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 June 30, 1997
                                       OR

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

                   For the Transition Period from ____ to ____
                         Commission File Number 0-24794

                             -----------------------

                             CHARTWELL LEISURE INC.
             (Exact name of Registrant as specified in its charter)

        DELAWARE                                       22-3326054
      (State or other jurisdiction of                  (IRS Employer
      incorporation or organization)                   Identification No.)


                                605 Third Avenue
                                   23rd Floor
                            New York, New York 10158
          (Address of principal executive offices, including zip code)

                                 (212) 692-1400
                     (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


As of June 30, 1997, there were 13,406,531 shares of the Registrant's common
stock, par value $.01 per share ("Common Stock"), issued and outstanding.





<PAGE>



                             CHARTWELL LEISURE INC.


This Quarterly Report on Form 10-Q contains historical information and
forward-looking statements. Statements looking forward in time are included in
this Form 10Q pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. They involve known and unknown risks and
uncertainties that may cause the Company's actual results in future periods to
be materially different from any future performance suggested herein. In the
context of forward-looking information provided in this Form 10-Q and in other
reports, please refer to the discussion of risk factors detailed in, as well as
the other information contained in, the Company's filings with the Securities
and Exchange Commission.

                              INDEX                                   PAGE NO.

PART I.        FINANCIAL INFORMATION

    Item 1.    Condensed Consolidated Balance Sheets                    1

               Condensed Consolidated Statements of                     2
               Operations

               Condensed Consolidated Statements of Cash                3
               Flows

               Notes to Condensed Consolidated Financial                4
               Statements

    Item 2.    Management's Discussion and Analysis of
               Financial Condition and Results of Operations            7

PART II.       OTHER INFORMATION

    Item 1.    Legal Proceedings                                        15

    Item 2.    Changes in Securities                                    15

    Item 3.    Defaults Upon Senior Securities                          15

    Item 4.    Submission of Matters to a Vote of                       15
               Security Holders

    Item 5.    Other Information                                        15

    Item 6.    Exhibits and Reports on Form 8-K                         16



                                       ii

<PAGE>





CHARTWELL LEISURE INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
-----------------------------------------------------------------------------------------------------
<S>                                                                     <C>             <C>
                                                                        June 30,        December 31,
ASSETS:                                                                     1997                1996

CURRENT ASSETS:
  Cash and cash equivalents                                        $      51,237        $     17,590
  Accounts receivable - Net                                                6,137               7,356
  Loans receivable                                                         8,270               2,687
  Prepaid and other current assets                                         5,125               3,010
                                                                     -----------         -----------
          Total current assets                                            70,769              30,643
INVESTMENTS                                                                  500                 500
LOANS RECEIVABLE                                                           2,834               9,767
JOINT VENTURE INTERESTS                                                   19,589              19,328
PROPERTY AND EQUIPMENT - Net                                             171,085             157,766
MANAGEMENT CONTRACTS - Net                                                 2,866               2,961
DEFERRED TAX  ASSET                                                        1,200               1,200
OTHER ASSETS                                                               9,206               9,873
                                                                     -----------         -----------
TOTAL ASSETS                                                         $   278,049         $   232,038
                                                                     ===========         ===========

LIABILITIES AND STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:
  Accounts payable                                                   $     5,099         $     3,594
  Accrued expenses                                                        12,066              12,139
  Current portion of long-term debt and capital lease                      5,875               7,442
                                                                     -----------         -----------
          Total current liabilities                                       23,040              23,175
LONG-TERM DEBT                                                            77,283              85,028
CAPITALIZED LEASE OBLIGATION                                               4,981               5,090
OTHER LIABILITIES                                                          1,219               4,068
            Total liabilities                                            106,523             117,361
MINORITY INTEREST                                                          4,444               3,459
STOCKHOLDERS' EQUITY:

  Common stock                                                               134                  95
  Paid-in capital                                                        214,655             161,480
  Accumulated deficit                                                   (47,656)            (50,386)
  Foreign currency translation adjustment                                   (51)                  29
                                                                     -----------         -----------
          Total stockholders' equity                                     167,082             111,218
                                                                     -----------         -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $  278,049         $   232,038
                                                                     ===========         ===========

</TABLE>

See notes to condensed consolidated financial statements.






<PAGE>





CHARTWELL LEISURE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                 Three Months Ended June 30,          Six Months Ended June 30,
                                                                     1997             1996              1997              1996
<S>                                                         <C>                 <C>            <C>               <C>
REVENUE:
  Hotel revenue                                              $     31,175       $   19,029       $  55,470      $     31,497
  Other income                                                      2,029            1,050           2,488             1,633
  Equity in earnings of unconsolidated joint ventures               1,360            1,696           2,120             2,510
                                                            -------------       -------------     -------------  -----------
         Total revenue                                             34,564           21,775          60,078            35,640
                                                            -------------       -------------     -------------  -----------
OPERATING EXPENSES:
  Hotel  operating expense                                         11,226            8,068          22,134            13,459
  General and administrative                                        6,701            4,349          12,481             8,016
  Marketing, franchise and reservation fees                         2,833            1,936           5,474             3,289
  Maintenance and property taxes                                    3,165            1,486           6,210             2,566
  Rent                                                              1,366            1,396           2,534             2,332
  Depreciation and amortization                                     2,359            2,467           4,746             4,250
  Minority interest                                                   517              350             742               447
  Office restructuring charge                                          80                -             780                 -
  General and administrative, related party                             -              375               -               772
  Provision for losses on gaming assets                                 -            9,069               -             9,447
                                                            -------------       -------------     -------------  -----------
         Total operating expenses                                  28,247           29,496          55,101            44,578
                                                            -------------       -------------     -------------  -----------

OPERATING INCOME (LOSS)                                             6,317          (7,721)           4,977           (8,938)
INTEREST INCOME (EXPENSE) - NET                                     (513)          (1,219)         (1,714)           (1,933)
GAIN (LOSS) ON SALE OF FIXED ASSETS                                  (98)               -               4                  -
                                                            -------------       -------------     -------------  -----------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE                             5,706          (8,940)           3,267          (10,871)
INCOME TAX EXPENSE                                                  (181)               -             (538)                -
                                                            -------------       -------------     -------------  -----------
NET INCOME (LOSS)                                          $        5,525      $   (8,940)       $   2,729      $   (10,871)
                                                            =============       ==============     =============  ===========
PER SHARE INFORMATION:
  Net Income (Loss)                                           $      0.40     $     (1.52)        $    0.22      $     (1.85)
                                                            =============       ==============     =============  ===========
  Weighted average common shares outstanding                       13,812            5,868           12,539             5,868
                                                            =============       ==============     =============  ===========
</TABLE>


See notes to condensed consolidated financial statements.

                                       2



<PAGE>



CHARTWELL LEISURE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 and 1996
(In Thousands)
<TABLE>
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>              <C>
                                                                                                    1997              1996



 NET CASH PROVIDED BY OPERATING ACTIVITIES                                                   $     7,934      $      1,553
                                                                                            ------------     -------------


INVESTING ACTIVITIES:
     Issuance of notes receivable                                                                   (20)             (263)
     Travelodge acquisition, net of cash acquired                                                      -          (99,175)
     Principal payments received on loans                                                            982             6,276
     Other acquisitions and additions to property and equipment                                 (15,507)           (2,781)
     Proceeds from hotel disposals                                                                   352                 -
     Investment in Chartwell de Mexico                                                           (1,292)                 -
     Other assets and investments                                                                  (361)                 -
                                                                                             -----------     -------------

                   Net cash (used in) investing activities                                      (15,846)          (95,943)
                                                                                          --------------     -------------

FINANCING ACTIVITIES:
     Proceeds of borrowing                                                                           997            70,000
     Loan closing costs                                                                                -           (1,622)
     Repayment on borrowings                                                                    (12,655)          (10,986)
     Proceeds from sale of common stock (net of expenses of $1.2 million)                         53,217                 -
                                                                                         ---------------      ------------

                    Net cash provided by financing activities                                     41,559            57,392
                                                                                          --------------     -------------

NET INCREASE/ (DECREASE)  IN CASH AND CASH EQUIVALENTS                                            33,647          (36,998)
                                                                                           -------------     -------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                    17,590            51,470
                                                                                           -------------    --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                                   $      51,237     $      14,472
                                                                                           =============     =============
</TABLE>


See notes to condensed consolidated financial statements


                                       3


<PAGE>





CHARTWELL LEISURE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.    BASIS OF PRESENTATION

      The condensed consolidated balance sheet of Chartwell Leisure Inc. and its
      subsidiaries (the "Company" or "Chartwell") as of June 30, 1997 and the
      related condensed consolidated statements of operations and cash flows for
      the six month period ended June 30, 1997 and 1996 are unaudited. In the
      opinion of management, all adjustments necessary for a fair presentation
      of such financial statements have been included. Such adjustments
      consisted only of normal recurring items. Interim results are not
      necessarily indicative of results for a full year.

      The condensed consolidated financial statements and notes are presented as
      required by Form 10-Q and do not contain certain information included in
      the Company's annual consolidated financial statements. The year-end
      condensed consolidated balance sheet was derived from the Company's
      audited financial statements. This form 10-Q should be read in conjunction
      with the Company's consolidated financial statements and notes
      incorporated by reference in the 1996 Annual Report on Form 10-K.

2.    ACQUISITIONS AND SALE OF STOCK

      Travelodge Acquisition - On January 23, 1996, the Company acquired the
      outstanding common stock of Forte Hotels, Inc. ("FHI") for $98.8 million
      plus expenses (the "Travelodge Acquisition"). In related transactions on
      January 23, 1996, prior to consummation of the Travelodge Acquisition, HFS
      Incorporated ("HFS") and Motels of America, Inc. acquired from FHI the
      Travelodge franchise system and 19 hotel properties, respectively, for an
      aggregate purchase price of $71.6 million. The principal assets of FHI
      acquired by the Company included 18 wholly-owned hotels, and joint venture
      interests in 97 other lodging facilities (twelve of which were
      subsequently disposed). The Company financed approximately $60.4 million
      of the purchase price with proceeds from a bank revolving credit facility
      and $38.4 million with existing cash.

      The Travelodge Acquisition was accounted for by the purchase method. The
      operating results of the acquired company are included in the consolidated
      statements of operations from its acquisition date, January 23, 1996.

      Canadian Acquisition - On October 1, 1996, the Company acquired (the
      "Canadian Acquisition") from Capital Properties Limited Partnership
      ("CPLP"), 20 hotels and a one-half interest in an additional hotel,
      consisting of approximately 3,500 guest rooms, which hotels are located
      throughout Canada and franchised under the "Travelodge" brand name. The
      Company paid approximately $70.0 million to purchase substantially all of
      CPLP's existing bank debt and to pay certain specified closing costs
      (including real estate taxes and transfer taxes), as well as its
      assumption of liability for identified trade payables and property
      specific bank debt, aggregating approximately $7.0 million. Also, the
      Company may be required to make certain contingent payments to CPLP's
      constituent partners following a preferred return to the Company. In
      connection with the Canadian Acquisition on October 1, 1996, the Company
      borrowed $65.9 million under its credit facility. The Canadian Acquisition
      was accounted for by the purchase method. The operating results of the
      acquired company are included in the consolidated statements of operations
      from its acquisition date, October 1, 1996.


                                       4





<PAGE>



      Sale of Stock - On August 8, 1996, the Company sold 4 million shares of
      the Company's Common Stock to an investment group ("CL Associates")
      primarily consisting of members of the Fisher Brothers family and a trust
      for the benefit of Gordon Getty and members of his family and a limited
      liability company ("FSNL") owned principally by a trust for the benefit of
      Charles de Gunzberg for an aggregate purchase price of $57.0 million.

      The following presents the unaudited pro forma consolidated results of
      operations for the six months ended June 30, 1996 as if all of the
      transactions described above occurred on January 1, 1996, giving effect to
      the sale of stock and financing costs associated with the Travelodge
      Acquisition and Canadian Acquisition.


                        Six Months Ended
                         June 30, 1996
----------------------------------------------------------------
            (In Thousands Except per Share Amounts)


          Revenue                                   $55,314

          Net Loss                                 $(9,837)

          Net loss per share                         $(.99)




      The pro forma results are not necessarily indicative of the actual results
      of operations that would have occurred had the transactions been
      consummated as indicated nor are they intended to indicate results that
      may occur in the future.

3.    STOCK OPTIONS

      In March, 1997, the Board of Directors authorized an additional one
      million shares for grant pursuant to the Company's 1994 Stock Option Plan,
      as amended, bringing the total number of shares reserved for issuance to 4
      million. The increase in the number of shares authorized for grant was
      approved at the stockholders' meeting held on May 1, 1997. Options for
      20,000 shares of common stock were granted on May 5, 1997 at an exercise
      price of $12.25, representing fair market value on the date of the grant.

4.    INCOME TAXES

      As of December 31, 1996, the Company had approximately $16.9 million of
      tax loss carryforwards. The amount of $16.9 million includes net operating
      loss carryforwards of approximately $13.1 million of which $1.1 million
      expire in 2009, $9.9 million expire in 2010, and $2.1 million expire in
      2011. Also included in the $16.9 million of tax loss carryforwards are
      capital loss carryforwards of approximately $3.8 million which expire at
      December 31, 2001. The use of the loss carryforwards will be restricted
      over several years pursuant to Section 382 of the Internal Revenue Code of
      1986. Due to the Company's recurring operating losses prior to the second
      quarter of 1997, the Company has not recorded any tax benefit for net
      operating loss carryforwards. Income tax expense of $0.5 million for the
      six months ended June 30, 1997 primarily consists of Canadian withholding
      and state franchise tax.


                                       5


<PAGE>




5.    PRESENTATION

      Certain items have been reclassified from the prior year to conform with
      the current period's presentation.

6.    SUBSEQUENT EVENTS

      Sale of Casino Building and Barge - On August 4, 1997, the Company sold
      its interest in a barge and other related assets to Boomtown, Inc. for net
      proceeds of $0.3 million. Since the book value of this asset had been
      written down to zero, the Company will recognize a gain on sale of $0.3
      million.

      Prepayment of Rainbow Casino Corporation Loan Receivable - In August 1997,
      the Company collected in full its loan receivables from Rainbow Casino
      Corporation. The balance of the receivable at June 30, 1997 was $6.2
      million. In connection with this receipt, the Company will incur a charge
      of $.4 million for the write-off of the deferred costs associated with the
      loan receivable.


                                       6





<PAGE>



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

      GENERAL OVERVIEW

      Chartwell owns, directly or with joint venture partners, 122 hotel
      properties (plus three sub-leased properties) in both the full-service and
      limited-service segments, with an aggregate of 11,072 guest rooms, located
      in 25 states and six Canadian provinces. In the full-service segment,
      Chartwell operates 30 hotels aggregating 5,915 guest rooms (of which 5,730
      rooms represent Chartwell's ownership interest) that contributed
      approximately 73% of Chartwell's hotel revenues during the six month
      period ended June 30, 1997, and approximately 71% of the Company's
      property level hotel earnings before interest expense, income tax expense,
      and depreciation and amortization expenses ("EBITDA") during the six month
      period ended June 30, 1997. Chartwell's remaining 92 hotels, consisting of
      5,157 rooms (of which 2,227 rooms represent Chartwell's ownership
      interest), operate in the limited-service segment, principally under the
      Travelodge brand. Chartwell's strategy is to be an opportunistic acquirer
      and developer of diversified hotel properties that it believes provide the
      potential for cash flow and earnings growth, principally through
      rebranding, repositioning, reimaging and remarketing. As an owner of
      hotels, the Company's goal is to capitalize on positive industry
      fundamentals, and to produce strong earnings growth due to the operating
      leverage inherent in hotel ownership.

      SECOND QUARTER HIGHLIGHTS

             o  Net income of $5.5 million and earnings per share of $.40 in the
                three months ended June 30, 1997 were record results for the
                Company.

             o  Revenue per available room ("REVPAR") on a pro forma basis for
                those hotels operating for at least 12 consecutive months
                increased approximately 6.2% for the three months ended June 30,
                1997 compared to the three months ended June 30, 1996.

             o  Chartwell made solid progress with its development program with
                nine hotels currently under development with construction
                commencing on two locations as follows:

<TABLE>
<S>                           <C>               <C>              <C>            <C>
                                Expected        Expected          Expected
          Location             Franchise      No. of Rooms         Opening         Owners
1)  Dallas, Texas               Wingate            114          1st Qtr 1998        (A)
2)  Mexico City, Mexico          Hilton            129          1st Qtr 1998        (B)
---------------------------- -------------- -----------------  ---------------  -----------
</TABLE>

             o  The following locations are under development:

                                     Expected             Expected
        Location                     Franchise          No. of Rooms    Owners
        --------
    1    Santa Fe, New Mexico       Hilton Garden Inn      123             (A)
    2    Albuquerque, New Mexico    Hilton Garden Inn      123             (A)
    3    San Diego, California      Hilton Garden Inn      159             (A)
    4    Indianapolis, Indiana      Hilton Garden Inn      159             (A)
    5    Syracuse, New York         Hilton Garden Inn      159             (C)
    6    Willow Grove, Pennsylvania Hilton Garden Inn      159             (C)
    7    Juarez, Mexico             Hilton Garden Inn      159             (B)
          (A)  Wholly Owned
          (B) Owned by Chartwell de Mexico in which Chartwell Leisure
              is a 50% partner. 
          (C) Joint Venture with Pioneer Development Corp.

                                       7


<PAGE>




             o  The Company spent approximately $8.7 million for capital
                improvements at its hotels.

             o  The Company entered into a joint venture with Pioneer
                Development Corp. to jointly develop and own Hilton Garden Inns
                in certain eastern cities.

             o  The Company has hired the investment banking firms Bear Stearns
                & Co., Inc. and Chase Securities Inc. to help the Company
                consider strategic alternatives, including a possible sale of
                the Company.


         RESULTS OF OPERATION

         June 30, 1997 Compared to Pro Forma June 30, 1996

         The pro forma financial data includes the operations of Forte Hotels,
         Inc. and Capital Properties Limited Partnership for the six months
         ended June 30, 1996, as if the Travelodge Acquisition and the Canadian
         Acquisition (together, the "Acquisitions") had occurred on January 1,
         1996, giving effect to financing costs associated with the
         acquisitions, depreciation and amortization associated with the
         acquired properties and the sale of 4 million shares of newly issued
         common stock on August 8, 1996. The pro forma financial data also
         includes revenues and expenses associated with the Company's gaming
         business which include a provision for losses on gaming assets of $9.4
         million for the six month period ended June 30, 1996.

         The Company spent $5.3 million for capital improvements at its hotels
         in the first quarter of 1997 and $8.7 million in the second quarter of
         1997. The Company also implemented a hotel-wide policy called "Prideful
         Maintenance" which stresses the importance of making necessary and
         preventative maintenance and repairs. As a result of the upgrade
         program, maintenance and repairs increased approximately $0.9 million
         in the first six months of 1997 compared to the same period in 1996.
         Chartwell believes the rebranding and renovation program has increased,
         and will continue to increase Chartwell's REVPAR. The average daily
         room rate ("ADR") from properties operating for at least twelve
         consecutive months rose 3.6% from $52.34 in 1996 to $54.21 in 1997. As
         a result of the increase in ADR, REVPAR grew 5.2% to $34.49, and hotel
         revenues increased by $4.8 million or 8.7% from $55.3 million in 1996
         to $60.1 million in 1997. Rooms out of service as a result of the
         renovation work are not excluded when computing the REVPAR numbers
         shown above. EBITDA for the six months ended June 30, 1997 was $11.3
         million before giving effect to a $0.8 million charge for the costs
         associated with closing the Company's El Cajon, California office. Pro
         forma EBITDA for the comparable 1996 period was $9.9 million before
         non-cash provision for loss on gaming assets.

         HOTEL OPERATING PERFORMANCE (U.S. AND CANADA)

         Chartwell's REVPAR increased in the three months and six months ended
         June 30, 1997 compared to REVPAR during the same periods in 1996.
         Results are as follows:


                                     Three Months Ended
            -------------------------------------------------------------------

                June 30, 1997           June 30, 1996 (1)             Increase
  Occupancy         70.0%                     68.2%                     2.6%
     ADR           $55.22                    $53.41                     3.4%
   REVPAR          $38.65                    $36.41                     6.2%

                                      Six Months Ended
            -------------------------------------------------------------------

                June 30, 1997           June 30, 1996 (1)             Increase
  Occupancy         63.6%                     62.7%                     1.4%
     ADR           $54.21                    $52.34                     3.6%
   REVPAR          $34.49                    $32.80                     5.2%
   (1)  Pro forma



                                       8


<PAGE>




         U.S. HOTEL OPERATING PERFORMANCE

         In the United States, Chartwell's REVPAR increased in the three months
         and six months ended June 30, 1997 compared to the REVPAR during the
         same period in 1996. The REVPAR growth was fueled by increases in ADR.
         Results for Chartwell's U.S. Hotels are as follows:


                                  Three Months Ended
            --------------------------------------------------------------------

             June 30, 1997             June 30, 1996         Increase (Decrease)
  Occupancy      69.7%                     69.9%                    (.3%)
     ADR        $64.21                    $60.93                     5.4%
   REVPAR       $44.73                    $42.56                     5.1%

                                   Six Months Ended
            --------------------------------------------------------------------

             June 30, 1997           June 30, 1996 (1)       Increase (Decrease)
  Occupancy      64.9%                     66.1%                    (1.8%)
     ADR        $62.42                    $59.17                     5.5%
   REVPAR       $40.52                    $39.09                     3.7%
   (1) Pro forma

         CANADIAN HOTEL OPERATING PERFORMANCE

         Chartwell's REVPAR for its Canadian Hotels increased to $30.05 for the
         second quarter of 1997 as compared to $27.23 during the second quarter
         of 1996 (pro forma), an increase of 10.4%. Chartwell has recently
         completed a $4.0 million capital improvement and renovation program of
         its Canadian Hotels.


                                           Three Months Ended
                ---------------------------------------------------------------

                  June 30, 1997           June 30, 1996 (1)             Increase
    Occupancy         70.5%                     65.6%                     7.5%
       ADR           $42.63                    $41.47                     2.8%
     REVPAR          $30.05                    $27.23                    10.4%

                                        Six Months Ended
                ---------------------------------------------------------------

                  June 30, 1997           June 30, 1996 (1)             Increase
    Occupancy         61.8%                     57.7%                     7.1%
       ADR           $42.01                    $41.00                     2.5%
     REVPAR          $25.95                    $23.67                     9.6%
     (1)  Pro forma

       Historical Six Month Period Ended June 30, 1997 Compared to the
       Comparable 1996 Period

       RESULTS OF OPERATIONS -- REVENUE OVERVIEW

       Hotel revenue increased by $24.0 million, from $31.5 million in 1996 to
       $55.5 million in 1997. Approximately $17.5 million of the increase
       represented hotel revenue generated from the Canadian Acquisition and
       approximately $4.0 million of the increase represents an additional 22
       days of



                                       9

<PAGE>



       operations in the June 30, 1997 results versus the June 30, 1996 results
       due to the fact that the Travelodge Acquisition was consummated on
       January 23, 1996.


       RESULTS OF OPERATIONS - EXPENSE OVERVIEW

       Hotel operating expense increased $8.6 million, from $13.5 million in
       1996 to $22.1 million in 1997. Approximately $6.0 million of the increase
       represents hotel operating expense from the Canadian Acquisition in
       October, 1996 and approximately $1.8 million represents the additional 22
       days of operations in the June 30, 1997 results due to the Travelodge
       Acquisition.

       General and administrative expense increased $4.5 million, from $8.0
       million in 1996 to $12.5 million in 1997. Approximately $1.5 million of
       the increase results from the Canadian Acquisition and approximately $0.8
       million represents the additional 22 days of operations in the June 30,
       1997 results due to the Travelodge Acquisition. Included in general and
       administrative expense for the six month ended June 30, 1997 are
       professional fees of $0.4 million relating to the termination of a
       proposed notes offering and $0.4 million relating to due diligence costs
       associated with an acquisition which was never consummated.

       Marketing, franchise and reservation fees expense increased $2.2 million,
       from $3.3 million in 1996 to $5.5 million in 1997. Approximately $1.6
       million of the increase results from the Canadian Acquisition and
       approximately $0.6 million represents the additional 22 days of
       operations in the June 30, 1997 results due to the Travelodge
       Acquisition.

       Maintenance and property tax expense increased $3.6 million, from $2.6
       million in 1996 to $6.2 million in 1997. Approximately $2.6 million of
       the increase results from the Canadian Acquisition and approximately $0.4
       million represents the additional 22 days of operations in the June 30,
       1997 results due to the Travelodge Acquisition. The Company also
       implemented a hotel-wide policy called "Prideful Maintenance" which
       stresses the importance of making necessary and preventative maintenance
       and repairs. As a result of the upgrade program, maintenance and repairs
       increased approximately $0.9 million in the first six months of 1997
       compared to the same period in 1996.

       Depreciation and amortization expense for the first six months of 1997
       increased $0.5 million as compared to the same period in 1996, primarily
       due to increased depreciation and amortization as a result of the
       Canadian Acquisition and the additional 22 days of operations in the June
       30, 1997 results due to the Travelodge Acquisition offset by a reduction
       of depreciation in the 1997 period for the properties purchased in the
       Travelodge Acquisition as a result of the finalization of the purchase
       price allocation.

       Interest expense (net of interest income) for the first six months of
       1997 decreased $0.2 million compared to 1996 primarily due to an increase
       in interest income from additional cash received in the Rights Offering
       and two private placements (described below).

       Liquidity and Capital Resources

       As of June 30, 1997, Chartwell has approximately $82.3 million of
       outstanding long-term debt and approximately $51.2 million of cash. In
       addition, Chartwell has approximately $72.0 million available under its
       Chase Credit Facility and $2.9 million available under its Bank of
       America Credit Facility.

       The biggest component of long-term debt is approximately $66.0 million
       drawn under the Chase Facility. The money has been borrowed in Canadian
       funds (C $91.0 million) and currently bears interest at a


                                       10


<PAGE>



       rate of 4.1%. Borrowing in Canadian dollars has the additional advantage
       of providing a foreign currency hedge against the Canadian denominated
       revenues received from the Company's Canadian hotels.

       The total weighted average interest rate on the long-term debt is
       approximately 6.4% as of June 30, 1997 (inclusive of a $1.5 million
       annual guarantee fee payable to HFS, Inc. for its guarantee of a portion
       of the Chase facility).

       The Company's ratio of current assets to current liabilities at June 30,
       1997 was 3.1:1.

          In connection with the Canadian Acquisition on October 1, 1996, the
       Company entered into a development agreement (the "Development
       Agreement") with NRG Management Services Ltd. ("NRG"), an affiliate of
       Royco Hotels and Resorts, Ltd. ("Royco") which manages the Company's
       Canadian hotels and any future hotels acquired by the Company in Canada,
       pursuant to which NRG has agreed to identify new hotel properties for
       acquisition and development in Canada on behalf of the Company. The
       Development Agreement provides that the Company will pay to NRG
       approximately $0.6 million through its expiration in October, 1997.

       Chartwell de Mexico

          Chartwell de Mexico, a joint venture in which the company owns a 50%
       interest, intends to develop hotel facilities throughout Mexico.
       Chartwell de Mexico is to be funded with up to $20.0 million in capital
       contributions, of which half are to be contributed by the Company. On
       September 18, 1996, the joint venture purchased a 30-year exclusive
       master franchise agreement (the "Mexican Master License") from HFS,
       pursuant to which the joint venture is entitled to franchise others to
       develop and operate, lodging facilities in Mexico under the Travelodge
       and Thriftlodge brand names. Chartwell de Mexico is obligated under the
       Mexican Master License to develop in various stages up to 1,140 hotel
       rooms by December 31, 2006. Under certain circumstances, including where
       the Company does not satisfy its development obligations in accordance
       with a prescribed schedule, the Mexican Master License may be terminated
       by HFS. Currently, Chartwell de Mexico has identified 60 sites in 15
       cities, gained control of four sites, begun development on two sites and
       construction on one site (a Hilton, at the Mexico City Airport). The
       Company invested $1.3 million in Chartwell de Mexico in the first six
       months of 1997.

       U.S. Hilton Alliance

          On January 20, 1997, the Company entered into a "Memorandum of
       Understanding" with Hilton Hotels Corporation ("Hilton") pursuant to
       which the Company will own, develop, manage and operate at least 20
       Hilton Garden Inn hotels in target markets nationwide under a franchise
       license. The initial term of the agreement is three years and represents
       a total investment of nearly $200.0 million by the Company, of which
       approximately $40.0 million is expected to be funded by the Company as
       equity. The Company and Hilton are in negotiations to arrange for
       construction financing and permanent mortgage financing for the Hilton
       Garden Inn development program. There can be no assurance that such
       financing can be obtained. It is expected that 80% of the total
       construction costs will be financed, and the remaining 20% will be funded
       by the Company. Hilton is expected to guarantee up to 25% of all
       construction financing. The Company has seven Hilton Garden Inns under
       development.

       Capital Improvement Program

          The Company has launched a major capital improvement program to
       increase room and occupancy rates by improving the quality of its
       properties. As part of this program, the Company expects to upgrade


                                       11


<PAGE>



       the interior and exterior of all U.S. and Canadian properties that do
       not meet corporate standards. During 1997, the Company intends to invest
       approximately $20.0 million in capital improvements (of which
       approximately $14.0 million has been spent through June 30, 1997), in
       addition to amounts budgeted for regular capital improvements. Once this
       capital initiative is completed, the Company intends to maintain a
       regular program of capital improvements, including the renovation and
       refurbishment of certain of its existing hotels. The program is expected
       to enhance the competitiveness of its hotels and increase profitability.

      Restructuring Program

       The company is in the process of consolidating certain corporate
       functions from its office in El Cajon, California to Calgary, Canada with
       the intention of achieving cost savings and improving operating
       efficiencies. Exit and severance cost of $0.8 million were incurred
       during the six months ended June 30, 1997. Additional costs may be
       incurred during 1997 in relation to closing facilities and additional
       severance costs as positions are consolidated and plans are finalized.

       Recent Developments

       In June, 1997, the Board of Directors of the Company determined that in
       light of current market conditions, it would in be in the best interests
       of the Company's shareholders to consider various alternatives to enhance
       shareholder value, including a possible sale of the Company. Chartwell
       has hired the investment banking firms Bear, Stearns & Co., Inc. and
       Chase Securities Inc. to help the Company consider strategic
       alternatives, including a possible sale of the Company. Bear Stearns has
       contacted various potential buyers of the Company on the Company's
       behalf.



                                       12





<PAGE>



       Credit Facilities:

       Revolving Credit Facility

          The Company is a party to a credit facility (the "Credit Facility")
       with the Chase Manhattan Bank and other banks named therein. The Credit
       Facility provides that the Company may borrow up to $150.0 million under
       a revolving credit commitment (the "Commitment"), which may be utilized
       for the incurrence of revolving credit loans or the issuance of letters
       of credit. An amount of up to C$95.0 million of the Commitment is
       available to be borrowed as a subfacility under the Credit Facility. As
       of June 30, 1997, $77.9 million was drawn on the Credit Facility,
       inclusive of $12.0 million of letters of credit. Pursuant to this
       agreement, HFS has guaranteed $75.0 million of the Company's borrowings
       under the Credit Facility, for which the Company pays HFS an annual fee
       of $1.5 million. All outstanding obligations under the Credit Facility
       mature in August 2002.

          The aggregate revolving credit commitment is scheduled to be reduced
       by $7.5 million in 1998, $17.5 million in 1999, $20.0 million in 2000 and
       2001, and $85.0 million in 2002. To the extent outstanding borrowings
       exceed the resulting commitment amount, principal will be required to be
       repaid. The revolving credit commitment amount also will be reduced and,
       to the extent outstanding borrowings exceed the resulting commitment
       amount, principal will be repaid upon the occurrence of certain events.

          The Credit Facility contains covenants restricting, with certain
       exceptions, the Company and its subsidiaries and joint ventures from: (i)
       creating, incurring or assuming any liens; (ii) merging or consolidating
       or disposing of its assets, or acquiring assets from any other person;
       (iii) changing the nature of their respective businesses; (iv) incurring
       indebtedness other than existing indebtedness, subordinated indebtedness
       not to exceed $50.0 million to finance permitted acquisitions and other
       permitted indebtedness specified in the Credit Facility; (v) modifying
       the agreements relating to the Company's indebtedness and preferred stock
       or its corporate charter documents; and (vi) prohibiting the payment of
       dividends.

          In addition, the Credit Facility requires that the Company, in certain
       cases on a stand alone basis and in other cases on a consolidated basis
       with its subsidiaries and joint ventures, satisfy certain financial ratio
       coverage tests, including maintenance of net worth, minimum interest
       coverage, and maximum leverage coverages. The Credit Facility contains a
       restrictive covenant based on the ratio of pro-forma earnings to debt as
       defined in the credit facility document.



                                       13



<PAGE>



          Bank of America Loan Agreement

          The Company has a loan agreement with Bank of America National Trust
       and Savings Association ("B of A"). That loan agreement (the "B of A Loan
       Agreement") permits the Company and certain of the joint ventures through
       which it owns hotels to make revolving credit borrowings in an aggregate
       amount of up to $10.0 million and provides for an uncommitted Credit
       Facility, which is available at the sole discretion of B of A, in an
       aggregate amount of up to $2.0 million. The B of A loan Agreement is
       scheduled to expire on December 31, 1997 at which time the Company's
       outstanding obligations under the agreement will become due. Revolving
       credit borrowings under the B of A Loan Agreement may be made, at the
       option of the Company, as short term borrowings, which have a maximum
       maturity of six months, or medium term borrowings, which have a maximum
       maturity of five years. Short term borrowings bear interest, at the
       option of the Company, at the B of A prime rate, 1/2 of 1% in excess of
       the B of A offshore rate or 3/4 of 1% in excess of the B of A CD rate.
       Medium term borrowings bear interest at the B of A prime rate. All
       borrowings fully amortize during their term. The borrowings under the B
       of A Loan Agreement are secured by a $12.0 million standby letter of
       credit issued under the Credit Facility. The Company is obligated to pay
       a commitment fee at an annual rate of .1875% on the unutilized portion of
       the B of A Loan Agreement. The Company primarily utilizes B of A loans to
       finance capital improvements for the U.S. joint venture hotels.
       Borrowings under the B of A Loan Agreement were approximately $7.1
       million at June 30, 1997 of which approximately $3.8 million is allocable
       to the Company.


          Equity Offerings

          During the first quarter of 1997, the Company raised approximately
       $54.4 million of equity through a rights offering to its stockholders
       (the "Rights Offering"), a private placement (the "Brahman Private
       Placement") to funds managed by affiliates of Brahman Management, LLC
       ("Brahman") and a private placement (the "Baron Private Placement") to
       Baron Asset Fund ("Baron").

          Pursuant to the Rights Offering, which closed on March 13, 1997, after
       deducting expenses of approximately $1.2 million, the Company raised
       approximately $30.0 million in net proceeds through the sale of 2,228,977
       shares of Common Stock. CL Associates and FSNL, the Company's two
       principal stockholders, invested approximately $15.8 million in the
       Company through the exercise of Rights they received. After giving effect
       to the Rights Offering, CL Associates and FSNL together own approximately
       45% of the company's outstanding shares of Common Stock.

          Pursuant to the Brahman Private Placement and the Baron Private
       Placement, which closed on January 31, 1997 and March 6, 1997,
       respectively, the company raised an aggregate of approximately $23.2
       million through the sale of an aggregate of 1,658,929 shares of Common
       Stock at $14.00 per share. Brahman, which manages investment funds
       including one affiliated with George Soros, purchased 1,000,000 shares of
       Common Stock. Baron, which is one of a family of funds managed by Ronald
       Baron, purchased 658,929 shares of Common Stock. As a result of their two
       purchases and after giving effect to the Rights Offering, Brahman and
       Baron own approximately 9.7% and 4.9%, respectively, of the Company's
       outstanding shares of Common Stock.

          The Company intends to use the proceeds of the Rights Offering, the
       Brahman Private Placement and the Baron Private Placement to fund the
       construction of Hilton Garden Inns under the Company's announced alliance
       with Hilton, to fund the Company's Mexican joint venture, to redevelop
       the Company's existing hotels and for general corporate purposes. In
       addition, as the Company from time to time evaluates potential
       acquisition opportunities, the Company may also use a portion of the net
       proceeds to acquire additional hotels.



                                       14


<PAGE>



          Notes Offering

          The Company terminated its proposed $100.0 million offering of senior
       notes due 2007 and incurred professional fee expenses in the amount of
       $0.4 million which are recorded in general and administrative expense.

          The Company had entered into treasury rate locks totaling $80.0
       million to partially hedge the interest rate of the proposed offering.
       The treasury rate locks were settled on March 28, 1997 resulting in
       proceeds from the hedge of $1.1 million. These proceeds were recorded in
       the first quarter 1997 as other liabilities pending the outcome of the
       note offering. Since the note offering was terminated in the second
       quarter of 1997, hedge income was recognized and recorded in Other
       Income.

          Cash Flows

          Cash provided by operating activities was $7.9 million for the six
       months ended June 30, 1997 compared to $1.6 million for the six months
       ended June 30, 1996. The increase relates primarily to the Canadian
       Acquisition and an increase in earnings in 1997 compared to 1996.

          Cash used in investing activities was $15.8 million for the six months
       ended June 30, 1997 compared to $95.9 million for the six months ended
       June 30, 1996. This change relates primarily to the Travelodge
       Acquisition, with no similar acquisition occurring in 1997.

          Cash provided by financing activities was $41.6 million for the six
       months ended June 30, 1997 compared to $57.4 million for the six months
       ended June 30, 1996. In 1997, financing activities related to the sale of
       stock through a Rights Offering, and two private placements. In 1996,
       finance activities related to borrowings to finance the Travelodge
       Acquisition.

          Seasonality

          Room occupancy and rates at its hotels are affected by normally
       recurring seasonal patterns and, in most locations in the United States
       and Canada, are higher in the late spring through early fall months than
       during the balance of the year, with the lowest occupancy rates occurring
       in the first quarter of the year. As a result, the Company experiences
       seasonal lodging revenue patterns similar to the hotel industry with the
       summer months, due to the increase in leisure travel, producing a higher
       revenue than other periods during the year.

         Impact of New Accounting Pronouncements

          In February 1997, FASB Statement No. 128, "Earnings Per Share" was
       released. The statement establishes standards for computing and
       presenting earnings per share ("EPS") for publicly traded companies. The
       statement simplifies the standards for computing earnings per share and
       makes them comparable to international EPS standards. The statement is
       effective for financial statements issued for periods ending after
       December 15, 1997. The Company does not believe that the requirements of
       the statement will have a significant impact on the presentation of EPS
       in the financial statements.


                                       15



<PAGE>





       Part II. Other Information

       Item 1. Legal Proceedings

       The Company is not party to any litigation which it believes will have a
       material impact on the financial condition of the Company.

       Item 2. Changes in Securities

       None.

       Item 3. Defaults upon Senior Securities

       None.

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

       On May 1, 1997, the Company held its annual meeting of stockholders, (the
       "Annual Meeting"). Three Class III Directors of the Company, Henry R.
       Silverman, Martin L. Edelman and Marc E. Leland, were elected to serve on
       the Company's Board of Directors for a term expiring in 2000. Mr.
       Silverman received 12,228,171 votes in favor of his election, 2,642
       shares withheld. Mr. Edelman received 12,227,931 votes in favor of his
       election, 2,882 shares withheld. Mr. Leland received 12, 228,271 votes in
       favor of his election, 2,542 shares withheld.

       Also at the Annual Meeting, a proposal to approve a consent to a waiver
       of a covenant under the Amended and Restated Stock Purchase Agreement,
       dated as of March 14, 1996, by and among Chartwell Leisure Associates
       L.P. II ("CL Associates"), FSNL LLC and the Company, which consent would
       allow certain affiliates of CL Associates to hold interests in
       full-service, upper-end lodging properties, was approved. The holders of
       4,075,348 shares of Common Stock voted in favor of the proposal and the
       holders of 214,843 shares voted against the proposal. The holders of 86
       shares of Common Stock abstained.

       Also at the Annual Meeting, a proposal to approve the Company's 1994
       Stock Option Plan, as amended in October, 1996 and March, 1997, was
       approved. The holders of 9,798,084 shares of Common Stock voted in favor
       of the proposal and the holders of 525,378 shares voted against the
       proposal. The holders of 280 shares of Common Stock abstained.

       Also at the Annual Meeting, the appointment of Deloitte and Touche LLP as
       independent auditors of the Company for its fiscal year ending December
       31, 1997 was ratified. The holders of 12,228,602 shares of Common Stock
       voted in favor of the ratification and the holders of 1,968 shares voted
       against the ratification. The holders of 243 shares of Common Stock
       abstained.


       Item 5. Other Information

       Not Applicable.


                                       16



<PAGE>





       Item 6. Exhibits and Reports on Form 8-K

       (a) Exhibits

       None.

       (b) Reports on Form 8-K

       None.



                                       17


<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.

                                     CHARTWELL LEISURE INC.



Date: August 14, 1997                 /s/ Kenneth  J. Weber
                                      Kenneth  J. Weber
                                      Chief Financial Officer (Duly 
                                      Authorized Officer of the 
                                      Registrant) (Principal Financial
                                      Officer and Principal Accounting Officer)


                                       18