UNITED STATES 
                        SECURITIES AND EXCHANGE COMMISSION 
                              Washington, D.C. 20549 
                              ______________________ 

                                     FORM 10-Q 

         (Mark One) 

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

         For the quarterly period ended September 30, 1998. 

         or 

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

         For the transition period from ______________ to ______________ 

                          Commission File Number: 33-78866 
                               ______________________ 
  
                                MOA HOSPITALITY, INC. 
              (Exact name of registrant as specified in its charter) 

            Delaware                                        33-0166914 
    (State or other jurisdiction of                      (I.R.S. Employer 
     incorporation or organization)                       Identification No.)
                               ______________________ 

                             701 Lee Street, Suite 1000 
                            Des Plaines, Illinois 60016 
                                   (847) 803-1200 
        (Address, including zip code, and telephone number, including 
         area code, of registrant's principal executive offices) 
                               ______________________ 
     
         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. 
                                                            [X] Yes    [  ] No

         Number of shares of Common Stock, $.01 par value, outstanding as of 
November 13, 1998:  800,000  

<PAGE>

                                INDEX

                 MOA HOSPITALITY, INC. AND SUBSIDIARIES


Part I - Financial Information


Item 1.  Financial Statements

     Condensed consolidated balance sheets - September 30, 1998 
     (unaudited) and December 31, 1997 ..................................... 2

     Condensed consolidated statements of operations - 
     Three months ended September 30, 1998 and 1997 (unaudited); 
     Nine months ended September 30, 1998 and 1997 (unaudited) ............. 3

     Condensed consolidated statements of cash flows - 
     Nine months ended September 30, 1998 and 1997 (unaudited) ............. 4

     Notes to condensed consolidated financial statements - 
     September 30, 1998 (unaudited) ........................................ 5


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

     General ............................................................... 7

     Results of Operations .................................................10

     Liquidity and Capital Resources .......................................17


Part II - Other Information


Item 1.  Legal Proceedings .................................................19

Item 2.  Changes in Securities .............................................19

Item 3.  Defaults upon Senior Securities ...................................19

Item 4.  Submission of Matters to a Vote of Security Holders ...............19

Item 5.  Other Information .................................................19

Item 6.  Exhibits and Reports on Form 8-K ..................................19

Signatures .................................................................20

<PAGE>

                                PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                            MOA HOSPITALITY, INC. AND SUBSIDIARIES

                            CONDENSED CONSOLIDATED BALANCE SHEETS
                            (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                 September 30,  December 31,
                                                                      1998         1997
                                                                 -------------  ------------ 
                                                                  (Unaudited)

<S>                                                               <C>           <C>
ASSETS
  Current Assets:
  Cash and cash equivalents ...................................   $    27,161   $    13,032
  Accounts receivable from property operations ................         2,870         2,241
  Operating supplies and prepaid expenses .....................         2,030         2,199
  Current portion of mortgage and notes receivable ............           194           602
                                                                  ------------  ------------
  Total Current Assets ........................................        32,255        18,074
  Investment property:
    Operating properties, net of accumulated depreciation .....       291,262       310,992
    Land held for development .................................         2,389         2,389
                                                                  ------------  ------------
Total investment property .....................................       293,651       313,381
  Other Assets:
  Deposits and other assets ...................................           427         6,798
  Restricted cash .............................................         1,549         1,226
  Mortgage and other notes receivable, less current portion ...        10,456         6,801
  Financing and other deferred costs, net of accumulated
    amortization of $8,015 in 1998 and $5,605 in 1997.                 14,232        16,579
                                                                  ------------  ------------
Total Other Assets ............................................        26,664        31,404
                                                                  ------------  ------------
    Total Assets                                                  $   352,570   $   362,859
                                                                  ============  ============
LIABILITIES, MINORITY INTERESTS AND
  STOCKHOLDERS' EQUITY
  Current Liabilities:
  Trade accounts payable ......................................   $     2,588   $     2,693
  Real estate taxes payable ...................................         3,406         2,450
  Accrued interest payable ....................................         5,822         3,625
  Other accounts payable and
    accrued expenses ..........................................         8,558         4,393
  Current portion of long-term debt ...........................        41,200        67,157
                                                                  ------------  ------------
  Total Current Liabilities ...................................        61,574        80,318

  Net deferred tax liability ..................................         3,415         3,351

  Long-term debt, less current portion:
  Mortgage and other notes payable ............................       175,850       181,098
  12% Senior Subordinated Notes, net of unamortized
    discount of $2,991 in 1998 and $3,265 in 1997..............        77,009        76,735
                                                                  ------------  ------------
  Total Long-term debt, excluding current portion .............       252,859       257,833
                                                                  ------------  ------------
  Total Liabilities ...........................................       317,848       341,502
                                                                  ------------  ------------
  Minority Interests ..........................................         1,717         1,763
  Stockholders' equity:
    Common stock, $.01 par value, 1,500,000 shares
      authorized; 800,000 shares issued and outstanding .......             8             8
    Additional paid-in capital ................................        15,294        15,294
    Retained earnings .........................................        17,703         4,292
                                                                  ------------  ------------
  Total stockholders' equity ..................................        33,005        19,594
                                                                  ------------  ------------
                                                                  $   352,570   $   362,859
                                                                  ============  ============

</TABLE>

  See accompanying notes to condensed consolidated financial statements.

<PAGE>

               MOA HOSPITALITY, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             (Unaudited, in thousands except share data)

<TABLE>
<CAPTION>


                                                 Three Months Ended      Nine Months Ended       
                                                    September 30           September 30       
                                              ----------------------  ----------------------  
                                                 1998        1997        1998        1997     
                                              ----------- ----------- ----------- ----------- 
<S>                                           <C>         <C>         <C>         <C>         
Revenues:
  Motel operating revenues .................. $   35,272  $   37,139  $   92,353  $   95,725  
  Other revenues ............................        357         139         810         614  
                                              ----------- ----------- ----------- ----------- 
Total revenues ..............................     35,629      37,278      93,163      96,339   
Costs and expenses:
  Motel operating expenses ..................     16,152      16,376      46,769      47,417      
  Marketing and royalty fees ................      2,132       2,631       5,942       6,928       
  General and administrative ................      2,642       1,817       7,516       5,609       
  Restructuring Costs .......................          0           0           0         750    
  Depreciation and amortization .............      4,194       3,731      12,280      11,058  
                                              ----------- ----------- ----------- ----------- 
Total direct expenses .......................     25,120      24,555      72,507      71,762      
                                              ----------- ----------- ----------- ----------- 
Net operating revenue .......................     10,509      12,723      20,656      24,577      
Interest expense ............................      7,705       7,674      23,120      23,332      
                                              ----------- ----------- ----------- ----------- 
Net income (loss) from operations ...........      2,804       5,049      (2,464)      1,245     
Gain on sale of properties ..................      9,658           0      24,532         669      
Minority interests of others in
  net income from operations ................        (72)       (111)       (112)       (180)        
                                              ----------- ----------- ----------- ----------- 
Net income (loss) before income taxes .......     12,390       4,938      21,956       1,734  
Income tax expense (credit) .................      4,822       1,933       8,545         690       
                                              ----------- ----------- ----------- ----------- 
Net income (loss) ........................... $    7,568  $    3,005   $  13,411  $    1,044 
                                              =========== =========== =========== =========== 
Net income (loss) per common share .......... $     9.46  $     3.76   $   16.76  $     1.31 
                                              =========== =========== =========== =========== 
Weighted average number of
  common shares outstanding .................    800,000     800,000     800,000     800,000     
                                              =========== =========== =========== =========== 
</TABLE>

See accompanying notes to condensed consolidated financial statements.

<PAGE>


                MOA HOSPITALITY, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (Unaudited, in thousands)

<TABLE>
<CAPTION>                                                                          Nine Months Ended    
                                                                                     September 30        
                                                                                ----------------------  
                                                                                    1998        1997        
                                                                                ----------  ----------  
<S>                                                                             <C>         <C>         
Cash flows provided by (used in) operating activities:
  Net income (loss) ........................................................... $   13,411  $    1,044  
  Adjustments to reconcile net income (loss) to cash provided by
    operating activities:
      Depreciation, amortization and accretion of
        discount on notes .....................................................     12,555      11,300   
      Minority interests of others in net income (loss)
        from operations .......................................................        112         180          
      Deferred income taxes ...................................................         64         129       
      Net gain on sale of properties ..........................................    (24,532)       (669)
      Change in assets and liabilities:
        (Increase) decrease in assets:
          Accounts receivable .................................................       (624)       (868)      
          Operating supplies, prepaid expenses,
            deposits and other assets .........................................      6,988       6,472      
          Increase (decrease) in liabilities:
            Accounts payable and accrued expenses .............................      5,044       2,025        
            Accrued interest payable ..........................................      2,197       2,379       
                                                                                ----------  ----------  
Net cash provided by (used in) operating activities ...........................     15,215      21,992     
Cash flows provided by (used in) investing activities:
  Acquisition and development of investment properties ........................    (13,107)    (11,116)     
  Refurbishment of investment properties ......................................     (5,631)     (4,413)     
  Net proceeds from sale of investment properties .............................     47,436         340
  Cash restricted for refurbishment of properties .............................       (322)        943         
  Collections on mortgage and other notes receivable ..........................      2,152         736         
                                                                                ----------  ----------  
Net cash provided by (used in) investing activities ...........................     30,528     (13,510)     
Cash flows provided by (used in) financing activities:
  Proceeds from secured notes payable .........................................      5,942       2,000      
  Repayment of secured notes payable ..........................................    (37,148)     (6,871)
  Distributions to minority interests .........................................       (157)       (236)       
  Deferred financing costs ....................................................       (251)       (297)  
                                                                                ----------  ----------  
Net cash provided by (used in) financing activities ...........................    (31,614)     (5,404)     
                                                                                ----------  ----------  
Net increase (decrease) in cash and cash equivalents ..........................     14,129       3,078     
Cash and cash equivalents at beginning of period ..............................     13,032      12,248      
                                                                                ----------  ---------- 
Cash and cash equivalents at end of period .................................... $   27,161  $   15,326  
                                                                                ==========  ========== 
Supplementary disclosure of cash flow information:
  Cash paid during the period for interest .................................... $   20,648  $   20,953  
                                                                                ==========  ==========  
  Cash paid (net of refunds received) during the period
    for income taxes .......................................................... $       96  $      252  
                                                                                ==========  ==========  
</TABLE>

See accompanying notes to condensed consolidated financial statements.

<PAGE>

                      MOA HOSPITALITY, INC. AND SUBSIDIARIES

               NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                                September 30, 1998


1.  Basis of Presentation

     The accompanying unaudited interim condensed consolidated financial 
statements have been prepared in accordance with generally accepted accounting 
principles for interim financial information and with the instructions to Form 
10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all 
of the information and footnotes required by generally accepted accounting 
principles for complete financial statements.  In the opinion of management, 
all adjustments (consisting only of normal recurring adjustments) considered 
necessary for a fair presentation have been included.  Operating results for 
the three-month and nine-month periods ended September 30, 1998 are not 
necessarily indicative of the results that may be expected for the year ended 
December 31, 1998.  For further information, refer to the consolidated 
financial statements and footnotes thereto included in MOA Hospitality, Inc. 
and Subsidiaries' Annual Report on Form 10-K for the year ended December 31, 
1997.  The terms "MOA" and the "Company" mean MOA Hospitality, Inc. and its 
subsidiaries. 

2. Maturing Debt Obligations

     At September 30 ,1998, the Company had $41,200,000 of debt obligations 
maturing within one year.  Included in the $41,200,000 is $37,818,000 of debt 
obligations maturing prior to December 31, 1998.  Two banks have agreed to 
refinance on a long-term basis $3,590,000 of the $37,818,000 with interest 
rate and principal amortization terms similar to the existing debt that they 
hold.  In addition, upon the sale of two properties in November 1998, the 
Company reduced the otherwise maturing principal balances by $4,584,000.  
Accordingly, as of November 13, 1998 the Company has $29,644,000 of debt 
obligations that matures prior to year end.  The Company has been actively 
pursuing the refinance of these maturing debt obligations; however, as of 
November 13, 1998, the Company has not been able to obtained any firm 
commitments for such refinancing.  Given the current state of the capital 
markets, there is no assurance that the Company will be able to obtain 
refinancing prior to the maturity of these debt obligations. The condensed
consolidated financial statements contain no adjustment relating to the
outcome of the above described uncertainty.

3.  Acquisitions and Divestitures

     In March 1998, the Company sold one lodging facility to an unrelated 
party, for approximately $1.4 million in cash.   The Company realized a pre-
tax gain of approximately $0.5 million.   

     In May 1998, the Company sold one lodging facility to an unrelated party, 
for approximately   $20 million in cash.  The Company realized a pre-tax gain 
of approximately $12.7 million.  The Company paid down approximately $12.4 
million of first mortgage debt in conjunction with this transaction.    

     In June 1998, the Company sold land to an unrelated party, for 
approximately $3.0 million in cash.  The Company realized a pre-tax gain of 
approximately $1.7 million. 

<PAGE>

                      MOA HOSPITALITY, INC. AND SUBSIDIARIES

         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (Unaudited)

     In June 1998, the Company borrowed approximately $4.8 million under its 
$150 million secured loan facility with Credit Suisse First Boston in 
conjunction with the acquisition of three properties for $8.5 million.  The 
three properties were purchased from an affiliate of the Company that had 
built the properties for the Company. 

     In July 1998, the Company sold one lodging facility to an unrelated 
party, for approximately $4.0 million consisting of $1.0 million in cash and a 
$3 million first mortgage note.   The Company realized a pre-tax gain of 
approximately $0.5 million.  The Company paid down approximately $2.5 million 
of the first mortgage debt in conjunction with this transaction. 

     In August 1998, the Company sold one lodging facility to an unrelated 
party, for approximately $2.1 million in cash.  The Company realized a pre-tax 
loss of approximately $.3 million.  The Company paid down approximately $2.2 
million of the first mortgage debt in conjunction with this transaction. 

     In September 1998, the Company sold three lodging facilities to unrelated 
parties in three separate transactions for approximately $24.9 million 
consisting of approximately $22.5 million of cash and two separate first 
mortgage notes aggregating approximately $2.4 million.  The Company realized a 
net pre-tax gain of approximately $8.8 million on these transactions and paid 
down approximately $11.6 million of first mortage debt. 

     In October 1998, the Company borrowed approximately $3.1 million under 
its $150 million secured loan facility with Credit Suisse First Boston in 
conjunction with the acquisition of two properties for approximately $6.1 
million.  The Company had assumed management control of one property in May 
1998 and the other property in September 1998.  The properties were purchased 
from an affiliate of the Company that had built the properties for the 
Company. 

     In November 1998, the Company sold two lodging facilities to an unrelated 
party for approximately $5.0 million in cash. The Company realized a pre-tax 
gain of approximately $.9 million.  The Company paid down approximately $4.6 
million of first mortgage debt in conjunction with this transaction.  In 
November, the Company leased one of its lodging facilities to an unrelated 
party.  The lease provided for a $150,000 security deposit, an annual base 
rent of approximately $157,000 and provided the tenant with option to purchase 
the property for $1.8 million between November 2003 and July 2004.  The lease 
expires October 31, 2004. The Company also has entered into an agreement to 
sell one of its lodging facility for $3.7 million consisting of cash in the 
approximate amount of $.8 million and a first mortgage note in the approximate 
amount of $2.9 million.  The Company has received a $.3 million non-refundable 
deposit to be applied toward the purchase price.  The transaction is expected 
to close in November and result in an approximate gain of $.4 million. 

     During the third quarter, the Company recognized a $.6 million gain on 
the sale of an investment. 
                                         
4.   Income Taxes   
     Income tax expense differs from the amounts computed by applying the U.S. 
federal income tax rate of 35% to income before income taxes principally as a 
result of state income taxes. 

<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS


CERTAIN STATEMENTS UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," CONSTITUTE "FORWARD-LOOKING 
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT 
OF 1995 AND, AS SUCH, SPEAK ONLY AS OF THE DATE MADE.  SUCH FORWARD-LOOKING 
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES AND OTHER FACTORS 
WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY 
TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR 
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.  SUCH 
FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING:  THE COMPANY'S ABILITY TO OBTAIN 
FINANCING, COMPETITION, INTEREST RATE FLUCTUATIONS, OR GENERAL BUSINESS AND 
ECONOMIC CONDITIONS. 

THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INTERIM CONDENSED 
CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES 
THERETO INCLUDED ELSEWHERE HEREIN.  THE SUPPLEMENTAL HISTORICAL OPERATING 
RESULTS PRESENTED BELOW FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 
30, 1998 AND 1997 HAVE BEEN PREPARED ON THE SAME BASIS AS THE INTERIM 
CONDENSED CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS AND, IN THE OPINION OF 
THE COMPANY, INCLUDE ALL ADJUSTMENTS (CONSISTING ONLY OF NORMAL RECURRING 
ADJUSTMENTS) NECESSARY TO PRESENT FAIRLY THE INFORMATION SET FORTH THEREIN. 

General

        MOA operates principally in the economy, limited-service segment of 
the lodging industry.  As a result, its average room rates tend to be lower 
than the average room rates of full service lodging facilities and the overall 
industry average.  However, due to the limited nature of the public space and 
ancillary services provided by economy limited service motels, the Company's 
expenses tend to be lower than those of full service lodging facilities and 
the overall industry average.  The profitability of the lodging industry in 
general is significantly dependent upon room rental rates and occupancy rates.  
Due to the fixed nature of a relatively high portion of the Company's 
expenses, changes in either room rates or occupancy rates can result in 
significant changes in the operating profit of the Company's motels. 

Between January 1, 1997 and September 30, 1998, the Company has acquired or 
assumed management control pending acquisition and sold a number of motels in 
various transactions summarized as follows: 

  
                                                                Number of
        Date                  Transaction                         Rooms 
        -----                 -----------                      -----------
        January 1997          Sold a motel located in             (130)
                              Kissimmee, FL.        

        February 1997         Assumed management control            48
                              of a motel located in 
                              Greensboro, GA which was built
                              by an affiliate for the Company
                              and acquired in October 1997.


<PAGE>
                                                                Number of
        Date                  Transaction                         Rooms  
        -----                 -----------                      -----------
        May 1997              Assumed management control            61 
                              of a motel located in
                              Wilson, NC which was built
                              by an affiliate for the Company
                              and acquired in October 1997.

        September 1997        Assumed management control           117
                              of two motels located in
                              Columbia, SC and Milford, MA
                              which were built by an 
                              affiliate for the Company
                              and acquired in October 1997.


        December 1997         Sold a motel located in              (48)
                              Cambridge, OH.

                              Purchased a motel located in          53
                              East Syracuse, NY which was built
                              by an affiliate for the Company.

        March 1998            Sold a motel located in              (49)
                              South Hill, VA.
                
                              Assumed management control            54
                              of a motel located in Mineral 
                              Wells, WV which was built by an
                              affiliate for the Company and 
                              acquired in June 1998.  The 
                              Company has leased the property 
                              to a third party tenant.

        May 1998              Sold a motel located in             (168)
                              Santa Clara, CA.  Sold adjacent
                              vacant land in June 1998.

                              Assumed management control            66
                              of a motel located in Mishawaka,
                              IN which was built by an affiliate 
                              for the Company.
 
<PAGE>
                                                                Number of
        Date                  Transaction                         Rooms  
        -----                 -----------                      -----------


        June 1998             Assumed management control           131    
                              of two motels located in Lake 
                              City, FL and Stafford, TX 
                              which were built by an affiliate
                              for the Company and acquired in
                              June 1998. The Company has 
                              leased the properties to third 
                              party tenants.

        July 1998             Sold a motel located in             (122)
                              Detroit/Novi, MI.

        August 1998           Sold a motel located in             (128)
                              Louisville, KY.                     

        September 1998        Sold three motels located in        (280)
                              Santa Monica, CA; Greensboro, GA; 
                              and, Birmingham/Pelham, AL.

                              Assumed management control of a        60
                              motel located in Athens, GA that 
                              was built by an affiliate for the 
                              Company and acquired in October, 
                              1998.  The Company has leased the 
                              property to a third party tenant.
                                                                   ------
                                                                    (335)
                                                                   ======

        In the aggregate, the Company received $29.7 million in cash 
(inclusive of $48.0 million of net proceeds from sales of properties) in 
conjunction with the above listed transactions.  Cash required for the above 
described acquisitions was funded from internal sources and $12.5 million in 
borrowings. 

        The above listed acquisitions have been accounted for under the 
purchase method of accounting and therefore results from operations have been 
included only since the earlier of the date of acquisition or date the Company 
assumed management control and was at financial risk. 


<PAGE>

Three Months Ended September 30, 1998 Compared to the Three Months Ended 
September 30, 1997

     The following chart presents certain historical operating results and 
statistics discussed herein and is being provided as a supplement to the 
condensed consolidated financial statements presented elsewhere herein.

<TABLE>
<CAPTION> 

                                                   Supplemental Operating Results and Statistics
                                             ----------------------------------------------------------  
                                                                    (unaudited)


                                                           Three Months Ended September 30
                                             ----------------------------------------------------------
                                                 Motels Owned        Acquisitions/
                                                 Both Periods        Divestitures       Consolidated
                                             --------------------  -----------------  -----------------
                                                1998      1997       1998     1997      1998     1997
                                             ---------- ---------  -------- --------  -------- --------
                                              
                                                      (dollars in thousands, except Other data)

<S>                                          <C>        <C>        <C>      <C>       <C>      <C>
Motel operations:
  Motel operating revenues:
    Room revenues ...........................$  31,092  $ 31,782   $ 2,272  $ 3,438   $33,364  $35,220
    Ancillary motel revenues ................    1,565     1,418       343      501     1,908    1,919
                                             ---------- ---------  -------- --------  -------- --------
      Total motel operating revenues.........   32,657    33,200     2,615    3,939    35,272   37,139
  Motel costs and expenses:
    Motel operating expenses ................   14,522    14,399     1,630    1,977    16,152   16,376
    Marketing and royalty fees ..............    2,001     2,413       131      218     2,132    2,631
    Depreciation and amortization ...........    3,343     3,246       308      279     3,651    3,525
                                             ---------- ---------  -------- --------  -------- --------
      Total motel direct expenses ...........   19,866    20,058     2,069    2,474    21,935   22,532
                                             ---------- ---------  -------- --------  -------- --------  
                                             $  12,791  $ 13,142   $   546  $ 1,465    13,337   14,607
                                             ========== =========  ======== ========  
Corporate operations:
  Other revenues ............................                                             357      139
  General and administrative expenses:
    Management operations ...................                                           1,462    1,042
    Construction/Acquisition and
       Divestiture ..........................                                             221      190
    Other general and administrative.........                                             959      585
                                                                                      -------- --------
  Total general and administrative expenses .                                           2,642    1,817
  Depreciation and amortization .............                                             543      206
                                                                                      -------- --------
                                                                                       (2,828)  (1,884)
                                                                                      -------- --------
Net operating income ........................                                         $10,509  $12,723
                                                                                      ======== ========

Other data:
  Number of motels at period end (5).........      128       128         4       10       132      138
  Number of rooms at period end (5) .........   10,490    10,490       236      912    10,726   11,402
  Occupancy percentage (5) ..................   69.64%    71.03%    70.92%   73.18%    69.71%   71.18%
  ADR (1)(5) ................................  $ 46.26   $ 46.28   $ 47.51  $ 64.42   $ 46.92  $ 47.59
  REVPAR (2)(5) .............................  $ 33.84   $ 34.34   $ 40.52  $ 54.01   $ 34.58  $ 35.72
  Net operating income margin (3) ...........                                          29.50%   34.13%
  Net motel revenue margin (4)(5) ...........   51.89%    51.56%    37.59%   50.73%    50.92%   51.48%

</TABLE>

[FN]

(1)  ADR represents room revenues divided by the total number of rooms
     occupied.

(2)  REVPAR represents total motel operating revenues divided by the total
     number of rooms available.

(3)  Net operating income margin represents net operating income divided by
     total motel operating revenues plus other revenues.

(4)  Net motel revenue margin represents total motel operating revenues less
     motel operating expenses and marketing and royalty fees, divided by motel
     room revenues.
 
(5)  At September 30, 1998 and for the three months then ended, excludes amounts
     related to four motels which are leased to third party tenants.



<PAGE>


        Total revenues consist principally of motel operating revenues.  Motel 
operating revenues are derived from room rentals and ancillary motel revenues 
such as food and beverage service, long distance telephone calls, fax machine 
use and from vending machines.  Other revenues include interest income, 
distributions on partnership interests in excess of the Company's basis in 
such partnerships and other miscellaneous income.  Total revenues decreased to 
$35,629,000 for the three months ended September 30, 1998 from $37,278,000 for 
the three months ended September 30, 1997, a decrease of $1,649,000 or 4.4%. 

        Motel revenues decreased to $35,272,000 for the three months ended 
September 30, 1998 from $37,139,000 for the three months ended September 30, 
1997, a decrease of $1,867,000 or 5.0%.  The motel revenues for motels owned 
during both periods decreased approximately $543,000 or 1.6%.  The decrease in 
motel revenues for motels owned during both periods was attributable 
principally to a decrease in the occupancy percentage.  The occupancy 
percentage decreased from 71.03% for the three months ended September 30, 1997 
to 69.64% for the three months ended September 30, 1998.  Management 
attributes the decline in occupancy principally to the significant increase in 
the supply of motels rooms in the markets in which the Company competes.  The 
average daily rate ("ADR") for the motels owned during both periods decreased 
slightly to $46.26 for the three months ended September 30, 1998 from $46.28 
for the three months ended September 30, 1997.  REVPAR for motels owned during 
both periods decreased to $33.84 for the three months ended September 30, 1998 
from $34.34 for the three months ended September 30, 1997, a decrease of $0.50 
or 1.5%.  Motel revenues for motels acquired and divested since January 1, 
1997 accounted for $1,324,000 of the overall $1,867,000 decrease in motel 
revenues.  The acquired and divested motels had an occupancy percentage of 
70.92%, an ADR of $47.51 and REVPAR of $40.52 for the three months ended 
September 30, 1998. 

        Motel operating expenses include payroll and related costs, utilities, 
repairs and maintenance, property taxes, insurance, linens and other operating 
supplies.  Motel operating expenses decreased to $16,152,000 for the three 
months ended September 30, 1998 from $16,376,000 for the three months ended 
September 30, 1997, a net decrease of $224,000 or 1.4%.  The cost of operating 
motels owned during both periods increased to $14,522,000 for the three months 
ended September 30, 1998 from $14,399,000 for the three months ended September 
30, 1997, an increase of $123,000 or 0.9%.  Increases in labor costs which 
were mitigated to some extent by a decline in certain other operating costs, 
were responsible for the overall increase in operating expenses.  Management 
attributes the increase in labor costs to be a result of the overall tight 
labor markets as indicated by the historically low level of unemployment and 
an increase in the minimum wage instituted in the prior year.  Motel operating 
expenses for motels acquired and divested since January 1, 1997 decreased to 
$1,630,000 for the three months ended September 30, 1998 from $1,977,000 for 
the three months ended September 30, 1997.  Motel operating expenses as a 
percentage of motel revenues increased to 45.8% for the three months ended 
September 30, 1998 from 44.1% for the three months ended September 30, 1997.  
Motel operating expenses as a percentage of motel revenues for the motels 
owned in both periods increased to 44.5% for the three months ended September 
30, 1998 from 43.4% for the three months ended September 30, 1997.  Motel 
operating expenses as a percentage of motel revenues for the acquired and 
divested motels was 62.3% for the three months ended September 30, 1998. 

<PAGE> 

        Marketing and royalty fees include media advertising, billboard rental 
expense, advertising fund contributions and royalty charges paid to 
franchisors and other related marketing expenses.  Marketing and royalty fees 
decreased to $2,132,000 for the three months ended September 30, 1998 from 
$2,631,000 for the three months ended September 30, 1997, a decrease of 
$499,000 or 19.0%.  The marketing and royalty fees for motels owned during 
both periods decreased to $2,001,000 for the three months ended September 30, 
1998 from $2,413,000 for the three months ended September 30, 1997, a decrease 
of $412,000 or 17.1%.  For the motels owned during both periods, marketing and 
royalty fees as a percentage of room revenues decreased to 6.4% for the three 
months ended September 30, 1998 from 7.6% for the three months ended September 
30, 1997.  The decrease in marketing and royalty fees is attributable to a 
reduction in franchise fees due to the decline in room revenues on which most 
such fees are based and a reduction in rates for certain contractual franchise 
fees.  In addition, during the period from February 1998 through May 1998 the 
Company disaffiliated its Shoney's Inns from the ShoLodge Franchise System and 
ceased the payments of franchise fees at such time.  On an annual basis, the 
Company historically paid approximately $650,000 of franchise fees on its 
fourteen Shoney's Inns.  Marketing and royalty fees for motels acquired and 
divested since January 1, 1997 decreased to $131,000 for the three months 
ended September 30, 1998 from $218,000 for the three months ended September 
30, 1997. 

        Corporate general and administrative expenses are segregated by the 
Company into three separate areas:  Management Company Operations, 
Construction/Acquisition and Divestiture Division and Other General and 
Administrative.  Included in the Management Company Operations, which is the 
division responsible for the day-to-day motel operations, are the costs 
associated with training, marketing, purchasing, administrative support, 
property related legal and accounting costs.  The major components of these 
costs are salaries, wages and related expenses, travel, rent and other 
administrative expenses.  The general and administrative expenses for the 
Management Operations increased $420,000 to $1,462,000 for the three months 
ended September 30, 1998 from $1,042,000 for the three months ended September 
30, 1997, an increase of 40.3%.  The increase is principally due to costs 
incurred with respect to the installation and the implementation of the 
Company's new primary financial accounting system. The general and 
administrative expenses associated with Construction/Acquisition and 
Divestiture Division increased $31,000 from $190,000 for the three months 
ended September 30, 1997 to $221,000 for the three months ended September 30, 
1998.  The increase is a result of an increase in the divestiture activities 
of the Company partially offset by a decline in development activities of the 
Company.  Other General and Administrative expenses increased $374,000 to 
$959,000 for the three months ended September 30, 1998 from $585,000 for the 
three months ended September 30, 1997.  The increase is principally due to 
legal costs incurred in connection with a lawsuit that the Company initiated 
against Shoney's Franchise Systems, Inc., the franchiser of the former
Shoney's Inn franchises operated by the Company.  As a percentage of total 
motel operating revenues, Management Operations general and administrative 
expenses was 4.1% for the three months ended Septembe 30, 1998 and 2.8% 
for the three months ended September 30, 1997. 

        Depreciation and amortization increased to $4,194,000 for the three 
months ended September 30, 1998 from $3,731,000 for the three months ended 
September 30, 1997, a net increase of $463,000 or 12.4%.  Approximately 
$337,000 of the net increase in depreciation and amortization is attributable 
to the corporate operations resulting from the amortization of deferred costs. 

        Net operating income decreased to $10,509,000 for the three months 
ended September 30, 1998 from $12,723,000 for the three months ended September 
30, 1997, a decrease of $2,214,000 or 17.4%.  The decrease in net operating 
income included a decrease of $1,144,000 in net motel revenues (motel revenues 
less motel operating expenses and marketing and royalty fees) an increase in 
corporate general and administrative expenses of $825,000 and an increase in 
depreciation and amortization of $463,000.  This decrease was partially 
mitigated by an increase in other revenues of $218,000.  Net operating income 
as a percent of total revenues was 29.5% for the three months ended September 
30, 1998 as compared to 34.1% for the three months ended September 30, 1997. 

<PAGE>

        Interest expense increased to $7,705,000 for the three months ended 
September 30, 1998 from $7,674,000 for the three months ended September 30, 
1997, an increase of $31,000.  

        Gain on sale of properties amounted to $9,658,000 on a pre-tax basis 
for the three months ended September 30, 1998.  The gain consisted of 
$9,058,000 from the sale of five lodging properties and a gain of $600,000 on 
the sale of an investment during the third quarter of 1998. 

        Net income increased to $7,568,000 for the three months ended 
September 30, 1998 from $3,005,000 for the three months ended September 30, 
1997.  The increase in net income was driven by the gains realized on the sale 
of properties which more than offset the decline in operating income. 
        
<PAGE>

Nine Months Ended September 30, 1998 Compared to the Nine Months Ended 
September 30, 1997

     The following chart presents certain historical operating results and 
statistics discussed herein and is being provided as a supplement to the 
consolidated financial statements presented elsewhere herein.

<TABLE>
<CAPTION>
                                                     Supplemental Operating Results and Statistics
                                              ---------------------------------------------------------- 
                                                                      (unaudited)

                                                             Nine Months Ended September 30
                                              ----------------------------------------------------------
                                                 Motels Owned        Acquisitions/
                                                 Both Periods        Divestitures        Consolidated
                                              ------------------  ------------------  ------------------
                                                1998      1997      1998      1997      1998      1997
                                              --------  --------  --------  --------  --------  --------
                                                       (dollars in thousands, except Other data)

<S>                                           <C>       <C>       <C>       <C>       <C>       <C>
Motel operations:
  Motel operating revenues:
    Room revenues ........................... $ 77,973  $ 80,820  $  8,629  $  9,404  $ 86,602  $ 90,224
    Ancillary motel revenues ................    4,434     4,085     1,317     1,416     5,751     5,501
                                              --------  --------  --------  --------  --------  --------
      Total motel operating revenues ........   82,407    84,905     9,946    10,820    92,353    95,725
  Motel costs and expenses:
    Motel operating expenses ................   41,111    41,417     5,658     6,000    46,769    47,417
    Marketing and royalty fees ..............    5,399     6,305       543       623     5,942     6,928
    Depreciation and amortization ...........   10,047     9,671       730       847    10,777    10,518
                                              --------  --------  --------  --------  --------  --------
      Total motel direct expenses ...........   56,557    57,393     6,931     7,470    63,488    64,863
                                              --------  --------  --------  --------  --------  --------
                                              $ 25,850  $ 27,512  $  3,015  $  3,350    28,865    30,862
                                              ========  ========  ========  ========  
Corporate operations:
  Other revenues ............................                                              810       614
  General and administrative expenses:
    Management operations ...................                                            4,011     3,605
    Construction/Acquisition and
       Divestiture ..........................                                              817       659
    Other general and administrative ........                                            2,688     1,345
                                                                                      --------  --------  
  Total general and administrative expenses .                                            7,516     5,609
  Restructuring costs .......................                                                0       750
  Depreciation and amortization .............                                            1,503       540
                                                                                      --------  --------  
                                                                                       (8,209)   (6,285)
                                                                                      --------  --------
Net operating income ........................                                         $ 20,656  $ 24,577
                                                                                      ========  ========
Other data:
  Number of motels at period end (5) ........      127       127         5        11       132       138
  Number of rooms at period end (5) .........   10,429    10,429       297       973    10,726    11,402
  Occupancy percentage (5) ..................   63.47%    66.39%    67.44%    70.49%    63.75%    66.65%
  ADR (1) (5) ............................... $  43.16  $  42.66  $  58.34  $  61.11  $  44.31  $  44.01
  REVPAR (2) (5) ............................ $  28.95  $  29.75  $  45.35  $  49.56  $  30.12  $  31.12
  Net operating income margin (3) ...........                                           22.17%    25.51%
  Net motel revenue margin (4) (5) ..........   46.04%    46.01%    43.40%    44.63%    45.77%    45.86%

</TABLE>
[FN]

(1)  ADR represents room revenues divided by the total number of rooms 
     occupied.

(2)  REVPAR represents total motel operating revenues divided by the total 
     number of rooms available.

(3)  Net operating income margin represents net operating income divided by 
     total motel operating revenues plus other revenues.

(4)  Net motel revenue margin represents total motel operating revenues less
     motel operating expenses and marketing and royalty fees, divided by motel
     room revenues.

(5)  At September 30, 1998 and for the nine months then ended, excludes amounts
     related to four motels which are leased to third party tenants.

<PAGE>



        Total revenues decreased $3,176,000 to $93,163,000 for the nine months 
ended September 30, 1998 from $96,339,000 for the nine months ended September 
30, 1997 or 3.3%. 

        Motel revenues decreased to $92,353,000 for the nine months ended 
September 30, 1998 from $95,725,000 for the nine months ended September 30, 
1997, a decrease of $3,372,000 or 3.5%.  The motel revenues for motels owned 
during both periods decreased approximately $2,498,000 or 2.9% and the motel 
revenues for acquired and divested motels, since January 1, 1997 declined 
approximately $874,000.  The decrease in motel revenues for motels owned 
during both periods was attributable principally to a decrease in the 
occupancy percentage.  The occupancy percentage decreased from 66.39% for the 
nine months ended September 30, 1997 to 63.47% for the nine months ended 
September 30, 1998.  Management attributes the decline in occupancy 
principally to two factors: i) a significant increase in the supply of 
motels rooms in the markets in which the Company competes and ii) the 
negative impact of the much publicized weather effect of El Nino during 
the first part of 1998.  The ADR for the motels owned during both periods 
increased to $43.16 for the nine months ended September 30, 1998 from $42.66 
for the nine months ended September 30, 1997, an increase of $0.50 or 1.2%.  
REVPAR for motels owned during both periods decreased to $28.95 for the nine 
months ended Sepember 30, 1998 from $29.75 for the nine months ended 
September 30, 1997, a decrease of $0.80 or 2.7%.  The acquired and divested 
motels had an occupancy percentage of 67.44%, an ADR of $58.34 and REVPAR 
of $45.35 for the period which they were owned by the Company in 1998. 

        Motel operating expenses include payroll and related costs, utilities, 
repairs and maintenance, property taxes, insurance, linens and other operating 
supplies.  Motel operating expenses decreased to $46,769,000 for the nine 
months ended September 30, 1998 from $47,417,000 for the nine months ended 
September 30, 1997, a net decrease of $648,000 or 1.4%.  The cost of operating 
motels owned during both periods decreased to $41,111,000 for the nine months 
ended September 30, 1998 from $41,417,000 for the nine months ended September 
30, 1997, a decrease of $306,000 or .7%.  Motel operating expenses for motels 
acquired and divested since January 1, 1997 decreased to $5,658,000 for the 
nine months ended September 30, 1998 from $6,000,000 for the nine months ended 
September 30, 1997.  Motel operating expenses as a percentage of motel 
revenues increased to 50.6% for the nine months ended September 30, 1998 from 
49.5% for the nine months ended September 30, 1997.  Motel operating expenses 
as a percentage of motel revenues for the motels owned in both periods 
increased to 49.9% for the nine months ended September 30, 1998 from 48.8% for 
the nine months ended September 30, 1997.  Motel operating expenses as a 
percentage of motel revenues for the acquired and divested motels was 56.9% 
for the nine months ended September 30, 1998. 

        Marketing and royalty fees include media advertising, billboard rental 
expense, advertising fund contributions and royalty charges paid to 
franchisors and other related marketing expenses.  Marketing and royalty fees 
decreased to $5,942,000 for the nine months ended September 30, 1998 from 
$6,928,000 for the nine months ended September 30, 1997, a decrease of 
$986,000 or 14.2%.  The marketing and royalty fees for motels owned during 
both periods decreased to $5,399,000 for the nine months ended September 30, 
1998 from $6,305,000 for the nine months ended September 30, 1997, a decrease 
of $906,000 or 14.4%.  For the motels owned during both periods, marketing and 
royalty fees as a percentage of room revenues decreased to 6.9% for the nine 
months ended September 30, 1998 from 7.8% for the nine months ended September 
30, 1997.  The decrease in marketing and royalty fees is attributable to a 
reduction in franchise fees due to the decline in room revenues on which most 
such fees are based and a reduction in rates for certain contractual franchise 
fees. In addition, during the period from February 1998 through May 1998 the 
Company disaffiliated its Shoney's Inns from the ShoLodge Franchise System and 
ceased the payments of franchise fees at such time.  On an annual basis, the 
Company historically paid approximately $650,000 of franchise fees on its 
fourteen Shoney's Inns.  Marketing and royalty fees for motels acquired and 
divested since January 1, 1997 decreased to $543,000 for the nine months ended 
September 30, 1998 from $623,000 for the nine months ended June 30, 1997. 

<PAGE>

        Corporate general and administrative expenses are segregated by the 
Company into three separate areas:  Management Company Operations, 
Construction/Acquisition and Divestiture Division and Other General and 
Administrative.  Included in the Management Company Operations, which is the 
division responsible for the motel operations, are the costs associated with 
training, marketing, purchasing, administrative support, property related 
legal and accounting costs.  The major components of these costs are salaries, 
wages and related expenses, travel, rent and other administrative expenses.  
The general and administrative expenses for the Management Operations 
increased $406,000 to $4,011,000 for the nine months ended September 30, 1998 
from $3,605,000 for the nine months ended September 30, 1997, an increase of 
11.3%.  The increase is principally due to the costs incurred with respect to 
the installation and implementation of the Company's new primary financial 
accounting system.  The general and administrative expenses associated with 
the Construction/Acquisition and Divestiture Division increased $158,000 
from $659,000 for the nine months ended September 30, 1997 to $817,000 for 
the nine months ended September 30, 1998.  Other General and Administrative 
expenses increased $1,343,000 to $2,688,000 for the nine months ended 
September 30, 1998 from $1,345,000 for the nine months ended September 
30, 1997.  The increase is principally due to legal costs incurred in 
connection with a lawsuit that the Company initiated against ShoLodge 
Franchise Systems, Inc.,  the franchiser of the Shoney's Inn franchises 
operated by the Company.  As a percentage of total motel operating revenues, 
Management Operations general and administrative expenses was 4.3% for the 
nine  months ended September 30, 1998 and 3.8% for the nine months ended 
September 30, 1997. 

        Restructuring costs in the amount of $750,000 were recorded in 1997 as 
a provision for the reorganization of the Company's management structure.  
This reorganization included the implementation of a decentralized 
organizational structure whereby many of the property management support 
functions previously based out of the corporate office were moved to various 
regional offices which are located throughout the country.  The provision for 
restructuring costs covered the associated relocation and severance costs. 

        Depreciation and amortization increased to $12,280,000 for the nine 
months ended September 30, 1998 from $11,058,000 for the nine months ended 
September 30, 1997, a net increase of $1,222,000 or 11.1%.  Approximately 
$963,000 of the net increase in depreciation and amortization is attributable 
to the corporate operations resulting from the amortization of deferred costs. 

        Net operating income decreased to $20,656,000 for the nine months 
ended September 30, 1998 from $24,577,000 for the nine months ended September 
30, 1997, a decrease of $3,921,000 or 16.0%.  The decrease in net operating 
income included a decrease of $1,738,000 in net motel revenues (motel revenues 
less motel operating expenses and marketing and royalty fees) an increase in 
corporate general and administrative expenses of $1,907,000 and an increase in 
depreciation and amortization of $1,222,000; partially offset by an increase 
of other revenues in the amount of $196,000 and the $750,000 restructuring 
provision recorded in 1997.  Of the $1,738,000 decrease in net motel revenues, 
$1,286,000 resulted from the motels owned during both periods or a decrease of 
3.5%.  Net operating income as a percent of total revenues was 22.4% for the 
nine months ended September 30, 1998 as compared to 25.7% for the nine months 
ended September 30, 1997. 

<PAGE>

        Interest expense decreased to $23,120,000 for the nine months ended 
September 30, 1998 from $23,332,000 for the nine months ended September 30, 
1997, a decrease of $212,000.  


        Gain on sale of properties amounted to $24,532,000 for the nine months 
ended September 30, 1998 compared to $669,000 for the respective period in 
1997.  Seven motels, a parcel of vacant land and an investment were sold in 
1998 as compared to one property in the respective period for 1997. 

        Net income increased to $13,411,000 for the nine months ended 
September 30, 1998 from $1,044,000 for the nine months ended September 30, 
1997.  The increase in net income is due to the sale of properties which more 
than offset the decline in operating income. 


Liquidity and Capital Resources

The Company's primary uses of its capital resources include debt service, 
capital expenditures (primarily for motel refurbishment) and working capital.  
In addition on a discretionary basis the Company utilizes its capital 
resources for the development and acquisition of motel properties. 

The Company's debt service requirements consist of the obligation to make 
interest and principal payments on its outstanding indebtedness.  As of 
September 30, 1998, the Company had principal repayment obligations of 
$39,269,000, $8,636,000 and $6,001,000 during the remainder of the fiscal year 
ending December 31, 1998 and during the fiscal years ending December 31, 1999 
and 2000, respectively.  The Company had been told by investment bankers that 
the cash flows derived from the properties securing the maturing mortgage 
loans would be sufficient to allow for the refinancing of such mortgage debt 
given the interest rate environment that had existed throughout much of 1998.  
The availability of financing however has changed significantly in the past 
couple of months with the capital markets seeking safety in the form of United 
States government securities and liquidity.  Accordingly, it is less certain 
that the Company will be able to secure replacement financing of its debt 
obligations that are maturing through the remainder of 1998.  The Company has 
been actively pursuing such refinancing; however, as of November 13, 1998 no 
firm commitments to refinance such maturing debt have been secured.  Banks 
holding two separate pieces of debt aggregating $3,590,000 at September 30, 
1998 that recently matured, have agreed to refinance such debt on a long-term 
basis at interest rates and principal amortization terms similar to the debt 
being refinanced.  The legal documentation of these refinances are in the 
process of being finalized.  There are two other separate pieces of debt 
maturing in the remainder of 1998 with principal balances of $17,540,000 and 
$16,688,000 at September 30, 1998.  Subsequent to September 30, 1998, the 
Company paid down $4,584,000 of the $16,688,000 outstanding at September 30, 
1998 with the net proceeds from the sale of two properties.  The Company 
believes that the remaining properties and the cash flow produced by the 
properties securing these borrowings should be sufficient to allow for 
refinancing to be obtained.  In addition, given the current cash balances 
of the Company, the Company would be in a position to reduce the amount of 
refinancing being sought in order to secure financing if necessary.  Given the 
current state of the capital markets, there is no assurance that the Company 
will be able to obtain refinancing prior to the maturity of debt obligations 
discussed above.  

The Company's capital expenditure requirements principally include capital 
improvements and refurbishment of its lodging facilities as part of its 
ongoing operating strategy to provide well-maintained facilities.  The Company 
made capital expenditures (exclusive of acquisitions and development of 
properties) of $5,631,000 and $4,413,000 for the nine months ended September 
30, 1998 and 1997, respectively.  In addition, as of September 30, 1998, the 
Company had $1,549,000 of cash restricted for future refurbishment of motel 
properties, in accordance with certain debt agreements.  The Company is not 
aware of any unusual required level of future capital expenditures necessary 
to maintain its existing properties. 

<PAGE>

In June 1998, three properties built by an affiliate were acquired for 
$8,500,000 of which $4,800,000 was funded from the $150,000,000 secured loan 
facility with CS First Boston.  In October 1998, the Company acquired two 
properties for $6,100,000 that were built by an affiliate.  The purchase was 
partially funded by $3,100,000 of borrowings by the Company under its 
$150,000,000 secured loan facility with CS First Boston.  As of November 13, 
1998, two properties were under various stages of development for the Company.  
Management anticipates approximately $5,550,000 will be expended to purchase 
these motels upon their completion toward the end of 1998 of which the Company 
anticipates borrowing approximately $3,550,000 from CS First Boston under the 
$150,000,000 secured loan facility.  In addition, the Company anticipates 
drawing upon its $150,000,000 secured loan facility with CS First Boston to 
finance a portion of the acquisition price for these properties. 

For the nine months ended September 30, 1998, cash and cash equivalents 
increased $14,129,000.  This increase consisted of $15,215,000 of funds 
provided by operating activities and $30,528,000 of funds provided by 
investing activities and $31,614,000 of funds used in financing activities.  
Net investing activities of $30,528,000 include: sources of $47,436,000 from 
the net proceeds from the sale of investment properties and $2,152,000 of 
funds provided from the collections on mortgage and other notes receivable; 
and uses of $322,000 representing the change in cash restricted for 
refurbishment, $13,107,000 of cash utilized for motel development and 
$5,631,000 expended on refurbishment of existing properties.  Cash used in 
financing activities includes: $37,148,000 of cash utilized to repay 
indebtedness; and $408,000 of cash used for deferred financing costs and 
distributions to minority interests offset by $5,942,000 from proceeds from 
additonal borrowings. 

Impact of Year 2000

The year 2000 issue is the result of computer programs being written using two 
digits rather than four to define the applicable year.  Any of the Company's 
computer programs that have time-sensitive software may recognize a date using 
"00" as the year 1900 rather than the year 2000.  This could result in a 
system failure or miscalculations causing disruptions of operations, 
including, among other things, a temporary inability to process transactions, 
send invoices, or engage in similar normal business activities. 

The Company completed the installation and implementation of its new primary 
financial accounting system in September 1998 at a cost of approximately 
$400,000.  The new system is year 2000 compliant according to the manufacturer 
and developer of the hardware and software.  The Company has made an 
assessment of its other financial systems and believes other than for a few 
necessary minor modifications, that they are year 2000 compliant.  There can 
be no guarantee that the systems of other companies, principally banks and the 
Company's credit card processor on which the Company relies upon to transact 
business in the normal course will be year 2000 compliant which could possibly 
cause hardships for the Company.  

<PAGE>

         PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

         Not Applicable

Item 2.  Changes in Securities

         Not Applicable

Item 3.  Defaults upon Senior Securities

         Not Applicable

Item 4.  Submission of Matters to a Vote of Security Holders

         Not Applicable

Item 5.  Other Information

         Not Applicable

Item 6.  Exhibits and Reports on Form 8-K

         (a) Exhibits:

         Not Applicable

         (b) Reports on Form 8-K:

         Not Applicable

<PAGE>

                              SIGNATURES

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

                                                        MOA HOSPITALITY, INC.




November 13, 1998                     By:  /s/  Kurt M. Mueller               
                                           Kurt M. Mueller
                                           Chief Financial Officer
                                           (Principal Accounting Officer)


November 13, 1998                     By:  /s/  John D. Simon                
                                           John D. Simon    
                                           Secretary and Treasurer


<PAGE>