##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-Q
   þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to    Commission File Number 1-14331
   Interstate Hotels &
    Resorts, Inc.
   Delaware(State of
    Incorporation)

52-2101815(IRS Employer
    Identification No.)4501 North Fairfax Drive, Ste
    500
    Arlington, VA(Address of Principal
    Executive Offices)

22203(Zip
    Code)    www.ihrco.com
 Form 10-Q
   (703) 387-3100
 (Registrants Telephone
    Number, Including Area Code)
   þ o
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  INDEX
  PagePART I.
    FINANCIAL INFORMATIONItem 1:


Financial
    Statements (Unaudited):Consolidated
    Balance Sheets  March 31, 2007 and
    December 31, 2006


2Consolidated
    Statements of Operations and Comprehensive Income
    (Loss)  Three months ended March 31, 2007 and
    2006


3Consolidated
    Statements of Cash Flows  Three months ended
    March 31, 2007 and 2006


4Notes to
    Consolidated Financial Statements


5Item 2:


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


18Item 3:


Quantitative and
    Qualitative Disclosures About Market Risk


26Item 4:


Controls and
    Procedures


26PART II.
    OTHER INFORMATIONItem 1:


Legal
    Proceedings


28Item 6:


Exhibits


28   1




---



##### 



PART I.
    FINANCIAL INFORMATION Item 1:  Financial
    Statements  INTERSTATE
    HOTELS & RESORTS, INC.CONSOLIDATED BALANCE SHEETS
 (In thousands, except share amounts)
  March 31,


December 31,2007


2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
49,896


$
25,308Restricted cash


8,391



6,485Accounts receivable, net of
    allowance for doubtful accounts of $615 and $538 respectively


33,073



31,186Due from related parties, net of
    allowance for doubtful accounts of $785 and $785 respectively


1,483



1,794Prepaid expenses and other current
    assets


3,523



2,592Assets held for sale






28,383Total current assets


96,366



95,748Marketable securities


1,656



1,610Property and equipment, net


154,739



103,895Investments in affiliates


11,998



11,144Notes receivable


4,994



4,962Deferred income taxes


12,385



12,451Goodwill


73,672



73,672Intangible assets, net


31,215



30,208Total assets

$
387,025


$
333,690LIABILITIES, MINORITY INTEREST
    AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
2,653


$
2,053Accrued expenses


58,194



68,395Liabilities related to assets held
    for sale






10,263Current portion of long-term debt


650



3,750Total current liabilities


61,497



84,461Deferred compensation


1,717



1,541Long-term debt


140,875



80,476Total liabilities


204,089



166,478Minority interest


521



516Commitments and contingenciesStockholders equity:Preferred stock, $.01 par
    value; 5,000,000 shares authorized, no shares issued






Common stock, $.01 par value;
    250,000,000 shares authorized; 31,578,716, and
    31,540,926 shares issued and outstanding at March 31,
    2007 and December 31, 2006 respectively


316



316Treasury stock


(69
)


(69
)Paid-in capital


194,625



194,460Accumulated other comprehensive
    (loss) income


(451
)


1,201Accumulated deficit


(12,006
)


(29,212
)Total stockholders equity


182,415



166,696Total liabilities, minority
    interest and stockholders equity

$
387,025


$
333,690   The accompanying notes are an integral part of the
    consolidated financial statements.
 2




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS
    AND COMPREHENSIVE INCOME (LOSS)
 (Unaudited, in thousands, except per share amounts)
  Three months ended March 31,2007


2006Revenue:Lodging

$
13,076


$
5,037Management fees


10,622



9,203Management fees-related parties


847



7,960Termination fees


1,575



285Termination fees-related parties






5,415Other


2,269



3,71128,389



31,611Other revenue from managed
    properties


176,370



224,949Total revenue


204,759



256,560Expenses:Lodging


9,372



3,888Administrative and general


13,315



13,645Depreciation and amortization


3,293



1,543Asset impairments and write-offs


108



8,55026,088



27,626Other expenses from managed
    properties


176,370



224,949Total operating expenses


202,458



252,575OPERATING INCOME


2,301



3,985Interest income


436



386Interest expense


(2,733
)


(2,055
)Equity in earnings (losses) of
    affiliates


401



(557
)INCOME BEFORE INCOME TAXES AND
    MINORITY INTEREST


405



1,759Income tax expense


(147
)


(669
)Minority interest expense


(53
)


(18
)INCOME FROM CONTINUING OPERATIONS


205



1,072Income (loss) from discontinued
    operations, net of tax


17,001



(326
)NET INCOME

$
17,206


$
746Other comprehensive income, net of
    tax:Foreign currency translation
    (loss) gain


(5
)


253Unrealized gain (loss) on
    investments


17



(12
)COMPREHENSIVE INCOME

$
17,218


$
987BASIC EARNINGS PER SHARE:Continuing operations

$
0.01


$
0.03Discontinued operations


0.54



(0.01
)Basic earnings per share

$
0.55


$
0.02DILUTED EARNINGS PER SHARE:Continuing operations

$
0.01


$
0.03Discontinued operations


0.53



(0.01
)Diluted earnings per share

$
0.54


$
(0.02
)   The accompanying notes are an integral part of the
    consolidated financial statements.
 3




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited, in thousands)
  Three months ended March 31,2007


2006OPERATING ACTIVITIES:Net income

$
17,206


$
746Adjustments to reconcile net income
    to cash provided by operating activities:Depreciation and amortization


3,293



1,543Amortization of deferred financing
    fees


743



196Stock compensation expense


259



296Bad debt expense


(32
)


179Asset impairments and write-offs


108



8,550Equity in earnings of affiliates


(401
)


557Operating distributions from
    unconsolidated affiliates


63



80Minority interest


53



18Deferred income taxes


66



584Excess tax benefits from
    share-based payment arrangements


(56
)


(68
)Discontinued operations:Depreciation and amortization






517(Gain) loss on sale


(17,609
)


Changes in operating assets and
    liabilities:Accounts receivable, net


(1,859
)


3,017Due from related parties, net


311



210Prepaid expenses and other current
    assets


(778
)


(1,176
)Accounts payable and accrued
    expenses


(9,638
)


(7,376
)Changes in assets and liabilities
    held for sale


93



Other changes in asset and
    liability accounts


164



(147
)Cash (used in) provided by
    operating activities


(8,014
)


7,726INVESTING ACTIVITIES:Proceeds from the sale of
    discontinued operations


34,444



Change in restricted cash


(1,906
)


(336
)Acquisition of hotel


(52,180
)


Purchases related to discontinued
    operations


(68
)


(918
)Purchases of property and equipment


(1,492
)


(1,049
)Additions to intangible assets


(909
)


(167
)Contributions to unconsolidated
    affiliates


(815
)


(209
)Distributions from unconsolidated
    affiliates


300



Changes in notes receivable


41



60Cash used in investing activities


(22,585
)


(2,619
)FINANCING ACTIVITIES:Proceeds from borrowings


97,825



4,000Repayment of borrowings


(40,526
)


(9,250
)Proceeds from issuance of common
    stock


1



397Excess tax benefits from
    share-based payment arrangements


56



68Financing fees paid


(2,164
)


Cash provided by (used in)
    financing activities


55,192



(4,785
)Effect of exchange rate changes on
    cash


(5
)


253Net increase in cash and cash
    equivalents


24,588



575CASH AND CASH EQUIVALENTS,
    beginning of period


25,308



12,929CASH AND CASH EQUIVALENTS, end of
    period

$
49,896


$
13,504SUPPLEMENTAL CASH FLOW
    INFORMATIONCash paid for interest and income
    taxes:Interest

$
1,751


$
1,892Income taxes


1,397



738   The accompanying notes are an integral part of the
    consolidated financial statements.
 4




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  1.
    BUSINESS
    SUMMARY          2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  General
  Form 10-K,
     5




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Related
    Parties
        Stock-Based
    Compensation
  Share Based Payment
  Accounting
    for Uncertainty in Income Taxes
    Recently
    Issued Accounting Pronouncements
  No. 06-3, 06-3) 06-3,
  Fair
    Value Measurements
 6




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    EARNINGS
    PER SHARE    Three months endedMarch 31, 2007


March 31, 2006Income/





Per Share


Income/





Per Share(Loss)


Shares


Amount


(Loss)


Shares


AmountIncome from continuing operations

$
205



31,563


$
0.01


$
1,072



30,685


$
0.03Income (loss) from discontinued
    operations, net of tax


17,001







0.54



(326
)






(0.01
)Basic net income

$
17,206



31,563


$
0.55


$
746



30,685


$
0.02Assuming exercise of outstanding
    employee stock options less shares repurchased at average market
    price






81











105



Assuming vesting of outstanding
    restricted stock






179



(0.01
)






130



Diluted net income

$
17,206



31,823


$
0.54


$
746



30,920


$
0.02   4.
    INVESTMENTS
    AND ADVANCES TO AFFILIATES    Our Equity

March 31,


December 31,Joint Venture

Number of Hotels


Participation

2007


2006CNL/IHC Partners, L.P.


3


15.0%

$
2,646


$
2,625RQB Resort/Development Investors,
    LLC


1


10.0%


680



447True North Tesoro Property
    Partners, L.P.


1


15.9%


1,331



1,381Amitel Holdings, LLC


6


15.0%


4,034



3,903Cameron S-Sixteen Hospitality, LLC


1


10.9%


463



487Cameron S-Sixteen Broadway, LLC


1


15.7%


1,100



1,136IHR Greenbuck Hotel Venture,
    LLC(1)





15.0%


649



362Interstate Cross Keys, LLC


1


15.0%


539



Other


4


5.0%-50.0%


556



803Total


18




$
11,998


$
11,144     (1)
    
    Hotel number is not listed since
    this joint venture is in the process of developing hotels.  ®
 7




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       5.
    PROPERTY
    AND EQUIPMENT    March 31,


December 31,2007


2006Land

$
15,129


$
10,269Furniture and fixtures


19,978



17,437Building and improvements


120,269



75,566Leasehold improvements


5,695



5,889Computer equipment


6,126



4,978Software


11,424



12,244Total


178,621



126,383Less accumulated depreciation


(23,882
)


(22,488
)Property and equipment, net

$
154,739


$
103,895   6.
    INTANGIBLE
    ASSETS    March 31,


December 31,2007


2006Management contracts

$
36,227


$
35,940Franchise fees


1,640



1,620Deferred financing fees


3,116



2,538Total cost


40,983



40,098Less accumulated amortization


(9,768
)


(9,890
)Intangible assets, net

$
31,215


$
30,208      8




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        7.
    ACCRUED
    EXPENSES    March 31,


December 31,2007


2006Salaries and employee related
    benefits

$
29,589


$
24,895Other


28,605



43,500Total

$
58,194


$
68,395     8.
    LONG-TERM
    DEBT    March 31,


December 31,2007


2006Senior credit facility 
    term loan

$
65,000


$
40,526Mortgage debt


76,525



43,700Total long-term debt


141,525



84,226Less current portion


(650
)


(3,750
)Long-term debt, net of current
    portion

$
140,875


$
80,476   Senior
    Credit Facility
     9




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    30-day
    Mortgage
    Debt
    Principal


Maturity


Spread over


Interest Rate as ofAmount


Date(1)


30-Day LIBOR


March 31, 2007Hilton
    Concord(2)

$
19.0 million



March  2008



225 bps



7.6
%Hilton Arlington

$
24.7 million



November 2009



135 bps



6.7
%Hilton Houston Westchase

$
32.8 million



February 2010



135 bps



6.7
%     (1)
    
    We are required to make
    interest-only payments until these loans mature, with two
    optional one-year extensions.(2)
    
    In April 2007, we repaid the entire
    mortgage loan of $19.0 million    Interest
    Rate Caps
    Maturity


30-day
    LIBORAmount


Date


Cap RateFebruary 2005 (Hilton Concord
    mortgage
    loan)(1)

$
19.0 million



March 2008



6.65
%March 2005 (Credit Facility)

$
55.0 million



January 2008



5.75
%October 2006 (Hilton Arlington
    mortgage loan)

$
24.7 million



November 2009



7.25
%February 2007 (Hilton Westchase
    mortgage loan)

$
32.8 million



February 2010



7.25
%     (1)
    
    In April 2007, we terminated this
    interest rate cap agreement in connection with the repayment of
    the Hilton Concord mortgage loan.   10




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    SEGMENT
    INFORMATION         11




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Hotel


HotelManagement


Ownership


Corporate


ConsolidatedThree months ended
    March 31, 2007Revenue

$
15,313


$
13,076


$



$
28,389Depreciation and amortization


1,763



1,426



104



3,293Operating expense


12,110



9,736



949



22,795Operating income (loss)


1,440



1,914



(1,053
)


2,301Interest expense, net






(1,410
)


(887
)


(2,297
)Equity in earnings of affiliates






401







401Income (loss) before minority
    interests and income taxes

$
1,440


$
905


$
(1,940
)

$
405Total assets

$
149,066


$
170,436


$
67,523


$
387,025Capital expenditures

$
587


$
52,938


$
147


$
53,672Three months ended
    March 31, 2006Revenue

$
26,574


$
5,037


$



$
31,611Depreciation and amortization


994



442



107



1,543Operating expense


20,634



4,033



1,416



26,083Operating income (loss)


4,946



562



(1,523
)


3,985Interest expense, net






(323
)


(1,346
)


(1,669
)Equity in earnings of affiliates






(557
)






(557
)Other gains














Income (loss) before minority
    interests and income taxes

$
4,946


$
(318
)

$
(2,869
)

$
1,759Total assets

$
168,664


$
54,586


$
61,611


$
284,861Capital expenditures

$
602


$
297


$
150


$
1,049   1
  Three months ended March 31,2007


2006Canada

$
73


$
73Russia

$
180


$
375   (1)
    BridgeStreet revenues from the
    United Kingdom and France were $2.8 million and
    $0.2 million, and $7.0 million and $0.5 million
    for the three months ended March 31, 2007, and 2006,
    respectively. These revenues have been classified as
    discontinued operations on the consolidated statement of
    operations for the related periods.   12




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    ASSET
    IMPAIRMENTS AND WRITE-OFFS    11.
    OTHER
    TRANSACTIONS    12.
    COMMITMENTS
    AND CONTINGENCIES  Insurance
    Matters
     13




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Leases
    March 31,
    2007-2008

$
3,553March 31,
    2008-2009


3,022March 31,
    2009-2010


2,969March 31,
    2010-2011


3,051March 31,
    2011-2012


3,136Thereafter


5,418Total

$
21,149   sub-lessee sub-tenant,
  March 31,
    2007-2008

$
1,101March 31,
    2008-2009


1,145March 31,
    2009-2010


1,190March 31,
    2010-2011


1,238March 31,
    2011-2012


1,288Thereafter


1,910Total

$
7,872   Commitments
    Related to Management Agreements and Hotel
    Ownership
      Letters
    of Credit
   14




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Contingent
    Liabilities Related to Partnership Interests
    13.
    ACQUISITIONS &
    DISPOSITIONS  Acquisitions
    Land

$
4,860Buildings and improvements


43,422Furniture and fixtures


3,411Intangible assets


303Working capital


184Total

$
52,180   Dispositions
    December 31,2006Accounts receivable, net

$
8,064Prepaid expenses and other current
    assets


8,247Property and equipment, net


2,214Goodwill


9,858Total assets held for sale

$
28,383Accounts payable


2,498Accrued expenses


7,765Total liabilities held for sale

$
10,263  15




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three monthsended March 31,2007


2006Revenue

$
8,500


$
27,765Depreciation and amortization






517Operating expense


8,969



27,716Operating loss

$
(469
)

$
(468
)Gain on sale


17,609



Interest expense






8Income (loss) before minority
    interest and taxes

$
17,140


$
(476
)Income tax (expense) benefit


(139
)


150Income (loss) from discontinued
    operations, net of taxes

$
17,001


$
(326
)     14.
    STOCK-BASED
    COMPENSATION  Share Based Payment
    AggregateNumber of


Weighted Average


IntrinsicShares


Exercise Price/Share


ValueOptions outstanding at
    December 31, 2006


495,413


$
6.81Granted


32,500


$
6.23Exercised


(200
)

$
3.45Forfeited


(11,840
)

$
3.41Options outstanding at
    March 31, 2007


515,873


$
6.93


$
639,000Options exercisable at
    March 31, 2007


370,879


$
7.28


$
547,000  16




---



##### 



NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    WeightedAverageNumber of


Grant-Restricted


Date FairShares


ValueUnvested at December 31, 2006


326,577


$
5.40Granted


174,000


$
6.23Vested


(55,465
)

$
4.87Forfeited






Unvested at March 31, 2007


445,112


$
5.81       15.
    FIN 48 
    RECOGNITION AND MEASUREMENT OF TAX POSITIONS AND
    BENEFITS          16.
    SUBSEQUENT
    EVENTS  Repayment
    of Hilton Concord Mortgage Loan
    Purchase
    of Westin Atlanta Airport in Georgia
   17




---



##### 



Item 2:  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Forward-Looking
    Statements
  Form 10-Q Form 10-K
  Form 10-Q Form 10-K
  Overview
    and Outlook
  Our
    Business
    Financial
    Highlights and Significant Events
  Financial Highlights 
 18




---



##### 



Significant Events 
        ® ® ®
   19




---



##### 



Industry
    Overview
      Critical
    Accounting Policies and Estimates
    Form 10-K,
  FASB
    Interpretation No. 48, Accounting for Uncertainty in
    Income Taxes
    Results
    of Operations
  Operating
    Statistics
    As of March 31,


Percent Change2007


2006


07 vs. 06Hotel ManagementProperties managed


207



282



(26.6
)%Number of rooms


47,157



63,980



(26.3
)%Hotel OwnershipNumber of properties


5



2



150.0
%Number of rooms


1,260



524



140.5
%  20




---



##### 




    We acquired 15 additional management contracts from various
    owners.
    17 properties owned by Meristar/Blackstone were transitioned out
    of our system.
    Sunstone sold 16 properties which we no longer manage.
    13 of the hotels we managed for Goldman Sachs and Highgate
    Holdings have been sold or transitioned from management.
    CNL sold 16 properties which we no longer manage.
    28 properties owned by other owners were transitioned out of our
    system.  1
  Three Monthsended March 31,


Percent Change2007


2006


07 vs. 06Hotel ManagementRevPAR

$
91.59


$
84.54



8.3
%ADR

$
129.24


$
120.28



7.4
%Occupancy


70.9
%


70.3
%


0.9
%   Revenue
    Three monthsended March 31,


Percent Change2007


2006


07 vs. 06Lodging

$
13,076


$
5,037



>100
%Management fees


11,469



17,163



(33.2
)%Termination fees


1,575



5,700



(72.4
)%Other


2,269



3,711



(38.9
)%Other revenue from managed
    properties


176,370



224,949



(21.6
)%Total revenue

$
204,759


$
256,560



(20.2
)%   Lodging
      1
    We present these operating
    statistics for the periods included in this report on a
    same-store basis. We define our same-store hotels as those which
    (i) are managed or owned by us for the entirety of the
    reporting periods being compared or have been managed by us for
    part of the reporting periods compared and we have been able to
    obtain operating statistics for the period of time in which we
    did not manage the hotel and (ii) have not sustained
    substantial property damage, business interruption or undergone
    large-scale capital projects during the periods being reported.
    In addition, the operating results of hotels for which we no
    longer manage as of March 31, 2007 are not included in
    same-store hotel results for the periods presented herein. Of
    the 207 properties that we managed as of March 31, 2007,
    186 hotels have been classified as same-store hotels. 21




---



##### 



Management
    fees
    Termination
    fees
    Other
    Other
    revenue from managed properties
    Operating
    Expenses
    Three MonthsEnded March 31,


Percent Change2007


2006


07 vs. 06Lodging

$
9,372


$
3,888



>100
%Administrative and general


13,315



13,645



(2.4
)%Depreciation and amortization


3,293



1,543



>100
%Asset impairments and write-offs


108



8,550



(98.7
)%Total undistributed operating
    expenses

$
26,088


$
27,626



(5.6
)%   Lodging
    Administrative
    and general
   22




---



##### 



Depreciation
    and amortization
    Asset
    impairments and write-offs
    Other
    Income and Expense
    Three MonthsEnded March 31,


Percent Change2007


2006


07 vs. 06Interest expense, net

$
2,297


$
1,669



37.6
%Equity in earnings (losses) of
    affiliates


401



(557
)


>100
%Gain on sale of
    investments & extinguishment of debt










Income tax expense


147



669



(78.0
)%Minority interest expense


53



18



>100
%Income (loss), from discontinued
    operations, net of tax


17,001



(326
)


>100
%   Interest
    expense
    Equity
    in earnings of affiliates
    Income
    tax expense
   23




---



##### 



Income
    from discontinued operations, net of tax
    Liquidity,
    Capital Resources and Financial Position
    Three MonthsEnded March 31,


Percent Change2007


2006


07 vs. 06Cash (used) provided by operating
    activities

$
(8,014
)

$
7,726



<100
%Cash used in investing activities


(22,585
)


(2,619
)


>100
%Cash provided (used in) financing
    activities


55,192



(4,785
)


>100
%Working capital (deficit)


34,869



(877
)


>100
%Cash interest expense


1,751



1,892



(7.5
)%Debt balance


141,525



79,802



77.3
%   Operating
    Activities
    Investing
    Activities
    
    In the first quarter of 2007, we purchased the Houston Westchase
    for $52.2 million, which included an escrow of additional
    restricted cash of $1.9 million associated with this
    acquisition.
    We made an additional $0.5 million in net contributions
    towards our joint venture investments in 2007 compared to 2006.
    In 2007, we contributed a total of $0.8 million for
    investments in two new joint ventures and received a
    distribution of $0.3 million from the sale of MIP Lessee,
    L.P. Distributions which are a return of our investment in the
    joint venture are recorded as investing cash flows while
    distributions which are a return on our investment are recorded
    as operating cash flows.
    We spent an additional $0.4 million on property and
    equipment in 2007, which is primarily related to improvements at
    our owned hotels and general corporate additions. We also spent
    $0.5 million in the first quarter of 2006 for the Twelve
    Oaks acquisition.
    The cash expenditures above were offset by proceeds of
    $34.4 million from the sale of BridgeStreet Corporate
    Housing. 24




---



##### 



Financing
    Activities
    Liquidity
        Senior
    Credit Facility
      30-day 30-day 30-day
   25




---



##### 



Mortgage
    Debt
    Principal


Maturity


Spread over


Interest Rate as ofAmount


Date(1)


30-Day LIBOR


March 31, 2007Hilton
    Concord(2)

$
19.0 million



March 2008



225 bps



7.6
%Hilton Arlington

$
24.7 million



November 2009



135 bps



6.7
%Hilton Houston Westchase

$
32.8 million



February 2010



135 bps



6.7
%     (1)
    
    We are required to make
    interest-only payments until these loans mature, with two
    optional one-year extensions.(2)
    
    In April 2007, we repaid the entire
    mortgage loan of $19.0 million.    Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  30-day 30-day
  30-day
  Form 10-K
  Item 4.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
  Rules 13a-15(e) 15d-15(e)).
   26




---



##### 



Changes
    in Internal Controls
     27




---



##### 



PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Item 6.
    Exhibits  Exhibits
  Exhibit No.

Description of Document3
.1

Amended and Restated Certificate
    of Incorporation of the Company, formerly MeriStar
    Hotels & Resorts, Inc. (incorporated by reference to
    Exhibit 3.1 to the Companys
    Form S-l/A
    filed with the Securities and Exchange Commission on
    July 23, 1998 (Registration
    No. 333-49881)).3
.1.1

Certificate of Amendment of the
    Restated Certificate of Incorporation of the Company dated
    September 30, 2001 (incorporated by reference to
    Exhibit 3.1.1 to the Companys
    Form 10-K
    filed with the Securities and Exchange Commission on
    April 15, 2002).3
.1.2

Certificate of Merger of
    Interstate Hotels Corporation into MeriStar Hotels &
    Resorts, Inc. (incorporated by reference to Exhibit 3.1.2
    to the Companys
    Form 8-A/A
    filed with the Securities and Exchange Commission on
    August 2, 2002).3
.1.3

Certificate of Amendment of the
    Restated Certificate of Incorporation of the Company dated
    July 31, 2002 (incorporated by reference to
    Exhibit 3.1.3 to the Companys
    Form 8-A/A
    filed with the Securities and Exchange Commission on
    August 2, 2002).3
.2

By-laws of the Company, formerly
    MeriStar Hotels & Resorts, Inc. (incorporated by
    reference to Exhibit 3.2 to the Companys
    Form S-l/A
    filed with the Securities and Exchange Commission on
    July 23, 1998 (Registration
    No. 333-49881)).3
.2.1

Amendment to the By-laws of the
    Company (incorporated by reference to Exhibit 3.3 to the
    Companys
    Form 8-A/A
    filed with the Securities and Exchange Commission on
    August 2, 2002).4
.1

Form of Common Stock Certificate
    of the Company (incorporated by reference to Exhibit 4.1 to
    the Companys
    Form 8-
    A/A filed with the Securities and Exchange Commission on
    August 2, 2002).4
.2

Preferred Share Purchase Rights
    Agreement, dated July 23,1998, between the Company,
    formerly MeriStar Hotels & Resorts, Inc., and the
    Rights Agent (incorporated by reference to Exhibit 4.4 to
    the Companys
    Form S-l/A
    filed with the Securities and Exchange Commission on
    July 23, 1998 (Registration
    No. 333-49881)).4
.2.1

Amendment to Rights Agreement,
    dated December 8, 2000, between the Company, formerly
    MeriStar Hotels & Resorts, Inc., and the Rights Agent
    (incorporated by reference to Exhibit 4.1 to the
    Companys
    Form 8-K
    filed with the Securities and Exchange Commission on
    December 12, 2000).4
.2.2

Second Amendment to Rights
    Agreement, dated May 1, 2002, between the Company, formerly
    MeriStar Hotels & Resorts, Inc., and the Rights Agent
    (incorporated by reference to Exhibit 4.1 to the
    Companys
    Form 8-K
    filed with the Securities and Exchange Commission on May 3,
    2002).4
.3

Form of Rights Certificate
    (incorporated by reference to Exhibit 4.3 to the
    Companys
    Form S-l/A
    filed with the Securities and Exchange Commission on
    July 23, 1998 (Registration
    No. 333-49881)).4
.4

Registration Rights Agreement,
    dated September 30, 1999, between the Company (formerly
    MeriStar Hotels & Resorts, Inc.), Oak Hill Capital
    Partners, L.P. and Oak Hill Capital Management Partners, L.P.
    (incorporated by reference to Exhibit 4.7 to the
    Companys
    Form 10-Q
    filed with the Securities and Exchange Commission for the three
    months ended June 30, 1999).10
.1

Employment Agreement, dated as of
    January 1, 2007, by and between Henry L. Ciaffone and the
    Company.10
.2

Agreement of Purchase and Sale
    between Capstar Westchase Partners, L.P., an affiliate of The
    Blackstone Group, and Interstate Westchase, LP, dated
    January 4, 2007, for the purchase of the Hilton Houston
    Westchase. 28




---



##### 



Exhibit No.

Description of Document10
.3

Amended and Restated Employment
    Agreement, dated as of January 16, 2007, by and between
    Thomas F. Hewitt and the Company.10
.4

Purchase and Sale Agreement by and
    among Interstate Hotels & Resorts, Inc., Interstate
    Operating Company, L.P., and Amkadian Holdings, Inc., dated
    January 26, 2007 for the sale of our BridgeStreet corporate
    housing subsidiary (incorporated by reference to
    Exhibit 2.1 to the Companys
    Form 8-K
    filed with the Securities and Exchange Commission on
    January 29, 2007).10
.5

Senior Secured Credit Facility,
    dated March 9, 2007, among Interstate Operating Company,
    LP, Lehman Brothers Inc. and various others lenders.10
.6*

Agreement of Purchase and Sale
    between Lepercq Atlanta Renaissance Partners, L.P., and
    affiliate of the Blackstone Group, and Interstate Atlanta
    Airport, LLC, dated May 4, 2007, for the purchase of the Westin
    Atlanta Airport.31
.1*

Sarbanes-Oxley Act
    Section 302 Certifications of the Chief Executive Officer.31
.2*

Sarbanes-Oxley Act
    Section 302 Certifications of the Chief Financial Officer.32*


Sarbanes-Oxley Act
    Section 906 Certifications of Chief Executive Officer and
    Chief Financial Officer.     *
    
    Filed herewith 29




---



##### 



SIGNATURE
    Interstate Hotels &
    Resorts, Inc.
  By:
    /s/  Denis
    S. McCarthy   Chief Accounting Officer
   30