<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 July 2, 2004

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes               No     X
    -------           -------

Number of shares of Registrant's Class A Common Stock outstanding as of August
10, 2004: 4,886,175
<PAGE>

PART I - FINANCIAL INFORMATION
         Item 1.  Financial Statements

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

                                     ASSETS


<TABLE>
<CAPTION>
                                                                                 JULY 2, 2004   JANUARY 2, 2004
                                                                                 ------------   ---------------
CURRENT ASSETS:                                                                   (UNAUDITED)
<S>                                                                              <C>            <C>
    Cash and equivalents                                                         $    42,954      $    23,790

    Restricted cash                                                                    1,125            1,268

    Marketable securities                                                             14,989           15,711

    Receivables:
      Trade, less allowance for doubtful accounts of $231                              9,744            7,214
      Other                                                                              187              251
      Management fees - related party                                                    347              223

    Inventories                                                                        1,116            1,067

    Prepaid expenses and other                                                         2,143            4,498
                                                                                 -----------      -----------

      Total current assets                                                            72,605           54,022
                                                                                 -----------      -----------

PROPERTY AND EQUIPMENT, at cost:
    Land and improvements                                                             62,852           62,779
    Buildings and improvements                                                       738,376          742,807
    Furniture, fixture and equipment                                                 337,333          338,833
    Construction in progress                                                           4,659               75
                                                                                 -----------      -----------
                                                                                   1,143,220        1,144,494

    Less-accumulated depreciation and amortization                                  (437,282)        (418,509)
                                                                                 -----------      -----------

                                                                                     705,938          725,985

DEFERRED FINANCING COSTS, FRANCHISE FEES AND OTHER, net, including $22,738 and
    $20,453 of restricted cash as of July 2, 2004 and January 2, 2004,
    respectively                                                                      43,137           42,176
                                                                                 -----------      -----------
TOTAL ASSETS                                                                     $   821,680      $   822,183
                                                                                 ===========      ===========
</TABLE>

            See Notes to Condensed Consolidated Financial Statements


                                       2
<PAGE>
                          JOHN Q. HAMMONS HOTELS, INC.
                                  AND COMPANIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       (000's omitted, except share data)

                        LIABILITIES AND EQUITY (DEFICIT)


<TABLE>
<CAPTION>
                                                                                  JULY 2, 2004    JANUARY 2, 2004
                                                                                  ------------    ---------------
LIABILITIES:                                                                      (UNAUDITED)
<S>                                                                                <C>            <C>
    Current portion of long-term debt                                              $   7,492        $   7,423

    Accounts payable                                                                   3,229            5,028

    Accrued expenses:
      Payroll and related benefits                                                     7,243            7,776
      Sales and property taxes                                                        14,250           12,077
      Insurance                                                                        2,960            2,646
      Interest                                                                         6,117            6,218
      Utilities, franchise fees and other                                              8,190            7,298
                                                                                   ---------        ---------
         Total current liabilities                                                    49,481           48,466

    Long-term debt                                                                   769,614          773,649
    Other obligations                                                                  2,961            2,530
                                                                                   ---------        ---------
         Total liabilities                                                           822,056          824,645
                                                                                   ---------        ---------

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST OF HOLDERS OF LIMITED
    PARTNER UNITS                                                                         --               --
                                                                                   ---------        ---------

STOCKHOLDERS' EQUITY (DEFICIT):
    Preferred Stock, $.01 par value, 2,000,000 shares
      authorized, none outstanding                                                        --               --
    Class A Common Stock, $.01 par value, 40,000,000 shares authorized at July
      2, 2004, and January 2, 2004, 6,042,000 shares issued at July 2, 2004, and
      January 2, 2004, and 4,874,575 and 4,808,879 shares outstanding at July 2,
      2004, and January 2, 2004, respectively                                             60               60
    Class B Common Stock, $.01 par value, 1,000,000 shares authorized, 294,100
      shares issued and outstanding                                                        3                3
    Paid-in capital                                                                   96,471           96,395
    Accumulated deficit, net                                                         (91,634)         (93,361)
    Less: Treasury Stock, at cost; 1,167,425 and 1,233,121 shares at
      July 2, 2004, and January 2, 2004, respectively                                 (5,284)          (5,582)

    Accumulated other comprehensive income                                                 8               23
                                                                                   ---------        ---------

         Total stockholders' equity (deficit)                                           (376)          (2,462)
                                                                                   ---------        ---------

TOTAL LIABILITIES AND EQUITY (DEFICIT)                                             $ 821,680        $ 822,183
                                                                                   =========        =========
</TABLE>


            See Notes to Condensed Consolidated Financial Statements


                                       3
<PAGE>
                          JOHN Q. HAMMONS HOTELS, INC.
                                  AND COMPANIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                       (000's omitted, except share data)


<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED            SIX MONTHS ENDED
                                                                           ---------------------------   ---------------------------
                                                                           JULY 2, 2004   JULY 4, 2003   JULY 2, 2004   JULY 4, 2003
<S>                                                                        <C>            <C>            <C>            <C>
                                                                           ------------   ------------   ------------   ------------
REVENUES:
    Rooms                                                                  $    72,157    $    68,959    $   142,345    $   136,362
    Food and beverage                                                           29,528         27,390         59,602         56,529
    Meeting room rental, related party management fee and other                 13,465         12,315         27,579         25,903
                                                                           -----------    -----------    -----------    -----------
      Total revenues                                                           115,150        108,664        229,526        218,794

OPERATING EXPENSES:
    Direct operating costs and expenses:
      Rooms                                                                     17,673         17,046         34,957         33,326
      Food and beverage                                                         23,134         21,982         45,270         43,888
      Other                                                                        578            701          1,194          1,393

    General, administrative, sales and management service expenses              37,749         33,747         74,106         69,822

    Repairs and maintenance                                                      4,968          4,585          9,674          9,038

    Asset impairment                                                             4,619             --          4,619             --

    Depreciation and amortization                                               12,079         12,586         24,010         25,067
                                                                           -----------    -----------    -----------    -----------

      Total operating expenses                                                 100,800         90,647        193,830        182,534
                                                                           -----------    -----------    -----------    -----------

INCOME FROM OPERATIONS                                                          14,350         18,017         35,696         36,260

OTHER INCOME (EXPENSE):
    Other income                                                                    --             --             --            175
    Interest income                                                                159            156            277            335
    Interest expense and amortization of deferred financing fees               (17,050)       (17,595)       (34,135)       (35,207)
                                                                           -----------    -----------    -----------    -----------

INCOME (LOSS) BEFORE MINORITY INTEREST AND
    PROVISION FOR INCOME TAXES                                                  (2,541)           578          1,838          1,563
    Minority interest in earnings of partnership                                    --           (439)            --         (1,187)
                                                                           -----------    -----------    -----------    -----------

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES                                 (2,541)           139          1,838            376
    Provision for income taxes                                                     (81)           (60)          (111)           (90)
                                                                           -----------    -----------    -----------    -----------

NET INCOME (LOSS) ALLOCABLE TO THE COMPANY                                 $    (2,622)   $        79    $     1,727    $       286
                                                                           ===========    ===========    ===========    ===========

BASIC EARNINGS (LOSS) PER SHARE:
    Net earnings (loss) allocable to Company                               $     (0.51)   $      0.02    $      0.34    $      0.06
                                                                           ===========    ===========    ===========    ===========

BASIC WEIGHTED AVERAGE SHARES OUTSTANDING                                    5,143,119      5,089,728      5,127,195      5,086,778
                                                                           ===========    ===========    ===========    ===========

DILUTED EARNINGS (LOSS) PER SHARE:
    Net earnings (loss) allocable to Company                               $     (0.51)   $      0.01    $      0.29    $      0.05
                                                                           ===========    ===========    ===========    ===========

DILUTED  WEIGHTED AVERAGE SHARES OUTSTANDING                                 5,143,119      5,372,627      5,902,355      5,369,677
                                                                           ===========    ===========    ===========    ===========
</TABLE>


            See Notes to Condensed Consolidated Financial Statements



                                       4
<PAGE>
                          JOHN Q. HAMMONS HOTELS, INC.
                                  AND COMPANIES
        CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MINORITY INTEREST
                       AND STOCKHOLDERS' EQUITY (DEFICIT)
                                 (000's omitted)

<TABLE>
<CAPTION>
                                                                             STOCKHOLDERS' EQUITY (DEFICIT)
                                                         ---------------------------------------------------------------------------
                                                                                                               Accumulated
                                Comprehensive            Class A  Class B              Company                   Other
                                   Income      Minority  Common    Common   Paid in  Accumulated   Treasury   Comprehensive
                                   (Loss)      Interest   Stock    Stock    Capital    Deficit      Stock     Income (Loss)   Total
                                -------------  --------  -------  -------   -------  -----------   --------   -------------  -------
<S>                             <C>            <C>       <C>       <C>      <C>      <C>          <C>          <C>           <C>
BALANCE, January 2, 2004                       $    -    $  60     $   3    $96,395  $(93,361)    $ (5,582)    $      23     (2,462)
Net income allocable to
    the Company                  $    1,727         -        -         -          -     1,727            -             -      1,727
Issuance of Common Stock
    to employees and directors                      -        -         -         76         -          298             -        374
Unrealized depreciation on
    marketable securities               (15)        -        -         -          -         -            -           (15)       (15)
                                 ----------    ------    -----     -----   --------  --------     --------     ---------    -------
                                 $    1,712
                                 ==========
BALANCE, July 2, 2004                          $    -    $  60     $   3   $ 96,471  $(91,634)    $ (5,284)    $       8    $  (376)
    (unaudited)                                ======    =====     =====   ========  ========     ========     =========    =======
</TABLE>


            See Notes to Condensed Consolidated Financial Statements


                                       5
<PAGE>
                          JOHN Q. HAMMONS HOTELS, INC.
                                  AND COMPANIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (000's omitted)

<TABLE>
<CAPTION>
                                                                                          SIX MONTHS ENDED
                                                                                   -------------------------------
                                                                                   JULY 2, 2004       JULY 4, 2003
                                                                                   ------------       ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                 <C>               <C>
Net income allocable to the Company                                                 $  1,727            $    286

Adjustment to reconcile net income to cash provided by operating activities:
        Minority interest in earnings of partnership                                       -               1,187
        Depreciation, amortization and loan cost amortization                         24,893              25,998
        Asset impairment                                                               4,619                   -
        Non-cash director compensation                                                    50                  50

Changes in certain assets and liabilities
        Restricted cash                                                                  143              (1,399)
        Receivables                                                                   (2,590)              1,506
        Inventories                                                                      (49)                  4
        Prepaid expenses and other                                                     2,355               3,221
        Accounts payable                                                              (1,799)             (2,032)
        Accrued expenses                                                               2,745               1,871
        Other obligations                                                                431                 224
                                                                                    --------            --------
              Net cash provided by operating activities                               32,525              30,916
                                                                                    --------            --------

CASH FLOWS FROM INVESTING ACTIVITIES
        Additions to property and equipment                                           (8,229)             (6,146)
        Franchise fees, long-term restricted cash and other                           (2,197)             (2,844)
        Sale of marketable securities                                                    707                 322
                                                                                    --------            --------
              Net cash used in investing activities                                   (9,719)             (8,668)
                                                                                    --------            --------

CASH FLOWS FROM FINANCING ACTIVITIES
        Proceeds from issuance of Treasury Stock                                         324                   -
        Repayments of debt                                                            (3,966)            (10,137)
                                                                                    --------            --------
              Net cash used in financing activities                                   (3,642)            (10,137)
                                                                                    --------            --------
              Increase in cash and equivalents                                        19,164              12,111

CASH AND EQUIVALENTS, beginning of period                                             23,790              21,774
                                                                                    --------            --------
CASH AND EQUIVALENTS, end of period                                                 $ 42,954            $ 33,885
                                                                                    ========            ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID FOR INTEREST                                                              $ 33,395            $ 34,403
                                                                                    =======             ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
UNREALIZED APPRECIATION (DEPRECIATION) OF MARKETABLE SECURITIES                     $    (15)           $     12
                                                                                    =======             ========
</TABLE>


            See Notes to Condensed Consolidated Financial Statements



                                       6
<PAGE>
                   JOHN Q. HAMMONS HOTELS, INC. AND COMPANIES
              NOTES TO CONDENSED 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).

We were incorporated in September 1994 and had no operations or assets prior to
our initial public offering of Class A Common Stock in November 1994.
Immediately prior to the initial public offering, Mr. John Q. Hammons
contributed approximately $5 million in cash to us in exchange for 294,100
shares of Class B Common Stock (which represented approximately 72% of the
voting control). We contributed the approximate $96 million of net proceeds from
our Class A and Class B Common Stock offerings to John Q. Hammons Hotels, L.P.,
or the Partnership, in exchange for an approximately 28% general partnership
interest. As of July 2, 2004, the Partnership had redeemed approximately 1.25
million Partnership units, net of shares issued. The number of net Partnership
units redeemed is equivalent to the number of net shares we have redeemed, as
required by the Partnership agreement. Accordingly, the allocation percentages
were approximately 24% for us, and approximately 76% for the limited partners in
2004 and 2003.

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 the accounting principles generally accepted in the United States
for complete financial statements have been omitted. Interim results may not be
indicative of fiscal year performance because of seasonal and other factors.
These interim statements should be read in conjunction with the financial
statements and notes thereto included in our Form 10-K for the fiscal year ended
January 2, 2004, which included financial statements for the fiscal years ended
January 2, 2004, January 3, 2003 and December 28, 2001.

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.


                                       7
<PAGE>
We consider all operating cash accounts and money market investments with an
original maturity of three months or less to be cash equivalents. Restricted
cash is escrowed for insurance, taxes, capital expenditures and certain other
obligations, in accordance with specific loan covenants and franchise
agreements. Marketable securities consist of available-for-sale commercial paper
and governmental agency obligations which mature or will be available for use in
operations in 2004. These securities are valued at current market value. As of
July 2, 2004, unrealized holding gains were approximately $8,000, all of which
is allocable to us (with no allocation to the minority interest), and are
included as a separate component of shareholders' equity (deficit) until
realized.

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. NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE

Basic and diluted loss per share for the three months ended July 2, 2004, was
$0.51, compared to basic and diluted earnings per share of $0.02 and $0.01,
respectively, for the three months ended July 4, 2003. Basic and diluted
earnings per share were $0.34 and $0.29, respectively for the six months ended
July 2, 2004, and $0.06 and $0.05, respectively, for the six months ended July
4, 2003. The weighted average diluted common shares outstanding for the three
months ended July 2, 2004 exclude approximately 2.2 million options, since such
options would have been anti-dilutive.

Basic earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding during the period. 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 potentially dilutive common shares had been issued.

The following is a reconciliation of the numerator and denominator for basic and
diluted earnings per share for the six months ended July 2, 2004 and July 4,
2003 and the three months ended July 4, 2003:



                                       8
<PAGE>
<TABLE>
<CAPTION>
                                        Six Months Ended July 2, 2004              Six Months Ended July 4, 2003
                                  -----------------------------------------   -----------------------------------------
                                    (in thousands, except per share data)      (in thousands, except per share data)
                                    Income          Shares        Per Share      Income         Shares        Per Share
                                  (Numerator)   (Denominator)       Amount    (Numerator)   (Denominator)      Amount
                                  -----------   -------------     ---------   -----------   -------------     ---------
<S>                               <C>           <C>               <C>         <C>           <C>               <C>
Basic earnings per share            $1,727          5,127         $   0.34      $  286          5,087         $   0.06
                                                                  ========                                    ========
Effect of dilutive securities:
     Options                                          775                                         283
                                                    -----                                       -----
Diluted earnings per share          $1,727          5,902         $   0.29      $  286          5,370         $   0.05
                                    ======          =====         ========      ======          =====         ========
</TABLE>


<TABLE>
<CAPTION>

                                                   Three Months Ended July 4, 2003
                                         --------------------------------------------------
                                                (in thousands, except per share data)
                                            Income             Shares             Per Share
                                         (Numerator)        (Denominator)           Amount
                                         -----------        -------------         ---------
<S>                                      <C>                <C>                   <C>
Basic earnings per share                    $ 79                5,090              $ 0.02
                                                                                   ======
Effect of dilutive securities:
     Options                                                      283
                                                                -----
Diluted earnings per share                  $ 79                5,373              $ 0.01
                                            ====                =====              ======
</TABLE>


4. STOCK OPTIONS

We account for our stock-based compensation plans according to the intrinsic
method under APB Opinion No. 25. In accordance with Statement of Financial
Accounting Standard No. 123 (SFAS No. 123), "Accounting for Stock-Based
Compensation," we are required, at a minimum, to report pro forma disclosures of
expense for stock-based awards based on their fair values. Had compensation cost
been determined consistent with SFAS No. 123, our net income (loss) and basic
and diluted earnings (loss) per share for the three months and six months ended
July 2, 2004, and July 4, 2003, would have been as follows:

<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                       ---------------------------
                                                                          July 2,         July 4,
                                                                           2004            2003
                                                                       ------------      ---------
                                                                               (In thousands,
                                                                           except per share data)
<S>                                                                    <C>               <C>
Net Income (Loss)
     As reported                                                       $    (2,622)      $      79
     Deduct - total stock-based employee compensation expense
        determined under the fair value based method for all awards,
        net of related tax effects                                             (51)            (48)
                                                                       -----------       ---------
     Pro forma                                                         $    (2,673)      $      31
                                                                       ===========       =========

Basic and Diluted Income (Loss) Per Share
     As reported - Basic                                               $     (0.51)      $    0.02
     Pro forma - Basic                                                 $     (0.52)      $    0.01

     As reported - Diluted                                             $     (0.51)      $    0.01
     Pro forma - Diluted                                               $     (0.52)      $    0.01
</TABLE>



                                       9
<PAGE>
<TABLE>
<CAPTION>
                                                                            Six Months Ended
                                                                       -------------------------
                                                                        July 2,            July 4,
                                                                          2004              2003
                                                                       ---------           -------
                                                                             (In thousands,
                                                                         except per share data)
<S>                                                                      <C>               <C>
Net Income
     As reported                                                         $1,727            $  286
     Deduct - total stock-based employee compensation expense
        determined under the fair value based method for all awards,
        net of related tax effects                                         (102)              (91)
                                                                         ------            ------
     Pro forma                                                           $1,625            $  195
                                                                         ======            ======

Basic and Diluted Income Per Share
     As reported - Basic                                                 $ 0.34            $ 0.06
     Pro forma - Basic                                                   $ 0.32            $ 0.04

     As reported - Diluted                                               $ 0.29            $ 0.05
     Pro forma - Diluted                                                 $ 0.28            $ 0.04
</TABLE>


The assumptions used to calculate the fair value of options granted are
evaluated and revised, upon estimating the fair value of each new option grant,
to reflect market conditions and experience.

5.       NEW ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued Interpretation No. 46 (FIN 46) "Consolidation
of Variable Interest Entities." Until this interpretation, a company generally
included another entity in its consolidated financial statements only if it
controlled the entity through voting interests. FIN 46 requires a variable
interest entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns. In December
2003, the FASB issued FIN 46R, "Consolidation of Variable Interest Entities, an
Interpretation of ARB 51 (as revised December 2003)." The primary objectives of
FIN 46R are to provide guidance on the identification of entities for which
control is achieved through means other than through voting rights (Variable
Interest Entities) and how to determine when and which business enterprise
should consolidate the Variable Interest Entity (the Primary Beneficiary). We do
not have any variable interest entities and therefore, FIN 46R did not impact
our financial position, results of operations or cash flows.


                                       10
<PAGE>

6.       ASSET CARRYING VALUE

We review the carrying value of our long-lived assets when events and
circumstances occur which indicate that the carrying value of an asset may not
be recoverable. In 2004, we completed a comprehensive review of our investment
strategy and of our existing hotel portfolio to identify those properties which
we believe either are non-core or no longer complement our business. As a result
of our decision to undertake the sale of these non-strategic hotels, we recorded
impairment charges of $4.6 million during the 2004 Quarter. There can be no
assurance, however, that we will be able to complete dispositions on
commercially reasonable terms or at all. As we identify other non-strategic
hotels in the future, we may recognize additional impairment charges.

7.       SUBSEQUENT EVENTS

On July 2, 2004, our board of directors approved Letters of Intent to enter into
a contract for the sale of the Holiday Inn, Tucson, Arizona and the Holiday Inn
Denver Northglenn, Northglenn, Colorado. The contracts for sale have not been
executed nor have the buyers completed their due diligence.

On July 23, 2004, we executed a contract for the sale of the Holiday Inn Bay
Bridge, Emeryville, California. The buyer is currently in process of completing
due diligence.

We have entered into a contract to sell our Holiday Inn hotel property located
in Bakersfield, California. As of July 22, 2004, the buyer's due diligence had
been completed and we have received a substantial non-refundable deposit. We
anticipate this sale to be completed prior to the end of August 2004.

We recorded an impairment charge during the 2004 Quarter to reflect the
difference between the net book value, less selling costs, and the estimated
selling price, for each of the Holiday Inn Denver Northglenn, Northglenn,
Colorado and the Holiday Inn Bakersfield, California.

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

GENERAL. Unless the context indicates or requires otherwise, the terms "we,"
"us," "our" and other references to our company refer to John Q. Hammons Hotels,
Inc. and John Q. Hammons Hotels, L.P., including all of our subsidiaries.

Our consolidated financial statements include revenues from our owned hotels and
management fee revenues for providing management services to the managed hotels
(owned or directly controlled by Mr. Hammons). References to our hotels include
both our owned hotels and our managed hotels. We derive revenues from the owned
hotels from rooms, food and beverage, meeting rooms and other revenues. Our
beverage revenues include only revenues from the sale of alcoholic beverages,
while we show revenues from the sale of non-alcoholic beverages as part of food
revenue. Direct operating costs and expenses include expenses we incur in

                                       11
<PAGE>
connection with the direct operation of rooms, food and beverage and telephones.
Our general, administrative, sales and management services expenses include
expenses incurred for franchise fees, administrative, sales and marketing,
utilities, insurance, property taxes, rent, management services and other
expenses.

We currently have no hotels under construction and no plans to develop new
hotels for the foreseeable future. During 2000, we entered into a five-year
management contract with John Q. Hammons whereby we will provide internal
administrative, architectural design, purchasing and legal services, to Mr.
Hammons in conjunction with the development of hotels in an amount not to exceed
1.5% of the total development cost of any single hotel for the opportunity to
manage the hotel upon opening and the right of first refusal to purchase the
hotel in the event it is offered for sale. These costs are amortized over a
five-year contract period, beginning upon the opening of the hotels.

Although we are not developing new hotels, Mr. Hammons has personally completed
several projects, including new hotels in Tulsa and Oklahoma City, Oklahoma and
Rogers and Hot Springs, Arkansas, all of which we currently manage under the
management agreement described above. Mr. Hammons also has numerous other
projects in various stages of development, which we intend to manage upon
completion, including properties in St. Charles and Springfield, Missouri;
Junction City, Kansas; Frisco, Texas; Albuquerque, New Mexico; North Charleston,
South Carolina; and Hampton, Virginia.

In 2004, we completed a comprehensive review of our investment strategy and of
our existing hotel portfolio to identify those properties which we believe
either are non-core or no longer complement our business. As a result of our
decision to undertake the sale of these non-strategic hotels, we recorded
impairment charges of $4.6 million during the 2004 Quarter. There can be no
assurance, however, that we will be able to complete dispositions on
commercially reasonable terms or at all. As we identify other non-strategic
hotels in the future, we may recognize additional impairment charges.

RESULTS OF OPERATIONS  - THREE-MONTH PERIOD

The following discussion and analysis addresses results of operations for the
three-month period ended July 2, 2004 (which we refer to as the 2004 Quarter),
and July 4, 2003 (which we refer to as the 2003 Quarter). The results of
operations for the three-month and six-month periods ended July 2, 2004 are not
indicative of the results to be expected for the full year.

Total revenues for the 2004 Quarter were $115.2 million, an increase of $6.5
million, or 6.0%, compared to the 2003 Quarter, reflecting an improving general
economy. Specifically, we experienced increases in the association, corporate
group and government market segments of our business and the related food and
beverage and meeting room rental revenues generated by the increased business.

                                       12
<PAGE>
Rooms revenues increased $3.2 million, or 4.6%, from the 2003 Quarter, but
decreased as a percentage of total revenues to 62.7% from 63.5%. The dollar
increase was primarily due to the increase in association, corporate group and
government market segments of our business noted above. Our average room rate
increased to $101.35, a 2.1% increase compared to the 2003 Quarter average room
rate of $99.21, and our occupancy for the 2004 Quarter increased 1.6 percentage
points to 67.3% from 65.7% in the 2003 Quarter. In comparison, the average room
rate for the hotel industry, based on information from Smith Travel Research,
was $86.17 in the 2004 Quarter, up 4.3% from the 2003 Quarter. Occupancy for the
hotel industry was 64.2% in the 2004 Quarter, up 4.2% from the 2003 Quarter. Our
Revenue Per Available Room, or RevPAR, was $68.19 in the 2004 Quarter, up 4.7%
from $65.16 in the 2003 Quarter. RevPAR for the hotel industry in the 2004
Quarter was $55.30, up 8.6% from the 2003 Quarter.

Food and beverage revenues increased by $2.1 million, or 7.7%, compared to the
2003 Quarter, and increased as a percentage of total revenues to 25.6% from
25.2%. The increase was due to increased revenues related to increased
association, corporate group and government market segments of our business
discussed above.

Meeting room rental, related party management fee and other revenues increased
$1.2 million, or 9.8%, from the 2003 Quarter and increased as a percentage of
revenues to 11.7% from 11.3% in the 2003 Quarter. The increase was primarily
related to guest room internet revenues and related party management fees,
partially offset by decreased telephone revenues.

Rooms operating expenses increased by $0.7 million, or 4.1%, compared to the
2003 Quarter, but decreased slightly as a percentage of rooms revenues to 24.5%
from 24.6% in the 2003 Quarter. The dollar increase was attributable to costs
associated with the increased number of occupied rooms, partially offset by
favorable workers compensation loss experience for employees in this
classification, compared to the 2003 Quarter.

Food and beverage operating expenses increased $1.1 million, or 5.0%, compared
to the 2003 Quarter, but decreased as a percentage of food and beverage revenues
to 78.3% from 80.3%. The dollar increase was attributable to higher food and
beverage sales volumes, and the percentage decrease related to certain food and
labor costs that do not vary as food and beverage sales volumes increase.

Other operating expenses decreased slightly to $0.6 million, compared to the
2003 Quarter, and decreased as a percentage of meeting room rental, related
party management fee and other revenues, to 4.4% from 5.7%.

General, administrative, sales and management service expenses increased $4.0
million, or 11.9%, over the 2003 Quarter, and increased as a percentage of total
revenues to 32.7% from 31.0%. The increase was primarily attributable to
unfavorable workers compensation loss experience for employees in this
classification and increases in costs associated with utilities,

                                       13
<PAGE>
franchise-sponsored sales and reservations offices, franchise fees, franchise
frequent traveler programs, and sales and marketing compensation costs compared
to the 2003 Quarter.

Repairs and maintenance expenses increased to $5.0 million from $4.6 million, or
8.7%, and increased slightly as a percentage of revenues to 4.3% from 4.2%.

Asset impairment of $4.6 million in the 2004 Quarter is attributable to our
decision to sell certain non-strategic hotels and reflects the difference
between the net book value, less selling costs, and the current estimated fair
market value of these hotels.

Depreciation and amortization expenses decreased $0.5 million, or 4.0%, compared
to the 2003 Quarter, and decreased as a percentage of revenues to 10.5% from
11.6%. The decrease is primarily attributable to our cessation of new
development in 2000.

Income from operations decreased by $3.6 million, or 20.0%, and decreased as a
percentage of revenues to 12.5% from 16.6% in the 2003 Quarter, primarily as the
result of the asset impairment charge, discussed above.

Interest expense and amortization of deferred financing fees, net of interest
income decreased by $0.5 million, or 2.8%, and decreased as a percentage of
total revenues to 14.7% from 16.0% in the 2003 Quarter. The decrease was
primarily attributable to the reduction in long-term debt compared to the 2003
Quarter.

Income (loss) before minority interest and provision for income taxes was a loss
of $2.5 million in the 2004 Quarter compared to income of $0.6 million in the
2003 Quarter.

Net income (loss) allocable to the company was a net loss of $2.6 million in the
2004 Quarter, compared to net income of $0.1 million for the 2003 Quarter. The
2004 Quarter results included two items, which, after giving effect to minority
interest, had a negative impact of $3.0 million on our net loss. One of the
items was the recognition of a $4.6 million asset impairment due to our decision
to sell certain non-strategic hotels and reflects the difference between the net
book value, less selling costs, and the current estimated fair market value of
these hotels. The other item includes $1.9 million of the limited partners'
losses we absorbed due to the inability of the limited partners' net
contribution to fall below zero. A total of $2.4 million must be recaptured
before the limited partners can be allocated future earnings in minority
interest.

The following represents a reconciliation of the net income (loss), as reported,
to the net income, as adjusted (in thousands):

                                       14
<PAGE>
<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED
                                                         JULY 2,       JULY 4,
                                                           2004          2003
                                                           ----          ----
<S>                                                      <C>           <C>
Net income (loss), as reported                           ($2,622)        $ 79

Additions:
   Asset impairment, net of expected minority interest     1,115           --
   Reallocation of minority interest losses                1,928           --
                                                         -------         ----
      Sub total                                            3,043           --
                                                         -------         ----
Net income, as adjusted                                  $   421         $ 79
                                                         =======         ====
</TABLE>

Basic and diluted earnings (loss) per share was a loss of $0.51 in the 2004
Quarter, compared to earnings of $0.02 and $0.01, respectively, in the 2003
Quarter.

RESULTS OF OPERATIONS - SIX-MONTH PERIOD

The following discussion and analysis addresses results of operations for the
six-month periods ended July 2, 2004 (which we refer to as the 2004 Six Months),
and July 4, 2003 (which we refer to as the 2003 Six Months).

Total revenues increased to $229.5 million in the 2004 Six Months from $218.8
million in the 2003 Six Months, an increase of $10.7 million or 4.9%. The
increase is attributable to improvement in the association, corporate group and
government travel segments of our business, and related segments, primarily
related to the overall improvement in the general economy, as noted above.

Rooms revenues increased to $142.3 million in the 2004 Six Months from $136.4
million in the 2003 Six Months, an increase of $5.9 million, or 4.3%, primarily
in the association, corporate group and government travel segments of our
business. Rooms revenues as a percentage of total revenues decreased slightly,
to 62.0%, compared to 62.3% in the 2003 Six Months. Our average room rate
increased to $101.32 in the 2004 Six Months from $100.29 in the 2003 Six Months,
an increase of $1.03, or 1.0%. Occupancy increased to 66.4% in the 2004 Six
Months from 64.2% in the 2003 Six Months, an increase of 2.2 percentage points.
Our revenue per available room (RevPAR) was $67.26 in the 2004 Six Months, up
4.4% from the 2003 Six Months. RevPAR for the hotel industry was $52.35, up 8.2%
from the 2003 Six Months.

Food and beverage revenues increased to $59.6 million in the 2004 Six Months
from $56.5 million in the 2003 Six Months, an increase of $3.1 million, or 5.5%,
and increased as a percentage of total revenues to 26.0% from 25.8% in the 2003
Six Months. The increase related to the increased association, corporate group
and government travel discussed above.

Meeting room rental, related party management fee and other revenues increased
to $27.6 million in the 2004 Six Months from $25.9 million in the 2003 Six
Months, an increase of

                                       15
<PAGE>
$1.7 million, or 6.6%. Meeting room rental, related party management fee and
other revenues also increased as a percentage of total revenues to 12.0% from
11.8%. The increase was primarily related to guest room internet revenue and
related party management fees, partially offset by decreased telephone revenue.

Rooms operating expenses increased to $35.0 million in the 2004 Six Months from
$33.3 million in the 2003 Six Months, an increase of $1.7 million, or 5.1%. This
expense increased slightly as a percentage of rooms revenue, to 24.6% from 24.4%
in the 2003 Six Months. The increase was attributable to increased labor and
other costs directly related to the increase in occupied rooms in the 2004 Six
Months.

Food and beverage operating expenses increased to $45.3 million in the 2004 Six
Months from $43.9 million in the 2003 Six Months, an increase of $1.4 million,
or 3.2%, as the result of increased food and beverage revenues. These expenses
decreased as a percentage of food and beverages revenues in the 2004 Six Months
to 76.0%, from 77.7% in the 2003 Six Months, as the result of fixed food and
labor costs that do not increase as food and beverage sales increase.

Other operating expenses decreased to $1.2 million in the 2004 Six Months, from
$1.4 million in the 2003 Six Months, and decreased as a percentage of meeting
room rental, related party management fee and other income, to 4.3% in the 2004
Six Months from 5.4% in the 2003 Six Months.

General, administrative, sales and management service expenses increased $4.3
million, or 6.2%, and increased as a percentage of total revenues to 32.3% from
31.9% in the 2003 Six Months. The increase was primarily attributable to
increased guest frequency programs, unfavorable workers compensation loss
experience for employees in this classification, and the other factors described
above for the 2004 Quarter.

Repairs and maintenance expenses increased $0.7 million, or 7.8%, compared to
the 2003 Six Months, and increased slightly as a percentage of revenues to 4.2%
from 4.1% in the 2003 Six Months.

Asset impairment of $4.6 million in the 2004 Six Months reflects the difference
between the net book value, less selling costs, and the current estimated fair
market value of hotels we intend to sell for strategic reasons, as described
above.

Depreciation and amortization expenses decreased to $24.0 million in the 2004
Six Months from $25.1 million in the 2003 Six Months, a decrease of $1.1
million, or 4.4%, and decreased as a percentage of total revenues to 10.5% from
11.5% in the 2003 Six Months. The decrease was related to cessation of new hotel
development in 2000.

Income from operations was $35.7 million in the 2004 Six Months compared to
$36.3 million in the 2003 Six Months, a decrease of $0.6 million, or 1.7%,
primarily as a result of the asset

                                       16
<PAGE>
impairment discussed above. As a percentage of revenue, income from operations
decreased to 15.6% in the 2004 Six Months from 16.6% in the 2003 Six Months.

Income before minority interest and provision for income taxes was $1.8 million
in the 2004 Six Months, compared to a $1.6 million in the 2003 Six Months.

Net income allocable to the company was $1.7 million in the 2004 Six Months
compared to $0.3 million in the 2003 Six Months. Results for the 2004 Six Months
included two items, which, after giving effect to minority interest, had a
favorable impact of $0.3 million on our net income. As mentioned above, one of
the items was the recognition of a $4.6 million asset impairment, and the other
item includes $1.4 million for the recapture of the limited partners' losses we
absorbed in the 2003 and 2004 Quarter.

The following represents a reconciliation of the net income, as reported, to the
net income, as adjusted (in thousands):

<TABLE>
<CAPTION>
                                                           SIX MONTHS ENDED
                                                         ---------------------
                                                         JULY 2,       JULY 4,
                                                          2004          2003
                                                          ----          ----
<S>                                                      <C>           <C>
Net income, as reported                                  $ 1,727       $ 286

Additions (subtractions):
   Asset impairment, net of expected minority interest     1,115          --
   Reallocation of minority interest gains                (1,394)         --
                                                         -------       -----
      Sub total                                             (279)         --
                                                         -------       -----
Net income, as adjusted                                  $ 1,448       $ 286
                                                         =======       =====
</TABLE>

Basic and diluted earnings per share were $0.34 and $0.29, respectively, in the
2004 Six Months, compared to $0.06 and $0.05, respectively, in the 2003 Six
Months.

LIQUIDITY AND CAPITAL RESOURCES

In general, we have financed our operations through internal cash flow, loans
from financial institutions, the issuance of public and private debt and equity
and the issuance of industrial revenue bonds. Our principal uses of cash are to
pay operating expenses, to service debt and to fund capital expenditures.

At July 2, 2004, we had $43.0 million of cash and equivalents and $15.0 million
of marketable securities, compared to $23.8 million and $15.7 million,
respectively, at the end of fiscal 2003. Such amounts are available for our
working capital requirements, capital expenditures and debt service. At July 2,
2004, and January 2, 2004, we had restricted cash reserves of $23.9 million and
$21.7 million, respectively. This restricted cash is escrowed for insurance,
taxes, capital expenditures and certain other obligations, in accordance with
specific loan covenants and franchise agreements.

                                       17
<PAGE>
Cash from operating activities increased to $32.5 million for the 2004 Six
Months, from $30.9 million for the 2003 Six Months, an increase of $1.6 million,
or 5.2%, primarily attributable to the increased net income and the non-cash
charge for asset impairment, partially offset by changes in other assets and
liabilities, including the recapture of the minority interest losses we
absorbed, as discussed above.

We incurred capital expenditures of $8.2 million in the 2004 Six Months,
compared to $6.1 million in 2003 Six Months. Capital expenditures typically
include capital improvements on existing hotel properties.

During fiscal 2000, we initiated claims against certain of our construction
service providers, as well as our insurance carrier. These claims resulted from
costs we incurred and expected to incur to address moisture related problems
caused by water intrusion through defective windows. In December 2001, we
initiated legal actions in an effort to collect claims previously submitted.
Subsequent to the filing of the legal action, the insurance carrier notified us
that a portion of our claims had been denied. As of July 2, 2004, we had
incurred approximately $11.8 million of an estimated $12.3 million of costs to
correct the underlying moisture problem. During the third quarter of 2003,
summary judgment was granted to our insurance carrier in one action, which is
currently on appeal. Summary judgment was also granted to one of our window
manufacturers and we are in the process of appealing that decision. We plan to
continue to vigorously pursue collection of these costs, although there can be
no assurance that we will be successful. Our total cumulative depreciation
charge through July 2, 2004, was $7.6 million, which we recorded in fiscal year
2001 to reserve the net historical costs of the hotel property assets
refurbished absent any recoveries. To the extent we realize recoveries, we will
record them as a component of other income.

At July 2, 2004, our total debt was $777.1 million compared with $781.1 million
at the end of fiscal 2003. The decrease of $4.0 million is primarily
attributable to scheduled principal payments on long term debt. The current
portion of long-term debt was $7.5 million at the end of the 2004 Six Months
compared with $7.4 million at the end of 2003.

We estimate 2004 capital requirements to be $30.8 million (including
approximately $5.7 million related to planned hotel franchise conversions of
some of our properties), and to be funded by cash and cash flow from operations.
Based upon current plans, we anticipate that our capital resources will be
adequate to satisfy our 2004 capital requirements for normal recurring capital
improvement projects.

OTHER MATTERS

From time to time, our Chairman, CEO and principal owner, Mr. John Q. Hammons,
may examine various alternatives with respect to some or all of his holdings in
the Company and the Partnership. These often times may be from inquiries
unsolicited by Mr Hammons, but they also may be solicited directly by him or by
persons engaged by him for these purposes.

                                       18
<PAGE>
Our board of directors is not involved in these discussions. If Mr. Hammons
seeks to pursue a particular transaction that would affect the Company, our
board of directors will evaluate the opportunity based upon what it believes to
be in the best interests of all holders of its common stock.

SUBSEQUENT EVENTS

On July 2, 2004, our board of directors approved Letters of Intent to enter into
a contract for the sale of the Holiday Inn, Tucson, Arizona and the Holiday Inn
Denver Northglenn, Northglenn, Colorado. The contracts for sale have not been
executed nor have the buyers completed their due diligence.

On July 23, 2004, we executed a contract for the sale of the Holiday Inn Bay
Bridge, Emeryville, California. The buyer is currently in process of completing
due diligence.

We have entered into a contract to sell our Holiday Inn hotel property located
in Bakersfield, California. As of July 22, 2004, the buyer's due diligence had
been completed and we have received a substantial non-refundable deposit. We
anticipate this sale to be completed prior to the end of August 2004.

We recorded an impairment charge during the 2004 Quarter to reflect the
difference between the net book value, less selling costs, and the estimated
selling price, of each of the Holiday Inn Denver Northglenn, Northglenn,
Colorado and the Holiday Inn in Bakersfield, California.

NEW ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued Interpretation No. 46 (FIN 46) "Consolidation
of Variable Interest Entities." Until this interpretation, a company generally
included another entity in its consolidated financial statements only if it
controlled the entity through voting interests. FIN 46 requires a variable
interest entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns. In December
2003, the FASB issued FIN 46R, "Consolidation of Variable Interest Entities, an
Interpretation of ARB 51 (as revised December 2003)." The primary objectives of
FIN 46R are to provide guidance on the identification of entities for which
control is achieved through means other than through voting rights (Variable
Interest Entities) and how to determine when and which business enterprise
should consolidate the Variable Interest Entity (the Primary Beneficiary). We do
not have any variable interest entities and therefore, FIN 46R did not impact
our financial position, results of operation or cash flows.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires us to make estimates and
assumptions that affect the

                                       19
<PAGE>
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. On an ongoing basis, we
evaluate our estimates and assumptions, including those related to bad debts,
investments, valuation of long-lived assets, tax valuation allowance,
self-insurance reserves, contingencies and litigation. We base our estimates and
judgments on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying value of assets and liabilities that are
not readily apparent from other sources. We believe the following critical
accounting policies, among others, affect our more significant estimates and
assumptions used in preparing our consolidated financial statements. Actual
results could differ from our estimates and assumptions.

Trade receivables are reflected net of an estimated allowance for doubtful
accounts. This estimate is based primarily on historical experience and
assumptions with respect to future payment trends.

Property and equipment are stated at cost less accumulated depreciation. We
periodically review the carrying value of property and equipment and other
long-lived assets for indications that the carrying value of such assets may not
be recoverable. This review consists of a comparison of the carrying value of
the assets with the expected future undiscounted cash flows. If the respective
carrying values exceed the expected future undiscounted cash flows, the
impairment is measured using fair value measures to the extent available or
discounted cash flows.

We consider each individual hotel to be an identifiable component of our
business. In accordance with SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," we do not consider a hotel as "held for sale"
until it is probable that the sale will be completed within one year. Once a
hotel is "held for sale" the operations related to the hotel will be included in
discontinued operations. We consider a hotel as "held for sale" once the
potential transaction has been approved by our board of directors (i.e., Letter
of Intent is approved), a contract for sale has been executed, the buyer has
completed its due diligence review of the asset, and we have received a
substantial non-refundable deposit. Until a buyer has completed its due
diligence review of the asset, necessary approvals have been received and
substantive conditions to the buyer's obligation to perform have been satisfied,
we do not consider a sale to be probable.

We do not depreciate hotel assets while they are classified as "held for sale."
Upon designation of a hotel as being "held for sale," and quarterly thereafter,
we review the carrying value of the hotel and, as appropriate, adjust its
carrying value to the lesser of depreciated cost or fair value less cost to
sell, in accordance with SFAS 144. Any such adjustment in the carrying value of
a hotel classified as "held for sale" will be reflected in discontinued
operations. We will include in discontinued operations the operating results of
hotels classified as "held for sale" or that have been sold.

                                       20
<PAGE>
Our deferred financing costs, franchise fees and other assets include management
and franchise contracts and leases. The value of our management and franchise
contracts and leases are amortized on a straight-line method over the life of
the respective agreement. The assessment of management and franchise contracts
and leases requires us to make certain judgments, including estimated future
cash flow from the respective properties.

We are self-insured for various levels of general liability, workers'
compensation and employee medical coverages. Estimated costs related to these
self insurance programs are accrued based on known claims and projected
settlements of unasserted claims. Subsequent changes in, among others,
unasserted claims, claim cost, claim frequency, as well as changes in actual
experience, could cause these estimates to change.

We recognize revenues from our rooms, catering and restaurant facilities as
earned on the close of business each day.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, regarding, among other
things, our operations outlook, business strategy, prospects and financial
position. These statements contain the words "believe," "anticipate,"
"estimate," "expect," "project," "forecast," "intend," "may," "will," and
similar words. These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results to be
materially different from any future results expressed or implied by such
forward-looking statements. Such factors include, among others:

      -     General economic conditions, including the speed and strength of the
            economic recovery;

      -     The impact of any serious communicable diseases on travel;

      -     Competition;

      -     Changes in operating costs, particularly energy and labor costs;

      -     Unexpected events, such as the September 11, 2001 terrorist attack;

      -     Risks of hotel operations, such as hotel room supply exceeding
            demand, increased energy and other travel costs and general industry
            downturns;

      -     Seasonality of the hotel business;

      -     Cyclical over-building in the hotel and leisure industry;

      -     Requirements of franchise agreements, including the right of some
            franchisors to immediately terminate their respective agreements if
            we breach certain provisions; and

      -     Costs of complying with applicable state and federal regulations.

These risks are uncertainties and, along with the risk factors discussed in our
Annual Report on Form 10-K, should be considered in evaluating any forward
looking statements contained in this Form 10-Q. We undertake no obligation to
update or review publicly any forwarding-looking statement, whether as a result
of new information, future events or otherwise, other than as required by law.

                                       21
<PAGE>
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to changes in interest rates primarily as a result of our
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. Our financing
activities 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 our long-term fixed and variable-rate debt
obligations as of July 2, 2004:

                             EXPECTED MATURITY DATE
                                  (in millions)

<TABLE>
<CAPTION>
                                                                                                                    Fair
                                                                                                                    Value
                                          2004(d)      2005      2006      2007     2008   There-After    Total       (e)
<S>                                       <C>         <C>       <C>       <C>      <C>     <C>            <C>       <C>
Long-Term Debt(a)
$510 Million 1st Mortgage Notes            $ --       $ --      $  -      $ --     $ --       $499        $499      $ 547
   Average interest rate(b)                 8.9%       8.9%      8.9%      8.9%     8.9%       8.9%        8.9%
Other fixed-rate debt obligations          $  6       $  7      $ 28      $ 41     $ 52       $108        $242      $ 242
   Average interest rate(b)                 8.4%       8.4%      7.8%      8.4%     8.4%       9.1%        8.7%
Other variable-rate debt obligations       $  1       $  1      $ 10      $  1     $ 23       $ --        $ 36        $36
   Average interest rate(c)                 4.7%       4.7%      4.7%      4.7%     4.7%        --%        4.7%
</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 July 2, 2004, that is maturing in the
      year reported. The weighted average interest rate excludes the effect of
      the amortization of deferred financing costs.

(d)   The 2004 balances include actual and projected principal repayments and
      weighted average interest rates.

(e)   The fair values of long-term debt obligations approximate their respective
      historical carrying amounts except with respect to the $510 million First
      Mortgage Notes. The fair value of the First Mortgage Notes is estimated by
      obtaining quotes from brokers. A one percentage point change in the par or
      the then-current premium or discount quote received for the $510 million
      First Mortgage Notes would have an effect of approximately $5 million. A
      one percentage point change in the 8-7/8% rate used to calculate the fair
      value of other fixed rate debt would change its estimated fair value by
      approximately $11 million.

                                       22
<PAGE>
ITEM 4. CONTROLS AND PROCEDURES.

      Evaluation of disclosure controls and procedures. Our chief executive
officer and chief financial officer have evaluated the effectiveness of our
"disclosure controls and procedures" (as defined in Rules 13a-14(d) and
15d-14(d) under the Securities Exchange Act of 1934) as of July 2, 2004. Based
on that review, they have concluded that, as of such date, our disclosure
controls and procedures were effective to ensure that material information
relating to us would be made known to them.

      Changes in internal controls. There were no significant changes in our
internal controls or, to the knowledge of our chief executive officer and chief
financial officer, in other factors that could significantly affect our internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses, after the date of such evaluation.

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

                                       23
<PAGE>
ITEM 4. Submission of Matters to a Vote of Securities Holders

      We held the annual meeting of our shareholders on May 11, 2004. The
following persons were elected as our directors by the holders of Common Stock:

<TABLE>
<CAPTION>
                                 Donald H. Dempsey        John E. Lopez-Ona
<S>                              <C>                      <C>
        Votes in Favor:
                Class A                  4,730,291                4,661,041
                Class B                 14,705,000               14,705,000
                                        ----------               ----------
                  Total                 19,435,291               19,366,041

         Votes Against:
                Class A                          0                        0
                Class B                          0                        0
                                                 -                        -
                  Total                          0                        0

        Votes Withheld:
                Class A                    176,562                  245,812
                Class B                          0                        0
                                        ----------               ----------
                  Total                    176,562                  245,812

           Abstentions:
                Class A                          0                        0
                Class B                          0                        0
                                                 -                        -
                  Total                          0                        0

      Broker Non-votes:
                Class A                          0                        0
                Class B                          0                        0
                                                 -                        -
                  Total                          0                        0
</TABLE>

The shareholders also ratified the selection of Deloitte & Touche LLP, as
outside auditors for the Company and its subsidiaries for fiscal 2004, as
follow:

<TABLE>
<S>                                                  <C>
Votes in Favor:
Class A                                               4,828,951
Class B                                              14,705,000
                                                     ----------
Total                                                19,533,951

Votes Against:
Class A                                                  75,100
Class B                                                       0
                                                     ----------
Total                                                    75,100

Votes Withheld:
Class A                                                       0
Class B                                                       0
                                                              -
Total                                                         0

Abstentions:
Class A                                                       0
Class B                                                       0
                                                              -
Total                                                         0

Broker Non-votes:
Class A                                                       0
Class B                                                       0
                                                              -
Total                                                         0
</TABLE>

ITEM 5. Other Information

      Not Applicable

ITEM 6. Exhibits and Reports on Form 8-K

      (a) Exhibits

      See Exhibit Index.

      (b) Reports on Form 8-K

      Report on Form 8-K filed August 9, 2004, to furnish press release with
July 2, 2004 financial results.

                                       24
<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/ Paul E. Muellner
                                         --------------------------------------
                                         Paul E. Muellner
                                         Chief Financial Officer

Dated: August 13, 2004

                                       25
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.   TITLE
<S>           <C>
31.1          Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2          Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32            Section 1350 Certification of Chief Executive Officer and Chief
              Financial Officer
</TABLE>