quarter of 1998 was
$7.0  million,  compared  with cash  provided by  financing  activities  of $1.6
million for the same period in 1997.  The Company  announced a share  repurchase
program  during 1997 for the  repurchase of up to $15.0 million of the Company's
stock on the  open  market  over a  two-year  period  and as of the end of 1997,
shares had been repurchased at an aggregate purchase price of $3.5 million.  The
Company  purchased  additional  treasury  stock during the first quarter of 1998
totaling $9.8 million. Offsetting the $9.8 million of cash payments for treasury
stock in the first  quarter  were  proceeds  received for the issuance of common
shares  relating to the Company's  employee stock and option plans totaling $2.1
million.  Cash provided by financing activities in 1997 was primarily due to the
issuance of common shares  relating to the Company's  employee  stock and option
plans totaling $1.9 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.

The  Company's   consolidated   earnings   before   interest   expense,   taxes,
depreciation,  amortization and other non-cash items  ("EBITDA")  increased $1.1
million,  or 7.4%,  to $16.0  million in the first  quarter of 1998.  The EBITDA
margin  improved 10 basis points to 5.8% of revenues,  up from 5.7% in the first
quarter of 1997. The Company's  cash interest  coverage ratio (defined as EBITDA
to interest  expense less  amortization of deferred  financing costs) was 3.4 to
1.0 in the first quarter of 1998 compared with 3.1 to 1.0 for the same period 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 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  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.

                                       14


<PAGE>

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



The following is a reconciliation of net loss to EBITDA:

           <TABLE>
           <CAPTION>
                                                                                    TWELVE WEEKS ENDED
                                                                                ---------------------------
                                                                                  MARCH 27,     MARCH 28,
           (IN MILLIONS)                                                            1998          1997
           ---------------------------------- --------- --------- ------------- -------------- ------------
           <S>                                                                       <C>           <C> 

           NET LOSS                                                                  $ (3.9)      $ (4.3)
           Interest expense (1)                                                         9.2          9.2 
           Benefit for income taxes                                                    (2.6)        (2.8)
           Depreciation and amortization                                               12.5         12.5 
           Other non-cash items                                                         0.8          0.3 
           ---------------------------------- --------- --------- ------------- -------------- ------------
           EBITDA                                                                    $ 16.0       $ 14.9 
           ---------------------------------- --------- --------- ------------- -------------- ------------

          <FN>
         (1) Amortization  of deferred  financing costs of $0.3 million and $0.2
             million for the first  quarter of 1998 and 1997,  respectively,  is
             included as a component of interest expense.
            </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 and 1997, 6 of the original 15 impaired  units were either  disposed
of or the lease term expired.  As of March 27, 1998, the total cash flow deficit
(including  operating cash flows and necessary  capital  expenditures)  from the
remaining 9 operating units was projected to be approximately $10.4 million over
the remaining weighted-average life of the contracts of 4.0 years. Substantially
all of the remaining  deficit is attributable to three  operating  units,  which
include two airport units and one tollroad unit.


DEFERRED INCOME TAXES

Realization  of the net deferred tax assets  totaling  $67.8 million as of March
27, 1998,  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
March 27, 1998.  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 that would allow  realization of the existing net deferred tax assets
within  nine to twelve  years.  During the third  quarter of 1997,  the  Company
recorded a $1.9  million  benefit to  recognize  certain tax  credits  that were
previously considered unrealizable.

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 

                                       15


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

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  may  contain  "forward-looking  statements"  within the meaning of the
federal securities laws, including  statements  concerning the Company's outlook
for 1998 and beyond;  the growth in total revenue in 1998 and subsequent  years;
the amount of additional  revenues  expected from new domestic and international
airport and domestic  shopping mall food court contracts that were added in 1997
or that are  expected  to be  added or  renewed  in 1998 and  subsequent  years;
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 the Year 2000 issue on
operations. For further information concerning risks applicable to the Company's
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.


OTHER MATTERS

The Company is  currently  working to resolve the  potential  impact of the Year
2000 on the Company's operations.  An action plan consisting of three phases was
formulated in 1997 and phase one was completed in the first quarter of 1998. The
first phase  consisted of a formulation  of an overall  assessment of the issues
and  documentation  of an action plan. Full completion of the action plan should
occur in 1999.  The Year 2000 problem is the result of computer  programs  being
written using two digits (rather than four) to define the  applicable  year. Any
of the Company's  programs or computer  hardware and  electronic  equipment that
have  time-sensitive  software or computer chips may recognize a date using "00"
as a date other than the Year 2000,  which could  result in  miscalculations  or
system  failures.  If the  Company,  its  customers or its vendors are unable to
resolve such processing issues in a timely manner, it could result in a material
financial risk.  Accordingly,  the Company is devoting  resources to resolve all
significant  Year 2000  issues in a timely  manner as they are  identified.  The
Company  currently  anticipates  the  cost of  funding  its  Year  2000  systems
compliance  program will total  approximately $1.5 million in 1998, $1.5 million
in 1999 and $0.5 million in 2000.  Additionally,  final  remediation may require
further capital investments to replace equipment and software.

In addition to the risks  noted  above,  the  Company's  operations  may also be
affected by Year 2000 issues facing the Federal Aviation  Administration related
to air traffic control and security systems used in airports. These issues could
potentially  lead to  degraded  flight  safety,  grounded  or  delayed  flights,
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 as it pertains to air traffic control and
airport security systems.


QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         Not applicable.

                                       16

<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  February  5,  1998  announcing  fiscal  year  1997 results
         and  containing  forward-looking  statements.


                                       17



<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 8, 1998                             /S/  BRIAN W. BETHERS
----------------------             ---------------------------------------
         Date                            Brian W. Bethers
                               Senior Vice President and Chief Financial Officer
                                       (duly authorized officer and
                                          chief financial officer)



                                       18