<PAGE>
 
                              FORM 10-Q          

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

(Mark One)

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

For the quarterly period ended April 2, 1999

                                      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 1-13486


                         John Q. Hammons Hotels, Inc.
            (Exact name of registrant as specified in its charter)


                  Delaware                                       43-1695093
(State or other jurisdiction of incorporation                   (IRS Employer
               or organization)                              Identification No.)


                          300 John Q. Hammons Parkway
                                   Suite 900
                            Springfield, MO  65806
                   (Address of principal executive offices)
                                  (Zip Code)

                                (417) 864-4300
             (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes    X     No _______
    -------            

Number of shares of Registrant's Class A Common Stock outstanding as of May 10,
1999:  5,798,100
<PAGE>
 
PART I - FINANCIAL INFORMATION
         Item 1. Financial Statements

                         JOHN Q. HAMMONS HOTELS, INC.
                                 AND COMPANIES
                          CONSOLIDATED BALANCE SHEETS
                                (000's omitted)

                                    ASSETS

<TABLE>
<CAPTION>

                                                                            April 2, 1999         January 1, 1999
                                                                            -------------         ---------------
                                                                             (Unaudited)             (Audited)
<S>                                                                         <C>                   <C>
CURRENT ASSETS
CASH AND EQUIVALENTS                                                          $  30,853             $  46,233
MARKETABLE SECURITIES                                                             8,119                 6,533
RECEIVABLES
     Trade, less allowance for doubtful accounts of $206                          8,923                 8,852
     Construction reimbursements, shareholder and other                           5,277                 5,269
     Management fees                                                                 71                    62

INVENTORIES                                                                       1,179                 1,205
PREPAID EXPENSES AND OTHER                                                        1,012                 1,089
                                                                              ---------             ---------
     Total Current Assets                                                        55,434                69,243

PROPERTY AND EQUIPMENT, at cost
     Land and improvements                                                       47,987                47,982
     Buildings and improvements                                                 605,901               605,586
     Furniture, fixture and equipment                                           240,855               239,648
     Construction in progress                                                    86,800                63,078
                                                                              ---------             ---------
                                                                                981,543               956,294
     Less-accumulated depreciation and amortization                            (205,611)             (194,860)
                                                                              ---------             ---------
                                                                                775,932               761,434

DEFERRED FINANCING COSTS, FRANCHISE FEES AND OTHER, net                          45,093                45,809
                                                                              ---------             ---------
TOTAL ASSETS                                                                  $ 876,459             $ 876,486
                                                                              =========             =========
</TABLE>

                See Notes to Consolidated Financial Statements

<PAGE>
 
                          JOHN Q. HAMMONS HOTELS, INC.
                                 AND COMPANIES
                          CONSOLIDATED BALANCE SHEETS
                       (000's omitted, except share data)
                             LIABILITIES AND EQUITY

<TABLE>
<CAPTION>
                                                                            April 2, 1999     January 1, 1999
                                                                            -------------     ---------------
                                                                             (Unaudited)          (Audited)
<S>                                                                         <C>               <C>
CURRENT LIABILITIES
Current portion of long-term debt                                              $ 30,570           $ 42,256
Accounts payable                                                                  4,169             13,141
Accrued expenses
          Payroll and related benefits                                            5,615              6,843
          Sales and property taxes                                               10,792              9,558
          Insurance                                                               9,629             10,061
          Interest                                                                3,684             12,540
          Utilities, franchise fees and other                                     6,867              5,568
Accrued dividends                                                                     -              2,936
                                                                               --------           --------
               Total current liabilities                                         71,326            102,903

Long-term debt                                                                  755,741            717,460

Other obligations and deferred revenue                                            7,934             10,884
                                                                               --------           --------
               Total liabilities                                                835,001            831,247
                                                                               --------           --------

COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST OF HOLDERS OF LIMITED
     PARTNER UNITS                                                               25,091             27,392

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000 shares
       authorized, none outstanding                                                   -                  -
Class A common stock, $.01 par value, 40,000,000 shares
      authorized in 1999 and 1998, 6,042,000 shares issued in 1999 and 1998,
      and 5,928,100 and 6,042,000 outstanding in 1999 and 1998, respectively         60                 60
Class B common stock, $.01 par value, 1,000,000 shares
     authorized, 294,100 shares issued and outstanding in 1999 and 1998               3                  3
Paid-in capital                                                                  96,373             96,373
Retained deficit, net                                                           (79,527)           (78,589)
Treasury stock, at cost; 113,900 shares in 1999 only                               (542)                 -
                                                                               --------           --------
    TOTAL STOCKHOLDERS' EQUITY                                                   16,367             17,847
                                                                               --------           --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $876,459           $876,486
                                                                               ========           ========
</TABLE>

                See Notes to Consolidated Financial Statements
<PAGE>
 
                         JOHN Q. HAMMONS HOTELS, INC.
                                 AND COMPANIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                      (000's omitted, except share data)

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                          ----------------------------------
                                                                          April 2, 1999        April 3, 1998
                                                                          -------------        -------------
                                                                           (Unaudited)          (Unaudited)
<S>                                                                        <C>                  <C>
REVENUES:
     Rooms                                                                 $   54,255            $   51,278
     Food and beverage                                                         23,305                21,938
     Meeting room rental and other                                              6,035                 5,736
                                                                           ----------            ----------
               Total revenues                                                  83,595                78,952
OPERATING EXPENSES:
     Direct operating costs and expenses
               Rooms                                                           13,757                13,195
               Food and beverage                                               16,314                15,451
               Other                                                              864                   876
     General, administrative and sales expenses                                24,738                23,984
     Repairs and maintenance                                                    3,533                 3,237
     Depreciation and amortization                                             10,695                11,077
                                                                           ----------            ----------
               Total operating expenses                                        69,901                67,820
                                                                           ----------            ----------
INCOME FROM OPERATIONS                                                         13,694                11,132

OTHER INCOME (EXPENSE)
     Gain on property disposition                                                  --                   238
     Interest income                                                              842                   888
     Interest expense and amortization of deferred financing fees             (15,801)              (14,457)
                                                                           ----------            ----------
LOSS BEFORE MINORITY INTEREST, PROVISION
  FOR INCOME TAXES, EXTRAORDINARY ITEM AND
  CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE                                                                    (1,265)               (2,199)
     Minority interest in earnings losses of partnership                          907                 1,576
                                                                           ----------            ----------
LOSS BEFORE PROVISION FOR INCOME
  TAXES, EXTRAORDINARY ITEM AND CUMULATIVE
  EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                                       (358)                 (623)
     Provision for income taxes                                                   (30)                  (30)
                                                                           ----------            ----------
LOSS BEFORE EXTRAORDINARY ITEM AND
  CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE                                                                      (388)                 (653)
Extraordinary item; Cost of extinguishment of debt                                (35)                 (316)
                                                                           ----------            ----------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
  IN ACCOUNTING PRINCIPLE                                                        (423)                 (969)
Cumulative effect of change in accounting principle, net                         (515)                   --
                                                                           ----------            ----------
NET LOSS                                                                   $     (938)           $     (969)
                                                                           ==========            ==========

BASIC AND DILUTED LOSS PER SHARE:
  Loss before extraordinary item and cumulative effect of change in
    accounting principle                                                        (0.06)                (0.10)
  Extraordinary item                                                            (0.01)                (0.05)
  Cumulative effect of change in accounting principle                           (0.08)                   --
                                                                           ----------            ----------
    Per share net loss allocable to Company                                $    (0.15)           $    (0.15)
                                                                           ==========            ==========
Weighted average shares outstanding                                         6,288,747             6,336,100
                                                                           ==========            ==========
</TABLE>
                                                                                

                See Notes to Consolidated Financial Statements

<PAGE>
 
                         JOHN Q. HAMMONS HOTELS, INC.
                                 AND COMPANIES
            CONSOLIDATED STATEMENTS OF CHANGES IN MINORITY INTEREST
                           AND STOCKHOLDERS' EQUITY
                                (000's omitted)


<TABLE> 
<CAPTION> 
                                                                      STOCKHOLDERS' EQUITY
                                       ----------------------------------------------------------------------------------

                                                    Class A     Class B                 Company
                                       Minority      Common      Common     Paid in     Retained     Treasury
                                       Interest      Stock       Stock      Capital     Deficit        Stock       Total
                                       --------     -------     -------     -------     --------     --------     -------
<S>                                    <C>          <C>         <C>         <C>         <C>          <C>          <C>
BALANCE, January 1, 1999               $27,392      $    60     $     3     $96,373     $(78,589)    $     --     $17,847
(audited)
Net loss allocable to the Company            -           --          --          --         (938)          --        (938)

Minority interest in losses of
  partnership after extraordinary
  item and cumulative effect of
  change in accounting principle of
  $1,394                                (2,301)          --          --          --           --           --          --
Treasury stock purchased               $    --      $    --     $    --     $    --     $     --     $   (542)    $  (542)
                                       -------      -------     -------     -------     --------     --------     -------
BALANCE, April 2, 1999                 $25,091      $    60     $     3     $96,373     $(79,527)    $   (542)    $16,367
(unaudited)                            =======      =======     =======     =======     ========     ========     =======
</TABLE>
                                                                                
                See Notes to Consolidated Financial Statements

<PAGE>
 
                         JOHN Q. HAMMONS HOTELS, INC.
                                 AND COMPANIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (000's omitted)

<TABLE>
<CAPTION>
                                                                                         Three months ended
                                                                                         ------------------

                                                                                   April 2, 1999     April 3, 1998
                                                                                   -------------     -------------
                                                                                    (unaudited)       (unaudited)
<S>                                                                                <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                                               $  (938)          $  (969)
Adjustment to reconcile net loss to cash provided by
    operating activities -
    Minority interest in losses of partnership                                            (907)           (1,576)
    Depreciation, amortization and loan cost amortization                               11,287            11,604
    Extraordinary item                                                                      35               316
    Cumulative effect of change in accounting principle                                    515                 -
    Gain on sale of property and equipment                                                   -              (238)
Changes in certain assets and liabilities
    Receivables                                                                            (88)           (1,701)
    Inventories                                                                             26                38
    Prepaid expenses and other                                                              77               368
    Accounts payable                                                                    (8,972)           (3,367)
    Accrued expenses                                                                    (7,983)          (10,128)
    Other obligations and deferred revenue                                              (2,950)              876
                                                                                      --------          --------
          Net cash used in operating activities                                         (9,898)           (4,777)

CASH FLOWS FROM INVESTING ACTIVITIES
    Additions to property and equipment                                                (25,139)          (27,587)
    Proceeds from sales of property and equipment                                            -            39,387
    Franchise fees and other                                                            (1,874)          (31,797)
    (Purchase) sale of marketable securities, net                                       (1,586)            2,593
                                                                                      --------          --------
          Net cash used in investing activities                                        (28,599)          (17,404)
                                                                                      --------          --------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from borrowings                                                            40,146            96,961
    Repayments of debt                                                                 (13,551)          (83,571)
    Distributions                                                                       (2,936)                -
    Purchase of treasury stock                                                            (542)                -
                                                                                      --------          --------
          Net cash provided by financing activities                                     23,117            13,390
                                                                                      --------          --------
Decrease in cash and equivalents                                                       (15,380)           (8,791)

CASH AND EQUIVALENTS, beginning of period                                               46,233            41,961
                                                                                      --------          --------
CASH AND EQUIVALENTS, end of period                                                   $ 30,853          $ 33,170
                                                                                      ========          ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID FOR INTEREST, net of amounts capitalized                                    $ 24,056          $ 22,821
                                                                                      ========          ========
</TABLE>

                 See Notes to Consolidated Financial Statements
<PAGE>
 
JOHN Q. HAMMONS HOTELS, INC. AND COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.   ENTITY MATTERS

The accompanying consolidated financial statements include the accounts of John
Q. Hammons Hotels, Inc. and John Q. Hammons Hotels, L.P. and subsidiaries.
(Collectively the Company or, as the context may require, John Q. Hammons
Hotels, Inc. only).

The Company was formed in September 1994 and had no operations or assets prior
to its initial public offering of Class A common stock in November 1994.
Immediately prior to the initial public offering, Mr. John Q. Hammons (JQH)
contributed approximately $5 million in cash to the Company in exchange for
294,100 shares of Class B common stock (which represents approximately 72% of
the voting control of the Company). The Company contributed the approximate $96
million of net proceeds from the Class A and Class B common stock offerings to
John Q. Hammons Hotels, L.P. (the "Partnership") in exchange for a 28.31%
general partnership interest.

All significant balances and transactions between the entities and properties
have been eliminated.

2.   GENERAL

The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for reporting on Form 10-Q. Accordingly, certain information and footnotes
required by generally accepted accounting principles (GAAP) for complete
financial statements have been omitted. These interim statements should be read
in conjunction with the financial statements and notes thereto included in the
Company's Form 10-K for the fiscal year ended January 1, 1999 which included
financial statements for the fiscal years ended January 1, 1999, January 2,
1998, and January 3, 1997.

The information contained herein reflects all normal and recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
the results of operations and financial position for the interim periods.

The Company considers all operating cash accounts and money market investments
with an original maturity of three months or less to be cash equivalents.
Marketable securities consist of available-for-sale commercial paper and
governmental agency obligations which mature or will be available for use in
operations in 1999. These securities are valued at current market value, which
approximates cost.
<PAGE>
 
The provision for income taxes was determined using an effective income tax rate
of approximately 5%, to provide for estimated state, local and franchise taxes.

3.   LOSS PER SHARE

In 1997, the Company adopted Statement of Financial Accounting Standards No. 128
"Earnings per Share" (SFAS 128). In accordance with SFAS 128, basic earnings per
share are computed by dividing net income by the weighted average number of
common shares outstanding during the year. Diluted earnings per share are
computed similar to basic except the denominator is increased to include the
number of additional common shares that would have been outstanding if dilutive
potential common shares had been issued.

In June, 1998, options to purchase 829,100 shares of common stock were issued at
a price of $7 3/8 per share and were not included in the computation of diluted
earnings (loss) per share since the options' exercise price was greater than the
average market price of the common shares and the options would be anti-
dilutive. The issuance of the stock options dated June 5, 1998, terminated and
canceled all options originally granted in 1994 regardless of whether such
options were vested.

Since there are no dilutive securities, basic and diluted loss per share are
identical, thus a reconciliation of the numerator and denominator is not
necessary.

During the 1999 period, the Company purchased 113,900 shares for approximately 
$0.5 million. The Board of Directors has authorized total purchases of treasury
shares in 1999 of $3.0 million.

Basic and diluted loss per share before extraordinary item and cumulative effect
of change in accounting principle was $0.06 for the three months ended April 2,
1999 and $0.10 for the three months ended April 3, 1998. The basic and diluted
loss per share impact of the extraordinary item and the cumulative effect of the
change in accounting principle was $0.09 for the 1999 period and $0.05 in the
1998 period. Basic and diluted loss per share was $0.15 for both the 1999 and
the 1998 periods.

4.   NEW ACCOUNTING PRONOUNCEMENTS

In April 1998, the American Institute of Certified Public Accountants released
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" (SOP
98-5), which requires costs of start-up activities, including preopening
expenses, to be expensed as incurred. The Company's past practice was to defer
these expenses until a hotel commenced operations, at which time the costs,
other than advertising costs that are expensed upon opening, were amortized over
a one-year period. The Company adopted the provisions of this statement in the
first quarter of fiscal 1999 and, as a result, cumulative unamortized preopening
costs of $0.5 million were charged to expense net of $1.3 million of minority
interest.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999. Upon
<PAGE>
 
adoption of this statement, the Company anticipates no impact on its reported
consolidated financial position, results of operations, cash flows or related
disclosures.

5.   PROPERTY DISPOSITIONS

Effective February 6, 1998, the Company completed the sale of six hotels to an
unrelated party for $39.4 million, resulting in a gain of approximately $0.2
million. Certain of these hotels served as collateral under the 1994 and 1995
first mortgage notes. Under the terms of these indentures the Company provided
replacement collateral in accordance with the indenture provisions.

On December 31, 1998, the Company completed the sale of an additional hotel
property to an unrelated party for $16.1 million, resulting in a gain of
approximately $8.0 million. In addition to cash received upon closing, the sales
price included a note receivable for $11.9 million, bearing 8.0% interest, due
in 1999. The note receivable is secured by the hotel and a personal guarantee by
a shareholder of the buyer. This hotel served as collateral under the 1994 first
mortgage notes. Under the terms of this indenture, the Company must provide
replacement collateral of equivalent value or apply the net proceeds from the
sale to amounts outstanding. The Company intends to provide replacement
collateral in accordance with the indenture provisions.

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

General. For purposes of this discussion, the Company classifies new hotels (New
Hotels) as those hotels opened during the current year and the prior year, and
defines all other hotels as mature hotels (Mature Hotels).

The Company announced on September 11, 1998, that is was ceasing new development
activity, except for the Hotels under construction. At the end of the 1999
Quarter, the Company had six hotels under construction: Hampton Inn and Suites
Hotel adjacent to the Mesquite Championship Rodeo Arena, Mesquite, Texas;
Radisson Plaza Hotel, Coral Springs, Florida; Marriott Renaissance Hotel at the
Charlotte, North Carolina airport; Embassy Suites Hotel, Grapevine, Texas,
adjacent to the Bass Pro Shop's Outdoor World, near the Dallas-Fort Worth
airport; Renaissance Hotel in Oklahoma City, Oklahoma and Embassy Suites Hotel
in Charleston, South Carolina. On April 15, 1999, the Company opened the
Mesquite Hampton Inn and Suites Hotel. The Company opened the Coral Springs
Radisson Plaza Hotel on May 1, 1999.

The Company's development activity limits its ability to grow per share income.
Fixed charges for New Hotels (such as depreciation and amortization expense and
interest expense) exceed New Hotel operating cash flow in the first one to three
years of operations. As New Hotels
<PAGE>
 
mature, the Company expects that the operating expenses for these hotels will
decrease as a percentage of revenues, although there can be no assurance that
this will occur.

Results of Operations. The following discussion and analysis addresses results
of operations for the three month periods ended April 2, 1999 (the "1999
Quarter") and April 3, 1998 (the "1998 Quarter").

For the 1999 Quarter, the Company's total earnings before interest expense,
taxes, depreciation and amortization (EBITDA) were $24.4 million, a 9.9%
increase over the 1998 Quarter EBITDA of $22.2 million. The Mature Hotels'
EBITDA was $20.1 million in the 1999 Quarter, up 9.8% from $18.3 million in the
1998 Quarter. As a percentage of total revenues, EBITDA related to the Mature
Hotels decreased to 27.3% in the 1999 Quarter from 29.1% in the 1998 Quarter.
The New Hotels' EBITDA for the 1999 Quarter was $2.3 million compared to $2.5
million in the 1998 Quarter. In the 1999 Quarter, the Company had four New
Hotels, compared to seven New Hotels in the 1998 Quarter. The 1999 Quarter
results also include $0.8 million in preopening expenses related to the six
hotels under construction. In prior years that amount would have been amortized
over twelve months, rather than being expensed as incurred.

Total revenues for the 1999 Quarter were $83.6 million, an increase of $4.6
million, or 5.9%, compared to the 1998 Quarter, primarily as a result of the
continued growth of the New Hotels, including the hotels opened during the last
half of fiscal 1998. The Company's Mature Hotels generated total revenues of
$73.6 million in the 1999 Quarter, an increase of $8.2 million, or 12.2%,
compared to the 1998 Quarter. The Company's four New Hotels generated total
revenues of $9.6 million during the 1999 Quarter compared to $13.2 million from
the seven New Hotels in the 1998 Quarter.

Rooms revenues increased $3.0 million, or 5.8%, from the 1998 Quarter, and
remained consistent as a percentage of total revenues at 64.9%. The dollar
increase was primarily due to increased rooms revenues from the Mature Hotels,
and an increase in the Company's average room rate to $95.02, a 5.3% increase
compared to the 1998 Quarter average room rate of $90.20. In comparison, the
average room rate for the hotel industry was $81.88 in the 1999 Quarter, up 3.7%
from the 1998 Quarter. The increased average room rate was partially offset by a
0.4 percentage point decrease in Company's occupancy for the 1999 Quarter to
61.0%. Occupancy for the hotel industry was 59.4%, down 0.7 percentage points
from the 1998 Quarter. The Company's Revenue Per Available Room (RevPAR) was
$57.94 in the 1999 Quarter, up 4.6% from $55.37 in the 1998 Quarter. RevPAR for
the hotel industry was $48.64, up 3.4% from the 1998 Quarter.

Food and beverage revenues increased $1.4 million, or 6.2%, compared to the 1998
Quarter, and increased slightly as a percentage of total revenues, to 27.9%,
from 27.8%.

Meeting room rental and other revenues increased $0.3 million, or 5.2%, from the
1998 Quarter, but decreased slightly as a percentage of revenues, to 7.2% from
7.3%.
<PAGE>
 
Rooms operating expenses increased $0.6 million, or 4.3%, compared to the 1998
Quarter, but decreased as a percentage of rooms revenues, to 25.4% compared to
25.7%. The dollar increase relates primarily to expenses for New Hotels.

Food and beverage operating expenses increased $0.9 million, or 5.6%, compared
to the 1998 Quarter, but decreased as a percentage of food and beverage
revenues, to 70.0% from 70.4%. The dollar increase was attributable to expenses
associated with food and beverage services at the New Hotels.

Other operating expenses remained stable compared to the 1998 Quarter, and
decreased as a percentage of meeting room rental and other revenues, to 14.3%
from 15.3% in the same period of the prior year.

General, administrative and sales expenses increased $0.8 million, or 3.1%, over
the 1998 Quarter, but decreased as a percentage of revenues to 29.6% from 30.4%.
The dollar increase was primarily attributable to expenses associated with the
hotels under construction, and included $0.6 million of preopening expenses
related to those hotels.

Repairs and maintenance expenses increased $0.3 million, or 9.1%, compared to
the 1998 Quarter and increased slightly as a percentage of revenues, to 4.2%,
from 4.1% in the 1998 Quarter.

Depreciation and amortization expenses decreased $0.4 million, or 3.5%, compared
to the 1998 Quarter, and decreased as a percentage of revenues to 12.8% from
14.0%. The depreciation and amortization decrease is primarily attributable to
the change in accounting principle for preopening costs. In the 1998 Quarter,
the Company amortized preopening costs which are now required to be expensed as
incurred rather than amortized over twelve months.

Income from operations increased $2.6 million, or 23.0%, compared to the 1998
Quarter, and increased significantly as a percentage of revenues, to 16.4% from
14.1% in the 1998 Quarter. The Company has stabilized its expenditure levels
while achieving revenue increases.

Interest income remained stable from the 1998 Quarter, as the Company reinvested
cash from the sale of hotels, as described above.

Interest expense and amortization of deferred financing fees increased $1.3
million, or 9.3%, from the 1998 Quarter, and increased as a percentage of total
revenues to 18.9% from 18.3%. These increased costs related to interest expense
for the New Hotels, and can be expected to continue to rise as the Company
completes its hotels under construction.

Loss before minority interest, provision for income taxes, extraordinary item
and cumulative effect of change in accounting principle was $1.3 million in the
1999 Quarter, compared to $2.2 million in the 1998 Quarter. The decrease in the
loss was primarily attributable to the Company's ability to hold costs stable
while increasing revenues.
<PAGE>
 
Basic and diluted loss per share in the 1999 Quarter was $0.15, including an
extraordinary charge of $0.01, and the $0.08 per share effect of the cumulative
effect of change in accounting principle described above in the Notes to
Consolidated Financial Statements, compared to $0.15 in the 1998 Quarter,
including an extraordinary charge of $0.05 per share.

Liquidity and Capital Resources. In general, the Company has financed its
operations through internal cash flow, loans from financial institutions, the
issuance of public debt and equity and the issuance of industrial revenue bonds.
The Company's principal uses of cash are to pay operating expenses, to service
debt, to fund capital expenditures and new hotel development and to make
permitted partnership distributions to fund some of the taxes allocable to the
partners.

At April 2, 1999, the Company had $30.9 million of cash and equivalents and $8.1
million of marketable securities, compared to $46.2 million and $6.5 million,
respectively, at the end of 1998. As of April 2, 1999, the Company also had $6.7
million of restricted cash and an $11.9 million note receivable which is
available for the replacement collateral for the hotel sold December 31, 1998.
The remaining amounts of cash and equivalents are available for completion of
hotels under construction and other working capital requirements of the Company.

Net cash used in operating activities was $9.9 million for the 1999 Quarter
compared to $4.8 million for the 1998 Quarter. The Company used more cash in the
1999 Quarter as it reduced its level of current liabilities.

At April 2, 1999, total debt was $786.3 million compared with $759.7 million at
the end of 1998. The increase is attributable to the six hotels under
construction. The current portion of long-term debt was $30.6 million, compared
with $42.3 million at the end of 1998 due to the refinancing of the Topeka
Capitol Plaza Hotel. The Company incurred net capital expenditures of
approximately $25.1 million during the 1999 Quarter and $27.6 million during the
1998 Quarter. Of the $25.1 million incurred during the 1999 Quarter,
approximately $1.6 million was for capital improvements on existing hotel
properties and approximately $23.5 million was for development of new hotels.
During the remainder of 1999, the Company expects capital expenditures to total
approximately $122.9 million, including approximately $13.9 million for capital
improvements on existing hotels and approximately $109.0 million for continued
new hotel development.

At the end of the 1999 Quarter, the Company had six hotels under construction.
The Company estimates the remaining building costs of these hotels will require
additional capital expenditures of approximately $109.0 million during 1999 and
2000. Construction in progress at April 2, 1999 included $86.8 million expended
for these projects and other hotel refurbishment. The Company has received loans
and loan commitments for projects under construction in the amount of $143.0
million, with $97.0 million available, and expects the remaining 1999 capital
requirements to be funded by cash, operating income and refinancing of certain
existing hotels. Based upon current plans relating to the timing of new hotel
development and loan draw schedules, the Company anticipates that its capital
resources will be adequate to satisfy its 1999 capital requirements for the
currently planned projects and normal recurring capital improvement.
<PAGE>
 
NOTE: In addition to historical information, this document contains certain
forward-looking statements within the meaning of the Private Securities
Litigation Act of 1995. These statements typically, but not exclusively, are
identified by the inclusion of phrases such as "the Company believes," "the
Company plans," "the Company intends," and other phrases of similar meaning.
These forward-looking statements involve risks and uncertainties and are based
on current expectations. Consequently, actual results could differ materially
from the expectations expressed in the forward-looking statements. Among the
various factors that could cause actual results to differ include a downturn in
the economy (either regionally or nationwide) affecting overall hotel occupancy
rates, revenues at New Hotels not reaching expected levels as quickly as planned
as the result of competitive factors or the Company's inability to obtain
permanent financing for New Hotels on terms similar to those available in the
past.

Year 2000

State Of Readiness

The Company is actively addressing the impact of the Year 2000 as it relates to
the processes of its information technology environment. Potential problems with
internal, external and embedded systems are being addressed. Capital budget
funds have been set aside for software and hardware upgrades and/or replacements
to address Year 2000 issues. Virtually all such upgrades were anticipated by the
Company and would have been implemented within the next few years even absent a
Year 2000 issue.

The Company is requiring vendors and suppliers to certify Year 2000 compliance
of supplied information technology systems and devices. Compliance is defined as
no failures or interruptions occurring due to the processing of date information
or data between the years through 1999 and years beginning with the year 2000.

The Company has reviewed the effects of the upcoming Year 2000 on its computer
systems and operations, as well as on those of the hotels it operates. The
Company does not anticipate any material impact on its corporate operation,
given that the current systems used are believed to be Year 2000 compliant.

Corporate Systems

Computer hardware and software systems were tested for Y2K compliance during the
first quarter of 1998. Ninety percent of those systems not compliant were
replaced other than the timekeeping software, which will be replaced during the
third quarter of 1999.

Hotel Systems

Testing of Company owned computer hardware and software was started during the
first quarter of 1998. All software systems and ninety percent of all hardware
systems have been tested and those systems deemed not Y2K compliant have been
identified and have either been replaced at this time or are scheduled for
replacement during the second quarter of 1999. Most
<PAGE>
 
non-compliant software is being replaced with Y2K compliant upgrades at no
expense to the Company.

Promus Hotels, Inc. uses the HMS Property Management System. This system is not
Y2K compliant and is scheduled for replacement at all non-compliant hotels
during the second quarter of 1999. Radisson Hotels and some Company hotels use
the Fidelio Property Management System. This software is Y2K compliant, and the
operating system on the file servers will be compliant with the installation of
software patches at no expense to the Company. These systems are scheduled for
upgrade in the year 2000 independent of the Y2K situation.

Embedded Systems

Non-Critical-Fax machines, copiers and similar equipment are generally leased.
The majority of these devices have been tested and deemed Y2K compliant. Those
failing the Y2K testing will be replaced by the lessor during 1999 under current
leasing agreements as required in order to be Y2K compliant.

Critical-Systems in this category include elevators, fire control, security,
energy management, credit card processing and telecommunications. The Company
has completed 95% of the testing and evaluation of these systems. Systems
requiring modifications to be Y2K compliant will be upgraded during the second
quarter of 1999.

Vendor Compliance Certifications

Requests for Y2K compliance have been sent to those vendors and utility
suppliers which have a strategic relationship with the Company specifically and
with the hotels in general. Those compliance letters will be on file in the
Company's offices.

Compliance Testing

Information Technology

The Company has received Y2K compliance certifications from the majority of its
property management system vendors. All certifications are expected to be on
file by the end of the second quarter 1999. The Company has received Y2K
compliance testing software from its property management system vendors and
completed those tests during the fourth quarter of 1998.

The Company will monitor all systems currently in place as well as Y2K upgrades
installed during the first half of 1999 to insure Y2K integrity throughout the
year 2000.

Embedded Systems

The Company has received Y2K compliance certifications from the majority of its
vendors. All certifications are expected to be on file by the end of the second
quarter, 1999. The
<PAGE>
 
Company or its authorized vendors began conducting Y2K compliance field testing
during the fourth quarter of 1998 and will continue testing throughout 1999.

The Company will monitor all systems currently in place and those Y2K upgrades
that will be installed during the first half of 1999, to insure Y2K integrity
throughout the year 2000.

Cost of Implementation

Total expenses directly attributed to Y2K compliance for the corporate office
were less than $75,000 through the end of the first quarter of 1999. The Company
also has allocated approximately $50,000 to date for upgrades necessary to meet
Y2K compliance the Promus Hotels. Remaining expenditures for hardware and
software were for scheduled upgrades not attributable to Y2K compliance.

Future Costs

Hotels operating under the Bass Hotels & Resorts flag (eighteen hotels) will
incur minimal costs to replace some computer systems. Average cost per hotel is
estimated to be less than $10,000. Hardware requirements will be offset with the
transfer of existing Y2K compliant hardware from other hotels that are receiving
technology-driven upgrades.

Hotels operating under the Promus Hotels flag (sixteen hotels) will receive new
hardware and software as part of a technology and Y2K compliant upgrade. The
estimated cost for this upgrade is approximately $625,000, including
approximately $50,000 spent to date as described above.

The balance of the Company's hotels have budgeted approximately $400,000 in
capital funds for technology replacements and Y2K compliance issues.

Contingency Plans

Information Technology

Hardware-A number of non-critical (time/date critical operations are not
dependent on these systems) hardware systems have failed Y2K compliance testing.
These systems are scheduled for replacement during the first half of 1999.
Failure to replace these systems will not materially impact the operation of the
Company or its hotels.

Software-Manual operation of guest services, reservations, credit card
processing and time keeping systems can be accomplished with existing personnel
and equipment. Since all known, non-compliant software systems will be replaced
during the first half of 1999, no material impact to the operation of the
Company is expected.

<PAGE>
 
Embedded Systems

Contingency plans will be finalized during the second quarter of 1999, when
evaluation of these systems is complete. All known embedded systems can be
manually over-ridden if necessary, in the event of a failure due to a Y2K issue.

Vendors and Suppliers

The Company will use alternative vendors and suppliers in the event any one
strategic vendor or supplier is incapable of operating as a result of a Y2K
compliance issue. The Company maintains a list of alternative vendors and
suppliers. These vendors and suppliers will be certified as Y2K compliant in the
event their services are required.

Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

The Company is exposed to changes in interest rates primarily as a result of its
investing and financing activities.  Investing activity includes operating cash
accounts and investments, with an original maturity of three months or less, and
certain balances of various money market and common bank accounts.  The
financing activities of the Company are comprised of long-term fixed and
variable rate debt obligations utilized to fund business operations and maintain
liquidity.   The following table presents the principal cash repayments and
related weighted average interest rates by maturity date for the Company's long-
term fixed and variable rate debt obligations as of April 2, 1999:

<TABLE>
<CAPTION>
                                                             Expected Maturity Date
                                                                  (in millions)

                                                                                                                    Fair
                                                                                                 There-             Value
                                                    1999     2000     2001     2002     2003     After     Total     (d)
<S>                                          <C>    <C>      <C>      <C>      <C>      <C>      <C>       <C>      <C>
Long-Term Debt                               (a)

  $300 Million 1st Mortgage Notes                   $   -    $   -    $   -    $   -    $   -    $ 300     $300     $ 313
    Average interest rate                    (b)     8.9%     8.9%     8.9%     8.9%     8.9%      8.9%     8.9%

  $90 Million 1st Mortgage Notes                    $   -    $   -    $   -    $   -    $   -    $  90     $ 90     $  94
    Average interest rate                    (b)     9.8%     9.8%     9.8%     9.8%     9.8%      9.8%     9.8%

  Other fixed-rate debt obligations                 $  29    $   6    $  13    $  30    $  23    $ 230     $331     $ 331
    Average interest rate                    (b)     8.7%     8.4%     8.2%     8.8%     8.6%      8.6%     8.6%

  Other variable-rate debt obligations              $   1    $   1    $  15    $  11    $   9    $  28     $ 65     $  65
    Average interest rate                    (c)     8.0%     8.0%     8.0%     8.0%     8.0%      8.0%     8.0%
</TABLE>

     (a)  Includes amounts reflected as long-term debt due within one year

     (b)  For the long-term fixed rate debt obligations, the weighted average
          interest rate is based on the stated rate of the debt that is maturing
          in the year reported. The weighted average interest rate excludes the
          effect of the amortization of deferred financing costs.

     (c)  For the long-term variable rate debt obligations, the weighted average
          interest rate assumes no changes in interest rates and is based on the
          variable rate of the debt, as of April 2, 1999, that is maturing in
          the year reported. The weighted average interest rate excludes the
          effect of the amortization of deferred financing costs.

<PAGE>
 
(d)  The fair values of long-term debt obligations approximate their respective
     historical carrying amounts except with respect to the $300 million 1st
     Mortgage Notes and the $90 million 1st Mortgage Notes. The fair value of
     the first mortgage note issues is estimated by obtaining quotes from
     brokers.

PART II.  OTHER INFORMATION AND SIGNATURES

Item 1.  Legal Proceedings

   Not Applicable

Item 2.  Changes in Securities and Use of Proceeds

   Not Applicable

Item 3.  Defaults Upon Senior Securities

   Not Applicable

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

   Not Applicable

Item 5.  Other Information

   Not Applicable

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits

   See Exhibit Index incorporated by reference.

(b) Reports on Form 8-K

   No reports on Form 8-K have been filed during the quarter for which this
   report is filed.

<PAGE>
 
                                  SIGNATURES

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


                                       JOHN Q. HAMMONS HOTELS, INC.


                                       By: /s/ John Q. Hammons
                                          -----------------------------------
                                           John Q. Hammons
                                           Chairman, Founder, and
                                           Chief Executive Officer


                                       By: /s/ Kenneth J. Weber
                                          -----------------------------------
                                           Kenneth J. Weber
                                           Chief Financial Officer and
                                           Executive Vice President


Dated: May 17, 1999

<PAGE>
 
EXHIBIT INDEX

Exhibit No.      Exhibit

27               Financial Data Schedule