UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, 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
    June 30, 2009ORo

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 or other jurisdiction
    of
    incorporation or organization)

52-2101815(I.R.S. 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
  Regulation S-T o o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company þ   Rule 12b-2 o þ




---



##### 



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

Financial Statements (Unaudited):Consolidated Balance Sheets 
    June 30, 2009 and December 31, 2008


2Consolidated Statements of Operations  Three and six
    months ended June 30, 2009 and 2008


3Consolidated Statements of Cash Flows 
    Three and six months ended June 30, 2009 and 2008


4Notes to Consolidated Financial Statements


5Item 2:

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


21Item 3:

Quantitative and Qualitative Disclosures About
    Market Risk


31Item 4T:

Controls and Procedures


31PART II. OTHER INFORMATIONItem 1:

Legal Proceedings


32Item 6:

Exhibits


32Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32   1




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##### 



PART I.
    FINANCIAL INFORMATION  Item 1:
    Financial
    Statements  INTERSTATE
    HOTELS & RESORTS, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share amounts)
  June 30,


December 31,2009


2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
22,764


$
22,924Restricted cash


7,829



7,174Accounts receivable, net of allowance for doubtful accounts of
    $1,399 and $1,432, respectively


21,691



27,775Due from related parties, net of allowance for doubtful accounts
    of $0 and $1,465, respectively


2,231



3,688Deferred income taxes






2,990Prepaid expenses and other current assets


4,473



3,514Total current assets


58,988



68,065Marketable securities


1,829



1,676Property and equipment, net


281,658



282,050Investments in unconsolidated entities


37,899



41,625Notes receivable, net of allowance of $1,605 and $2,856,
    respectively


3,335



4,254Deferred income taxes






9,750Goodwill


66,046



66,046Intangible assets, net


15,838



16,353Total assets

$
465,593


$
489,819LIABILITIES AND EQUITYCurrent liabilities:Accounts payable

$
1,747


$
2,491Salaries and employee related benefits


23,643



28,326Other accrued expenses


40,709



41,166Current portion of long-term debt


20,000



161,758Total current liabilities


86,099



233,741Deferred compensation


1,832



1,649Long-term debt


223,708



82,525Total liabilities


311,639



317,915Commitments and contingencies (see Note 10)Equity:Interstate stockholders equity:Preferred stock, $.01 par value; 5,000,000 shares
    authorized, no shares issued






Common stock, $.01 par value; 250,000,000 shares
    authorized; 32,170,981 and 32,154,181 shares issued and
    outstanding, respectively, at June 30, 2009; 31,859,986 and
    31,843,186 shares issued and outstanding, respectively, at
    December 31, 2008


322



319Treasury stock


(69
)


(69
)Paid-in capital


198,167



197,300Accumulated other comprehensive loss


(1,127
)


(1,521
)Accumulated deficit


(43,591
)


(24,407
)Total Interstate stockholders equity


153,702



171,622Noncontrolling interest (redemption value of $42 and $36 at
    June 30, 2009 and December 31, 2008, respectively)


252



282Total equity


153,954



171,904Total liabilities and equity

$
465,593


$
489,819    2




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##### 



INTERSTATE
    HOTELS & RESORTS, INC.
 CONSOLIDATED
    STATEMENTS OF OPERATIONS



(Unaudited,
    in thousands, except per share amounts) Three Months Ended


Six Months EndedJune 30,


June 30,2009


2008


2009


2008Revenue:Lodging

$
21,225


$
25,796


$
40,261


$
49,714Management fees


7,260



9,021



14,255



17,544Management fees-related parties


1,498



1,799



2,854



3,185Termination fees


1,995



1,194



3,241



4,204Other


1,508



1,846



3,022



3,434Other-related parties


531



847



901



1,35834,017



40,503



64,534



79,439Other revenue from managed properties


133,657



157,333



265,746



308,347Total revenue


167,674



197,836



330,280



387,786Expenses:Lodging


15,224



17,510



29,806



34,452Administrative and general


10,783



15,331



22,021



31,243Depreciation and amortization


3,849



4,901



7,690



9,175Restructuring costs


90







921



Asset impairments and write-offs


236



29



236



1,14130,182



37,771



60,674



76,011Other expenses from managed properties


133,657



157,333



265,746



308,347Total operating expenses


163,839



195,104



326,420



384,358OPERATING INCOME


3,835



2,732



3,860



3,428Interest income


25



280



125



599Interest expense


(3,126
)


(3,333
)


(6,033
)


(7,148
)Equity in (losses) earnings of unconsolidated entities


(3,713
)


535



(4,511
)


2,896Gain on sale of investments










13



(LOSS) INCOME BEFORE INCOME TAXES


(2,979
)


214



(6,546
)


(225
)Income tax (expense) benefit


(3,733
)


(79
)


(12,649
)


72NET (LOSS) INCOME


(6,712
)


135



(19,195
)


(153
)Add: Net loss (income) attributable to noncontrolling interest


5



(1
)


11



1NET (LOSS) INCOME ATTRIBUTABLE TO INTERSTATE STOCKHOLDERS

$
(6,707
)

$
134


$
(19,184
)

$
(152
)(LOSS) EARNINGS PER SHARE:Basic

$
(0.21
)

$



$
(0.60
)

$
Diluted

$
(0.21
)

$



$
(0.60
)

$
WEIGHTED-AVERAGE SHARES OUTSTANDING:Basic


32,135



31,764



32,030



31,765Diluted


32,135



32,864



32,030



31,765    3




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited, in thousands)
  Six Months EndedJune 30,2009


2008OPERATING ACTIVITIES:Net loss

$
(19,195
)

$
(153
)Adjustments to reconcile net loss to cash used in operating
    activities:Depreciation and amortization


7,690



9,175Amortization of deferred financing fees


962



633Amortization of key money management contracts


842



406Stock compensation expense


877



890Discount on notes receivable


(255
)


(152
)Bad debt expense


778



1,062Asset impairments and write-offs


236



1,141Equity in losses (earnings) from unconsolidated entities


4,511



(2,896
)Operating distributions from unconsolidated entities


73



767Gain on sale of investments


(13
)


Deferred income taxes


12,477



(1,290
)Excess tax benefits from share-based payment arrangements






80Changes in assets and liabilities:Accounts receivable and due from related parties


6,481



3,436Prepaid expenses and other current assets


(959
)


939Notes receivable related to termination fees


672



(1,023
)Accounts payable and accrued expenses


(4,665
)


6,269Other changes in asset and liability accounts


(21
)


(163
)Cash provided by operating activities


10,491



19,121INVESTING ACTIVITIES:Purchases of property and equipment


(6,367
)


(16,225
)Additions to intangible assets


(1,135
)


(3,419
)Contributions to unconsolidated entities


(968
)


(19,008
)Distributions from unconsolidated entities


110



1,830Proceeds from sale of discontinued operations






959Proceeds from sale of investments


13



Change in restricted cash


(655
)


(1,483
)Change in notes receivable


200



(497
)Cash used in investing activities


(8,802
)


(37,843
)FINANCING ACTIVITIES:Proceeds from borrowings






47,000Repayment of borrowings


(575
)


(28,875
)Excess tax benefits from share-based payments






(80
)Proceeds from issuance of common stock






1Financing fees paid


(1,262
)


(810
)Cash (used in) provided by financing activities


(1,837
)


17,236Effect of exchange rate on cash


(12
)


27Net decrease in cash and cash equivalents


(160
)


(1,459
)CASH AND CASH EQUIVALENTS, beginning of period


22,924



9,775CASH AND CASH EQUIVALENTS, end of period

$
22,764


$
8,316SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest and income taxes:Interest

$
5,278


$
6,588Income taxes


892



1,080    4




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##### 



INTERSTATE
    HOTELS & RESORTS, INC.



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




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Related
    Parties
    Recently
    Adopted Accounting Pronouncements
  Subsequent Events
  FAS 157-4 FAS 115-2 FAS 124-2 other-than-temporary FAS 157-4, FAS 115-2 FAS 124-2
  03-6, Determining Whether Instruments Granted in Share-Based
    Payment Transactions Are Participating Securities EITF 03-6-1). EITF 03-6-1 states EITF 03-6-1. EITF 03-6-1
 6




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  FAS 107-1 28-1 Disclosures about Fair Value of Financial
    Instruments,
  Recently
    Issued Accounting Pronouncements Not Yet Adopted
  The FASB Accounting Standards Codification and the
    Hierarchy of Generally Accepted Accounting
    Principles  a replacement of FASB Statement
    No. 162 FASB Accounting Standards
    Codification
  Amendments to
    FASB Interpretation No. 46(R)
  Accounting for
    Transfers of Financial Assets  an amendment of FASB
    Statement No. 140
  Accounting for
    Contingencies, Reasonable Estimation of the Amount of a
    Loss  an interpretation of FASB Statement
    No. 5.
 7




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##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    COMPREHENSIVE
    (LOSS) INCOME    Three Months EndedJune 30,2009


2008Net (loss) income

$
(6,712
)

$
135Other comprehensive (loss) income, net of tax:Foreign currency translation gain (loss)


42



(28
)Unrealized (loss) gain on cash flow hedge instrument


(134
)


552Unrealized gain on investments


27



39Comprehensive (loss) income


(6,777
)


698Less: Comprehensive loss (income) attributable to noncontrolling
    interest


6



(1
)Comprehensive (loss) income attributable to stockholders

$
(6,771
)

$
697   Six Months Ended June 30,2009


2008Net loss

$
(19,195
)

$
(153
)Other comprehensive loss, net of tax:Foreign currency translation loss


(23
)


(17
)Unrealized (loss) gain on cash flow hedge instrument


(279
)


101Unrealized gain on investments


19



40Comprehensive loss


(19,478
)


(29
)Less: Comprehensive loss attributable to noncontrolling interest


12



1Comprehensive loss attributable to stockholders

$
(19,466
)

$
(28
)  8




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##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    INVESTMENTS
    IN UNCONSOLIDATED ENTITIES    Number of


Our Equity


June 30,


December 31,Hotels


Participation


2009


2008Equity method investmentsAmitel Holdings joint venture


6



15.0
%

$
4,344


$
4,291Budget Portfolio Properties, LLC


22



10.0
%


894



1,370Cameron S-Sixteen Broadway, LLC


1



15.7
%


798



844Cameron S-Sixteen Hospitality, LLC


1



10.9
%


152



188CNL/IHC Partners, L.P.


3



15.0
%


3,313



3,047Harte IHR joint venture


4



20.0
%


10,318



10,933IHR Greenbuck joint venture


2



15.0
%


1,911



2,170IHR Invest Hospitality Holdings, LLC


2



15.0
%


3,484



3,647IHR/Steadfast Hospitality Management, LLC(1)






50.0
%


829



719JHM Interstate Hotels India Ltd(1)






50.0
%


289



500MPVF IHR Lexington, LLC


1



5.0
%


981



992Steadfast Mexico, LLC


3



10.3
%


1,730



1,676Other equity method investments


3



various



41



59Total equity method investments


48







29,084



30,436Cost method investmentsDuet Fund(2)










6,251



6,251RQB Resort/Development Investors, LLC(3)


1



10.0
%






2,512Other cost method investments










2,564



2,426Total cost method investments










8,815



11,189Total investments in unconsolidated entities


49






$
37,899


$
41,625     (1)
    
    Hotel number is not listed as this joint venture owns a
    management company.(2)
    
    Hotel number is not listed as this fund is in the process of
    developing hotels.(3)
    
    We hold Limited Partnership Units in this joint venture which
    entitles us to a preferred return on our investment.     9




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Three Months Ended June 30,2009


2008Revenue

$
46,232


$
58,345Operating expenses


33,672



40,044Net loss


(2,076
)


(2,234
)   Six Months Ended June 30,2009


2008Revenue

$
90,187


$
97,695Operating expenses


66,816



68,094Net loss


(11,690
)


(776
)  10




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##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    PROPERTY
    AND EQUIPMENT    June 30,


December 31,2009


2008Land

$
29,712


$
29,712Furniture and fixtures


33,636



32,919Building and improvements


240,322



235,543Leasehold improvements


6,113



6,109Computer equipment


3,266



3,228Software


2,362



2,475Total


315,411


$
309,986Less accumulated depreciation


(33,753
)


(27,936
)Property and equipment, net

$
281,658


$
282,050   6.
    INTANGIBLE
    ASSETS AND GOODWILL    June 30,


December 31,2009


2008Management contracts

$
22,592


$
21,955Franchise fees


1,925



1,925Deferred financing fees


5,658



4,295Total cost


30,175



28,175Less accumulated amortization


(14,337
)


(11,822
)Intangible assets, net

$
15,838


$
16,353      11




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##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         12




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   7.
    FAIR
    VALUE OF FINANCIAL AND DERIVATIVE INSTRUMENTS    Fair Value at June 30, 2009Total


Level 1


Level 2


Level 3Assets:Interest rate caps (included within intangible assets, net)

$
151


$



$
151


$
Marketable securities


1,829



1,829







Total:

$
1,980


$
1,829


$
151


$
Liabilities:Interest rate collar (included within other accrued expenses)

$
1,272


$



$
1,272


$
Deferred compensation


1,832



1,832







Total:

$
3,104


$
1,832


$
1,272


$
   Disclosures about Fair
    Value of Financial Instruments, FAS 107-1
  8.
    LONG-TERM
    DEBT    June 30,


December 31,2009


2008Senior credit facility  term loan

$
112,413


$
112,988Senior credit facility  revolver loan


48,770



48,770Mortgage debt


82,525



82,525Total long-term debt


243,708



244,283Less current portion


(20,000
)


(161,758
)Long-term debt, net of current portion

$
223,708


$
82,525   Credit
    Facility
  30-day
 13




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##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    30-day
    (payment-in-kind)
    Mortgage
    Debt
    Principal


Maturity

Spread Over


Interest Rate as ofAmount


Date

LIBOR(1)


June 30, 2009Hilton Arlington

$
24.7 million


November 2009


135 bps



1.73
%Hilton Houston Westchase

$
32.8 million


February 2010


135 bps



1.73
%Sheraton Columbia

$
25.0 million


April 2013


200 bps



3.03
%  14




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##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (1)
    
    The interest rate for the Hilton Arlington and Hilton Houston
    Westchase mortgage debt is based on a
    30-day
    LIBOR, whereas, the interest rate for the Sheraton Columbia
    mortgage is based on a
    90-day LIBOR.  25-year
  Interest
    Rate Caps and Collar
  Accounting for Derivative Instruments and
    Hedging Activities.
  Maturity

30-Day LIBORAmount


Date

Cap RateOctober 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
%April 2008 (Sheraton Columbia mortgage loan)

$
25.0 million


May 2013


6.00
%   30-day 30-day 30-day
   15




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##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    SEGMENT
    INFORMATION            Hotel


HotelOwnership


Management


Corporate


ConsolidatedThree months ended June 30, 2009Revenue

$
21,225


$
12,792


$



$
34,017Depreciation and amortization


2,922



833



94



3,849Operating expense


15,818



9,637



878



26,333Operating income (loss)


2,485



2,322



(972
)


3,835Interest income


5



20







25Interest expense


(3,126
)










(3,126
)Gain on sale of investments














Equity in earnings of unconsolidated entities


(3,713
)










(3,713
)Income (loss) before income taxes

$
(4,349
)

$
2,342


$
(972
)

$
(2,979
)Capital expenditures

$
1,218


$
115


$
29


$
1,362Three months ended June 30, 2008Revenue

$
25,796


$
14,707


$



$
40,503Depreciation and amortization


3,784



1,001



116



4,901Operating expense


18,471



13,177



1,222



32,870Operating income (loss)


3,541



529



(1,338
)


2,732Interest income


148



132







280Interest expense


(3,333
)










(3,333
)Equity in earnings of unconsolidated entities


535











535Income (loss) before income taxes

$
891


$
661


$
(1,338
)

$
214Capital expenditures

$
8,547


$
501


$
75


$
9,123  16




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##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Hotel


HotelOwnership


Management


Corporate


ConsolidatedSix months ended June 30, 2009Revenue

$
40,261


$
24,273


$



$
64,534Depreciation and amortization


5,808



1,691



191



7,690Operating expense


30,965



19,391



2,628



52,984Operating income (loss)


3,488



3,191



(2,819
)


3,860Interest income


15



110







125Interest expense


(6,033
)










(6,033
)Gain on sale of investments










13



13Equity in earnings of unconsolidated entities


(4,511
)










(4,511
)Income (loss) before income taxes

$
(7,041
)

$
3,301


$
(2,806
)

$
(6,546
)Total assets

$
325,429


$
114,437


$
25,727


$
465,593Capital expenditures

$
5,573


$
635


$
159


$
6,367Six months ended June 30, 2008Revenue

$
49,714


$
29,725


$



$
79,439Depreciation and amortization


6,968



1,976



231



9,175Operating expense


35,829



28,493



2,514



66,836Operating income (loss)


6,917



(744
)


(2,745
)


3,428Interest income


350



249







599Interest expense


(7,148
)










(7,148
)Equity in earnings of unconsolidated entities


2,896











2,896Income (loss) before income taxes

$
3,015


$
(495
)

$
(2,745
)

$
(225
)Total assets

$
336,825


$
121,979


$
36,496


$
495,300Capital expenditures

$
15,307


$
799


$
119


$
16,225     Three Months Ended


Six Months EndedJune 30,


June 30,2009


2008


2009


2008Russia

$
329


$
180


$
575


$
358Other

$
128


$
123


$
232


$
207     (1)
    
    Management fee revenues from our managed properties in Mexico
    are recorded through our joint venture, IHR/Steadfast
    Hospitality Management, LLC, and as such, are included in equity
    in earnings of unconsolidated entities in our consolidated
    statement of operations for all periods presented.    10.
    COMMITMENTS
    AND CONTINGENCIES  Insurance
    Matters
   17




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Insurance
    Receivables and Reserves
    Commitments
    Related to Management Agreements and Hotel
    Ownership
        Guarantees
   18




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Letters
    of Credit
    Contingent
    Liabilities Related to Partnership Interests
    Litigation
      11.
    STOCK-BASED
    COMPENSATION  Share Based Payment
 19




---



##### 



INTERSTATE
    HOTELS & RESORTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      12.
    INCOME
    TAXES  Accounting for Income Taxes
 20




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##### 



Item 2:
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K
  Forward-Looking
    Statements
  Form 10-Q Form 10-K
  Form 10-Q, Form 10-K,
  Overview
    and Outlook
  Our Business 
   21




---



##### 



Form 10-K
  Industry Overview 
    Cost-Savings Program 
    Turnover of Management Contracts 
 22




---



##### 



Number of


Number ofProperties


RoomsAs of December 31, 2008


226



46,448New contracts


4



651Lost contracts


(9
)


(1,749
)As of June 30, 2009


221



45,350     Critical
    Accounting Policies and Estimates
    Form 10-K
  Recently
    Issued Accounting Pronouncements
    Results
    of Operations
  Operating
    Statistics
    As of June 30,


Percent Change2009


2008


09 vs. 08Hotel OwnershipNumber of properties


7



7



Number of rooms


2,052



2,045



0.3
%Hotel Management(1)Properties managed


221



221



Number of rooms


45,350



45,960



(1.3
)%     (1)
    
    Statistics related to hotels in which we hold a partial
    ownership interest through a joint venture or wholly-owned have
    been included in hotel management. 23




---



##### 



Three Months EndedJune 30,


Percent Change2009


2008


09 vs. 08Hotel OwnershipRevPAR

$
73.38


$
87.79



(16.4
)%ADR

$
107.18


$
122.69



(12.6
)%Occupancy


68.5
%


71.6
%


(4.3
)%   Six Months EndedJune 30,


Percent Change2009


2008


09 vs. 08Hotel OwnershipRevPAR

$
69.85


$
83.34



(16.2
)%ADR

$
109.43


$
122.34



(10.6
)%Occupancy


63.8
%


68.1
%


(6.3
)%     (2)
    
    Operating statistics for our wholly-owned hotels includes our
    entire portfolio of 7 hotels, including the Sheraton Columbia
    and the Westin Atlanta Airport, both of which underwent
    comprehensive renovation programs throughout 2008.    Three Months EndedJune 30,


Percent Change2009


2008


09 vs. 08Hotel ManagementRevPAR

$
81.81


$
104.08



(21.4
)%ADR

$
122.30


$
140.26



(12.8
)%Occupancy


66.9
%


74.2
%


(9.8
)%   Six Months EndedJune 30,


Percent Change2009


2008


09 vs. 08Hotel ManagementRevPAR

$
77.54


$
97.52



(20.5
)%ADR

$
122.15


$
137.89



(11.4
)%Occupancy


63.5
%


70.7
%


(10.2
)%     (3)
    
    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 current period being reported. In addition, the
    operating results of hotels for which we no longer managed as of
    June 30, 2009 are not included in same-store hotel results
    for the periods presented herein. Of the 221 properties that we
    managed as of June 30, 2009, 193 properties have been
    classified as same-store hotels. 24




---



##### 



Three
    months ended June 30, 2009 compared to three months ended
    June 30, 2008
  Revenue
    Three Months EndedJune 30,


Percent Change2009


2008


09 vs. 08Lodging

$
21,225


$
25,796



(17.7
)%Management fees


8,758



10,820



(19.1
)%Termination fees


1,995



1,194



67.1
%Other


2,039



2,693



(24.3
)%Other revenue from managed properties


133,657



157,333



(15.0
)%Total revenue

$
167,674


$
197,836



(15.2
)%   Lodging
    Management
    fees and termination fees
      Other
    revenue from managed properties
   25




---



##### 



Operating
    Expenses
    Three Months EndedJune 30,


Percent Change2009


2008


09 vs. 08Lodging

$
15,224


$
17,510



(13.1
)%Administrative and general


10,783



15,331



(29.7
)%Depreciation and amortization


3,849



4,901



(21.5
)%Restructuring costs


90







100
%Asset impairments and write-offs


236



29



>100
%Other expenses from managed properties


133,657



157,333



(15.0
)%Total operating expenses

$
163,839


$
195,104



(16.0
)%   Lodging
    Administrative
    and general
    Depreciation
    and amortization
    Asset
    impairments and write-offs
    Other
    Income and Expense
    Three Months EndedJune 30,


Percent Change2009


2008


09 vs. 08Interest expense, net

$
3,101


$
3,053



1.6
%Equity in (losses) earnings of unconsolidated entities


(3,713
)


535



>(100
)%Income tax expense


3,733



79



>100
%  26




---



##### 



Equity in
    (losses) earnings of unconsolidated entities
    Income
    tax (expense) benefit
    Six
    months ended June 30, 2009 compared to six months ended
    June 30, 2008
  Revenue
    Six Months EndedJune 30,


Percent Change2009


2008


09 vs. 08Lodging

$
40,261


$
49,714



(19.0
)%Management fees


17,109



20,729



(17.5
)%Termination fees


3,241



4,204



(22.9
)%Other


3,923



4,792



(18.1
)%Other revenue from managed properties


265,746



308,347



(13.8
)%Total revenue

$
330,280


$
387,786



(14.8
)%   Lodging
    Management
    fees and termination fees
     27




---



##### 



Other
    revenue from managed properties
    Operating
    Expenses
    Six Months EndedJune 30,


Percent Change2009


2008


09 vs. 08Lodging

$
29,806


$
34,452



(13.5
)%Administrative and general


22,021



31,243



(29.5
)%Depreciation and amortization


7,690



9,175



(16.2
)%Restructuring costs


921







100.0
%Asset impairments and write-offs


236



1,141



(79.3
)%Other expenses from managed properties


265,746



308,347



(13.8
)%Total operating expenses

$
326,420


$
384,358



(15.1
)%   Lodging
    Administrative
    and general
    Depreciation
    and amortization
    Restructuring
    costs
   28




---



##### 



Asset
    impairments and write-offs
    Other
    Income and Expense
    Six Months EndedJune 30,


Percent Change2009


2008


09 vs. 08Interest expense, net

$
5,908


$
6,549



(9.8
)%Equity in (losses) earnings of unconsolidated entities


(4,511
)


2,896



>(100
)%Gain on sale of investments


13







100
%Income tax (expense) benefit


(12,649
)


72



>(100
)%   Interest
    expense, net
    Equity in
    (losses) earnings of unconsolidated entities
    Income
    tax (expense) benefit
    Liquidity,
    Capital Resources and Financial Position
    Six Months EndedJune 30,


Percent Change2009


2008


09 vs. 08Cash provided by operating activities

$
10,491


$
19,121



(45.1
)%Cash used in investing activities


(8,802
)


(37,843
)


(76.7
)%Cash (used in) provided by financing activities


(1,837
)


17,236



>(100
)%Working capital deficit


27,111



22,445



20.8
%Cash interest expense


5,278



6,588



(19.9
)%Debt balance


243,708



229,788



6.1
%  29




---



##### 



Operating
    Activities
    Investing
    Activities
    
    In the first half of 2009, we invested a total of
    $1.0 million in various existing joint ventures while
    receiving distributions totaling $0.1 million from two
    joint ventures. In the first half of 2008, we made contributions
    of $19.0 million in joint venture investments, of which
    $11.1 million was for investments in three new joint
    ventures and $6.3 million for investment in the Duet Fund.
    In 2008, we also received a distribution of $1.8 million
    related to the sale of the Doral Tesoro Hotel & Golf
    Club by one of our joint ventures. 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 $9.9 million less on property and equipment in the
    first half of 2009 compared to the same period in 2008 as the
    comprehensive renovation program at the Westin Atlanta was
    completed in 2008.
    In the first half of 2008, we received additional proceeds of
    $1.0 million from the sale of BridgeStreet Corporate
    Housing Worldwide, Inc. and its affiliated subsidiaries in
    January 2007.  Financing
    Activities
      Liquidity
  Liquidity Requirements 
   30




---



##### 



(payment-in-kind)
        Contractual
    Obligations and Off-Balance Sheet Arrangements
  Form 10-K.
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Form 10-K
  Item 4T.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
  Rules 13a-15(e) 15-d-15(e)).
    Changes
    in Internal Control over Financial Reporting
   31




---



##### 



PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Item 6.
    Exhibits  ExhibitNo.

Description of Document10
.1*

First Amended and Restated Senior Secured Credit Agreement,
    dated July 10, 2009, among Interstate Operating Company, L.P.,
    Banc of America Securities LLC and various other lenders.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 32




---



##### 



SIGNATURE
    Interstate
    Hotels & Resorts, Inc.
  By:
    /s/  Bruce
    A. Riggins   Chief Financial Officer
   33