<PAGE>

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the fiscal year ended December 31, 1999
     OR
[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from ______________ to __________________

                        Commission File Number 1-13486

                         JOHN Q. HAMMONS HOTELS, L.P.
                  JOHN Q. HAMMONS HOTELS FINANCE CORPORATION
                 JOHN Q. HAMMONS HOTELS FINANCE CORPORATION II
          (Exact Name of Registrants as specified in their charters)

            Delaware                                 43-1523951
            Missouri                                 43-1680322
            Missouri                                 43-1720400
     (State of Organization)              (I.R.S. employer identification no.)

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

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

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  None

     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 and (2) has been subject to such filing
requirements for the past 90 days.  YES  X  NO  ___
                                        ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  X
           ---
<PAGE>

                                    PART I

Item 1.  Business.

     As used herein, the term "Company" means John Q. Hammons Hotels, L.P., a
Delaware limited partnership, and its corporate and partnership subsidiaries
collectively, or, as the context may require, John Q. Hammons Hotels, L.P. only.
As used herein, the term "General Partner" means John Q. Hammons Hotels, Inc., a
Delaware corporation, or Hammons, Inc., a Missouri corporation, and the
predecessor general partner of the Company.  As used herein, the term "Finance
Corp." means John Q. Hammons Hotels Finance Corporation, a wholly owned
subsidiary of the Company which has nominal assets and does not conduct any
operations, and Finance Corp. II means John Q. Hammons Hotels Finance
Corporation II, each of which is co-obligor for the 1994 Notes and the 1995
Notes (as defined herein).  As used herein, the term "Registrants" means John Q.
Hammons Hotels, L.P., Finance Corp. and Finance Corp. II.

Overview

     The Company is a leading independent owner, manager and developer of
affordable upscale hotels in capital city, secondary and airport markets.  The
Company owns 45 hotels located in 19 states, containing 11,067 guest rooms or
suites (the "Owned Hotels"), including four new hotels opened in 1999.  The
Company also manages five additional hotels located in two states, containing
1,136 guest rooms (the "Managed Hotels").  One of the Managed Hotels, a Days
Inn, closed in December, 1999.  On December 31, 1999, the Company also owned two
upscale hotels at various stages of development, which opened early in 2000.
The Company's existing Owned Hotels and Managed Hotels (together, the "JQH
Hotels") operate primarily under the Holiday Inn and Embassy Suites trade names.
Most of the Company's hotels are near a state capitol, university, airport or
corporate headquarters, plant or other major facility and generally serve
markets with populations of up to 300,000 people (or larger populations in the
case of airport markets and many of the markets in which the Company has
developed new hotels over the past several years).

     The Company's strategy is to increase cash flow and thereby enhance
investor value primarily through (i) capitalizing on positive operating
fundamentals in the upscale full-service sector of its markets and improving the
operating results of its newer hotels, (ii) converting the franchises of its
existing hotels to franchise brands that are considered to be more upscale, and
(iii) selling certain mature assets and re-investing the net proceeds.

     The JQH Hotels are designed to appeal to a broad range of hotel customers,
including frequent business travelers, groups and conventions, as well as
leisure travelers.  Each of the JQH Hotels is individually designed by the
Company, and most contain an impressive multi-storied atrium, with water
features and lush plantings, expansive meeting space, large guest rooms or
suites and comfortable lounge areas.  The Company believes that these design
features enhance guest comfort and safety and increase the value perceived by
the guest.  The JQH Hotels' meeting facilities can be readily adapted to
accommodate both larger and smaller meetings, conventions and trade shows.  The
17 Holiday Inn JQH Hotels are affordably priced hotels designed to attract the
business and leisure traveler desiring quality accommodations, including meeting
facilities, in-house restaurants, cocktail lounges and room service.  The  14

                                       2
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Embassy Suites JQH Hotels are all-suite hotels which appeal to the traveler
needing or desiring greater space and specialized services.  The JQH Hotels also
include five non-franchise hotels, three Radissons, two Hampton Inn & Suites,
two Marriotts, two Homewood Suites, one Crowne Plaza, one Sheraton, and two
Renaissance hotels.  Four of the non-franchise hotels have the word "Plaza" in
their names and the other non-franchise hotel is a resort hotel.  The Company
determines which brand of hotel to develop depending upon the demographics of
the market to be served.

     Management of the JQH Hotels is coordinated from the Company's headquarters
in Springfield, Missouri by its senior management team.  Six Regional Vice
Presidents and one District Director are responsible for supervising a group of
General Managers of JQH Hotels in day-to-day operations.  Centralized management
services and functions include development, design, sales and marketing,
purchasing and financial controls.  Through these centralized services,
significant cost savings are realized due to economies of scale.

     The Company conducts all of its business operations through the Partnership
and its subsidiaries.  Mr. Hammons beneficially owns all 294,100 shares of Class
B Common Stock of the Company, representing 73.5% of the combined voting power
of both classes of the Company's Common Stock.  The Company is the sole general
partner of the Partnership through its ownership of all 6,336,100 general
partner units (the "GP Units"), representing 28.31% of the total equity in the
Partnership.  Mr. Hammons beneficially owns all 16,043,900 limited partnership
units of the Partnership (the "LP Units"), representing 71.69% of the total
equity in the Partnership.  The Class A Common Stock of the Company represents
24.5% of the total equity of the Partnership, and the Class B Common Stock and
LP Units beneficially owned by Mr. Hammons represent 75.5% of the total equity
in the Partnership.  Mr. Hammons is also the beneficial owner of 244,300 shares
of Class A Common Stock.

     The Company's executive offices are located at 300 John Q. Hammons Parkway,
Suite 900, Springfield, Missouri 65806 and its telephone number is (417) 864-
4300.  The Company is a Delaware corporation that was formed on September 29,
1994.

Development

     The Company announced on September 11, 1998 that it was ceasing new
development activity, except for the hotels then under construction.  The
Company currently has no hotels under construction.  The following table sets
forth information as to the hotels opened after December 31, 1999:

<TABLE>
<CAPTION>
                                               Number of
                                               ---------
Location                 Franchise/Name       Rooms/Suites    Description              Completion Date
--------                 --------------       ------------    -----------              ---------------
<S>                      <C>                  <C>             <C>                      <C>
Oklahoma City, OK        Renaissance              311         Atrium; Convention       Opened January 29, 2000
                                                              Center
Charleston, SC           Embassy Suites           255         Atrium; Convention       Opened February 18, 2000
                                                              Center
</TABLE>

     Although the Company has in the past chosen to develop rather than acquire
existing hotels, the Company may in the future acquire hotels if suitable
opportunities arise.  The Company continues to be approached from time to time
by third-party hotel owners seeking to

                                       3
<PAGE>

sell or buy hotels. The Company will continue to evaluate each offer and base
its decision on the market location, capital required, and return on investment
alternatives.

     On June 16, 1999, the Holiday Inn Express Hotel and Conference Center in
Joliet, Illinois was sold to an unrelated party for $6.5 million, resulting in a
gain of approximately $2.4 million.  This hotel served as collateral under the
1994 first mortgage notes.  Under the terms of this indenture, the Company must
provide replacement collateral of equivalent value or apply the proceeds from
the sale to amounts outstanding.  The Company provided replacement collateral in
accordance with the indenture provisions.

     The Company's development activity restricts its ability to grow net income
in the short term.  Fixed charges for new hotels (such as depreciation and
amortization expense and interest expense) exceed new hotel operating cash flow
in the first one to three years of operations.  As new hotels mature, the
Company expects, based on past experience, that the operating expenses for these
hotels will decrease as a percentage of revenues, although there can be no
assurance that this will continue to occur.

Operations

     Management of the JQH Hotels network is coordinated by the Company's senior
management team at the Company's headquarters in Springfield, Missouri.  The
management team is responsible for managing the day-to-day financial needs of
the Company, including the Company's internal accounting audits.  The Company's
management team administers insurance plans and business contract review,
oversees the financial budgeting and forecasting for the JQH Hotels, analyzes
the financial feasibility of new hotel developments, and identifies new systems
and procedures to employ within the JQH Hotels to improve efficiency and
profitability.  The management team also coordinates each JQH Hotel's sales
force, designing sales training programs, tracking future business under
contract, and identifying, employing and monitoring marketing programs aimed at
specific target markets.  The management team is indirectly responsible for
interior design of all hotels and each hotel's product quality, and directly
oversees the detailed refurbishment of existing operations.  The overall
management of the JQH Hotels is coordinated by the central management team
through six Regional Vice Presidents and one District Director responsible for
guiding the General Managers of each JQH Hotel in day-to-day operations.

     Central management utilizes information systems that track each JQH Hotel's
daily occupancy, average room rate, and rooms and food and beverage revenues.
Contracted business is tracked for each hotel individually five years into the
future using the Company's sales projection and usage reporting system.  By
having the latest information available at all times, management is better able
to respond to changes in each market by focusing sales and yield management
efforts on periods of demand extremes (low periods and high periods of demand)
and controlling variable expenses to maximize the profitability of each JQH
Hotel.

     Creating operating, cost and guest service efficiencies in each hotel is a
top priority to the Company.  With a total of 50 hotels under management, the
Company is able to realize significant cost savings due to economies of scale.
By leveraging the total hotels/rooms under its management, the Company is able
to secure volume pricing from its vendors that is not available

                                       4
<PAGE>

to smaller hotel companies. The Company employs a systems trainer who is
responsible for installing new computer systems and providing training to hotel
employees to maximize the effectiveness of these systems and to ensure that
guest service is enhanced.

     Regional management constantly monitors each JQH Hotel to verify that the
Company's high level of operating standards are being met.  The Company's
franchisors maintain rigorous inspection programs in which chain representatives
visit their respective JQH Hotels (typically 2 or 3 times per year ) to evaluate
product and service quality.  Each chain also provides feedback to each hotel
through their guest satisfaction rating systems in which guests who visited the
hotel are asked to rate a variety of product and service issues.

Sales and Marketing

     The Company's marketing strategy is to market the JQH Hotels both through
national  marketing programs and local sales managers and a director of sales at
each of the JQH Hotels.  While the Company makes periodic modifications to the
concept in order to address differences and maintain a sales organization
structure based on market needs and local preferences, it generally utilizes the
same major campaign concept throughout the country.  The concepts are developed
at its management headquarters while the modifications are implemented by the
JQH Hotels Regional Vice Presidents, District Director and local sales force,
all of whom are experienced in hotel marketing.  The sales force reacts promptly
to local changes and market trends in order to customize marketing programs to
meet each hotel's competitive needs.  In addition, the local sales force is
responsible for developing and implementing marketing programs targeted at
specific customer segments within each market.  The Company requires that each
of its sales managers complete an extensive sales training program.  Before
finishing the program, the sales manager must successfully complete
certifications in three development phases.

     The Company's core market consists of business travelers who visit a given
area several times per year, including salespersons covering a regional
territory, government and military personnel and technicians.  The profile of
the primary target customer is a college educated business traveler, age 25 to
54, from a two-income household with a middle management white collar occupation
or upper level blue collar occupation.  The Company believes that business
travelers are attracted to the JQH Hotels because of their convenient locations
in state capitals, their proximity to airports or corporate headquarters,
plants, convention centers or other major facilities, the availability of ample
meeting space and the high level of service relative to other hotel operators
serving the same markets.  The Company's sales force markets to organizations
which consistently produce a high volume of room nights and which have a
significant number of individuals traveling in the Company's operating regions.
The Company also targets groups and conventions attracted by a JQH Hotel's
proximity to convention or trade centers (often adjacent).  JQH Hotels' group
meetings logistics include flexible space readily adaptable to groups of varying
size, high-tech audio-visual equipment and on-site catering facilities.  The
Company believes that suburban convention centers attract more convention
sponsors due to lower prices than larger, more cosmopolitan cities.  In addition
to the business market, the Company's targeted customers also include leisure
travelers looking for secure, comfortable lodging at an affordable price as well
as women travelers who find the security benefits of the Company's atrium hotels
appealing.

                                       5
<PAGE>

     The Company advertises primarily through direct mail, magazine
publications, directories, and newspaper advertisements, all of which focus on
value delivered to and perceived by the guest.  The Company has developed in-
house marketing materials including professional photographs and written
materials that can be mixed and matched to appeal to a specific target group
(business traveler, vacationer, religious group, reunions, etc.).  The Company's
marketing efforts focus primarily on business travelers who account for
approximately 50% of the rooms rented in the JQH Hotels.

     The Company's franchise hotels utilize the centralized reservation systems
of its franchisors, which the Company believes are among the more advanced
reservation systems in the hotel industry.  The franchisors' reservation systems
receive reservation requests entered (i) on terminals located at all of their
respective franchises, (ii) at reservation centers utilizing 1-800 phone access
and (iii) through several major domestic airlines.  Such reservation systems
immediately confirm reservations or indicate accommodations available at
alternate system hotels.  Confirmations are transmitted automatically to the
hotel for which the reservations are made.  The Company believes that these
systems are effective in directing customers to the Company's franchise hotels.

Franchise Agreements

     The Company enters into non-exclusive franchise licensing agreements (the
"Franchise Agreements") with franchisors which it believes are the most
successful brands in the hotel industry.  The term of the individual Franchise
Agreement for a hotel typically is 20 years.  The Franchise Agreements allow the
Company to start with and then build upon the reputation of the brand names by
setting higher standards of excellence than the brands themselves require.  The
non-exclusive nature of the Franchise Agreements allows the Company the
flexibility to continue to develop properties with the brands that have shown
success in the past or to operate hotels in conjunction with other brand names.
While the Company currently has a good relationship with its franchisors, there
can be no assurance that a desirable replacement would be available if any of
the Franchise Agreements were to be terminated.

     Holiday Inn.  The Franchise Agreement grants to the Company a
nonassignable, non-exclusive license to use the Holiday Inns service mark and
computerized reservation network.  The franchisor maintains the right to improve
and change the reservation system to make it more efficient, economical and
competitive.  Monthly fees paid by the Company are based on a percentage of
gross revenues attributable to room rentals, plus marketing and reservation
contributions which are also a percentage of gross revenues.  The term of the
Franchise Agreement is 20 years with a renewal option in the 15th year.

     Embassy Suites.  The Franchise Agreement grants to the Company a
nonassignable, non-exclusive license to use the Embassy Suites service mark and
computerized reservation network.  The franchisor maintains the exclusive right
to improve and change the reservation system for the purpose of making it more
efficient, economical and competitive.  Monthly fees paid by the Company are
based on a percentage of gross revenues attributable to suite rentals, plus
marketing and reservation contributions which are also a percentage of gross
revenues.  The term of the Franchise Agreement is 20 years with a renewal option
in the 18th year.

                                       6
<PAGE>

     Other Franchisors.  The franchise agreements with other franchisors not
listed above are similar in that they are nonassignable, non-exclusive licenses
to use the franchisor's service mark and computerized reservation network.
Payments and terms of agreement vary based on specific negotiations with the
franchisor.

Competition

     Each of the JQH Hotels competes in its market area with numerous full
service lodging brands, especially in the upscale market, and with numerous
other hotels, motels and other lodging establishments.  Chains such as Sheraton
Inns, Marriott Hotels, Ramada Inns, Radisson Inns, Comfort Inns, Hilton hotels
and Doubletree/Red Lion Inns are direct competitors of JQH Hotels in their
respective markets.  There is, however, no single competitor or group of
competitors of the JQH Hotels that is consistently located nearby and competing
with most of the JQH Hotels.  Competitive factors in the lodging industry
include reasonableness of room rates, quality of accommodations, level of
service and convenience of locations.

Regulations and Insurance

     General.  A number of states regulate the licensing of hotels and
restaurants including liquor license grants by requiring registration,
disclosure statements and compliance with specific standards of conduct.  In
addition, various federal and state regulations mandate certain disclosures and
practices with respect to the sales of license agreements and the
licensor/licensee relationship.  The Company believes that each of the JQH
Hotels has the necessary permits and approvals to operate its respective
businesses. To supplement the Company's self insurance programs, umbrella,
property, auto, commercial liability and worker's compensation insurance is
provided to the JQH Hotels under a blanket policy.  Insurance expenses for the
JQH Hotels were approximately $6.2 million, $2.2 million and $1.1 million in
1997, 1998 and 1999, respectively.  During 1999, the Company realized continued
favorable trends in insurance expense as a result of claim experience and rate
improvements and a favorable buyout of several prior self-insured years.  The
Company believes that the JQH Hotels are adequately covered by insurance.

     Americans with Disabilities Act.  The JQH Hotels and any newly developed or
acquired hotels must comply with Title III of the Americans with Disabilities
Act ("ADA") to the extent that such properties are "public accommodations" and
/or "commercial facilities" as defined by the ADA.  Compliance with the ADA
requirements could require removal of structural barriers to handicapped areas
in certain public areas of the JQH Hotels where such removal is readily
achievable.  Noncompliance could result in a judicial order requiring
compliance, an imposition of fines or an award of damages to private litigants.
The Company has taken into account an estimate of the expense required to make
any changes required by the ADA and believes that such expenses will not have a
material adverse effect on the Company's financial condition or results of
operations.  If required changes involve a greater expenditure than the Company
currently anticipates, or if the changes must be made on a more accelerated
basis than the Company anticipates, the Company could be adversely affected.
The Company believes that its competitors face similar costs to comply with the
requirements of the ADA.

                                       7
<PAGE>

     Asbestos Containing Materials.  Certain, federal, state and local laws,
regulations and ordinances govern the removal, encapsulation or disturbance of
Asbestos Containing Materials ("ACMs") when ACMs are in poor condition or in the
event of building, remodeling, renovation or demolition.  These laws may impose
liability for the release of ACMs and may permit third parties to seek recovery
from owners or operators of real estate for personal injury associated with
ACMs.  Based on prior environmental assessments, seven of the Owned Hotels
contain ACMs and four of the Owned Hotels may contain ACMs, generally in
sprayed-on ceiling treatments or in roofing materials.  However, no removal of
asbestos from the Owned Hotels has been recommended, and the Company has no
plans to undertake any such removal, beyond the removal that has already
occurred.  The Company believes that the presence of ACMs in the Owned Hotels
will not have a material adverse effect on the Company, but there can be no
assurance that this will be the case.

     Environmental Regulations.  The JQH Hotels are subject to environmental
regulations under federal, state and local laws.  Certain of these laws may
require a current or previous owner or operator of real estate to clean up
designated hazardous or toxic substances or petroleum product releases affecting
the property.  In addition, the owner or operator may be held liable to a
governmental entity or to third parties for damages or costs incurred by such
parties in connection with the contamination.  The Company does not believe that
it is subject to any material environmental liability.

Employees

     The Company employs approximately 8,000 full time employees, approximately
300 of whom are members of labor unions.  The Company believes that labor
relations with employees are good.

Management

     The following is a biographical summary of the experience of the executive
officers and other key officers of the General Partner.

     John Q. Hammons is the Chairman, Chief Executive Officer, a director and
founder of the General Partner, and a founder of the Company.  Mr. Hammons has
been actively engaged in the development, management and acquisition of hotel
properties since 1959.  From 1959 through 1969, Mr. Hammons and a business
partner developed 34 Holiday Inn franchises, 23 of which were sold in 1969 to
Holiday Inns, Inc.  Since 1969, Mr. Hammons has developed 85 hotels on a
nationwide basis, primarily under the Holiday Inn and Embassy Suites trade
names.

     Kenneth J. Weber is the Chief Financial Officer of the General Partner.  He
joined the General Partner in April 1998 and became a director of the General
Partner in May 1998.  Prior to joining the General Partner, Mr. Weber was the
Executive Vice President and Chief Financial Officer of Chartwell Leisure, a New
York based hotel company.  From 1992 to 1996, Mr. Weber was the Senior Vice
President and Chief Financial Officer of Omni Hotels, based in Hampton, New
Hampshire.  From 1986 to 1992, Mr. Weber worked with Red Lion Hotels, based in
Vancouver, Washington, holding the positions of Senior Vice President, Chief
Accounting Officer and Corporate Controller.  Mr. Weber began his career in the
hotel industry with the

                                       8
<PAGE>

Marriott Corporation, holding positions in several of Marriott's divisions,
including President and Chief Executive Officer of Farrell's Ice Cream Parlour
Restaurants from 1983 to 1986.

     Lonnie A. Funk is Senior Vice President of Operations of the General
Partner. He began with the General Partner in 1975 as the General Manager at the
Holiday Inn in Billings, Montana.  In 1981, he was promoted to Regional Vice
President of the Midwest Region.  In November 1998, he was promoted to his
current position.

     Debra M. Shantz is Corporate Counsel of the General Partner.  She joined
the General Partner in May 1995.  Prior thereto, Ms. Shantz was a partner of
Farrington & Curtis, P.C. (now Husch & Eppenberger, LLC), a law firm which
serves as Mr. Hammons' primary outside counsel, where she practiced primarily in
the area of real estate law.  Ms. Shantz had been with that firm since 1988.

     Pat A. Shivers is Senior Vice President, Administration and Control, of the
General Partner.  He has been active in Mr. Hammons' hotel operations since
1985.  Prior thereto, he had served as Vice President of Product Management in
Winegardner & Hammons, Inc., a hotel management company.

     Steven E. Minton is Senior Vice President, Architecture, of the General
Partner.  He has been active in Mr. Hammons' hotel operations since 1985. Prior
to that time, Mr. Minton was a project manager with the firm of Pellham and
Phillips working on various John Q. Hammons projects.

     Jacqueline A. Dowdy has been the Secretary and a director of the General
Partner since 1989.  She has been active in Mr. Hammons' hotel operations since
1981.  She is an officer of several affiliates of the General Partner.

     John D. Fulton is Vice President, Design and Construction of the General
Partner.  He joined the General Partner in 1989 from Integra/Brock Hotel
Corporation, Dallas, Texas where he had been Director of Design and Purchasing
for ten years.

     Paul E. Muellner is Vice President, Corporate Controller of the General
Partner.  Prior to joining the General Partner in June of 1998, Mr. Muellner was
Vice President of Finance for Carnival Hotels.  He also served as Operations
Controller at Omni Hotels as well as positions with Red Lion Inns and Marriott
Corporation.

     Kent Foster joined the General Partner as Vice President of Human Resources
in August of 1999. Prior to that time, he served as Director and Manager, Human
Resources of Dayco Products, Inc. in Michigan.  Prior thereto, Mr. Foster served
as Assistant Vice President and Director, Human Resources, for Great Southern
Savings & Loan Association, Springfield, Missouri.

     William T. George, Jr., is Vice President, Capital Planning and Asset
Protection of the Company.  He joined the Company in 1994 from Promus Hotel
Corporation, where he had been director of capital refurbishment.

                                       9
<PAGE>

Forward-Looking Statements

     In addition to historical information, this document contains certain
forward-looking statements within the meaning of the Private Securities
Litigation Act of 1995.  These statements typically, but not exclusively, are
identified by the inclusion of phrases such as "the Company believes," "the
Company plans," "the Company intends," and other phrases of similar meaning.
These forward-looking statements involve risks and uncertainties and are based
on current expectations.  Consequently, actual results could differ materially
from the expectations expressed in the forward-looking statements.  Among the
various factors that could cause actual results to differ include a downturn in
the economy (either regionally or nationwide) affecting overall hotel occupancy
rates, revenues at New Hotels not reaching expected levels as quickly as planned
as the result of competitive factors or the Company's inability to obtain
permanent financing for New Hotels on terms similar to those available in the
past.

Item 2.  Properties.

     The Company leases its headquarters in Springfield, Missouri from a
Missouri general partnership of which Mr. Hammons is a 50% partner.  In 1999,
the Company made aggregate annual lease payments of approximately $234,000 to
such Missouri general partnership.  The Company leases from John Q. Hammons the
real estate on which two of the Company's hotels are located.  These leases are
more fully described in Item 13 "Certain Relationships and Related
Transactions."  The Company owns the land on which 33 of the Owned Hotels are
located, while ten of the Owned Hotels are subject to long-term ground leases.

Description of Hotels - General

     The JQH Hotels are located in 20 states and contain a total of 12,203
rooms.  The JQH Hotels operate primarily under the Holiday Inn and Embassy
Suites trade names.  Most of the JQH Hotels have assumed a leadership position
in their local market by providing a high quality product in a market unable to
economically support a second competitor of similar quality.

     Each of the JQH Hotels is individually designed by the Company.  Many of
the JQH Hotels contain an impressive multi-storied atrium, large indoor water
features, lush plantings, expansive meeting space, large guest rooms or suites
and comfortable lounge areas.  In addition to the visual appeal, the Company
believes that an atrium design in which each of the hotel's room doors face into
the atrium, combined with glass elevators, achieves a greater level of security
for all guests.  The Company believes this safety factor is particularly
relevant to women, who represent a growing portion of its business clientele.
The JQH Hotels also appeal to fitness conscious guests as all of the JQH Hotels
have at least one swimming pool and most have exercise facilities.

     The Company believes that the presence of adjacent convention centers
provides incremental revenues for its hotel rooms, meeting facilities, and
catering services, and that hotels which are adjacent to convention centers
occupy a particularly successful niche within the hotel industry.  These
convention or trade centers are available for rent by hotel guests.  Each of the
JQH Hotels has a restaurant/catering service on its premises which provides an
essential amenity to the convention trade.  The Company chooses not to lease out
the restaurant business to third-

                                       10
<PAGE>

party caterers or vendors since it considers the restaurant business an
important component of securing convention business. All of the restaurants in
the JQH Hotels are owned and managed by the Company specifically to maintain
direct quality control over a vital aspect of the convention and hotel business.
The Company also derives significant revenue and operating profit from food and
beverage sales due to its ownership and management of all of the restaurants in
the JQH Hotels. The Company believes that its food and beverage sales are more
profitable than its competitors due to the amount of catering business provided
to convention and other meetings at the Owned Hotels.

     The Company retains responsibility for all aspects of the day-to-day
management of each of the JQH Hotels, including establishing and implementing
standards of operation at all levels; hiring, training and supervising staff;
creating and maintaining financial controls; regulating compliance with laws and
regulations relating to the hotel operations; and providing for the safekeeping,
repair and maintenance of the hotels owned by the Company.  The Company
typically refurbishes individual hotels every four to six years, and has spent
an average per year of $20.3 million in the last four years on the Owned Hotels.
During 2000, the Company expects to spend approximately $19.1 million on
refurbishment of the Owned Hotels.

Owned Hotels

     The Owned Hotels consist of 45 hotels, which are located in 19 states and
contain a total of 11,067 guest rooms or suites.  The following table sets forth
certain information concerning location, franchise/name, number of rooms/suites,
description and opening date for each Owned Hotel:

<TABLE>
<CAPTION>
                                                             Number of
                                                             ---------
Location                      Franchise/Name                 Rooms/Suites  Description                                 Opening Date
--------                      --------------                 ------------  -----------                                 ------------
<S>                           <C>                            <C>           <C>                      <C>                <C>
Montgomery, AL                Embassy Suites                 237           Atrium;                                          8/95
                                                                           Meeting Space:           15,000 sq. ft.  (c)
Tucson, AZ                    Holiday Inn                    299           Atrium;                                         11/81
                                                                           Meeting Space:           14,000 sq. ft.
Tucson, AZ                    Marriott                       250           Atrium;                                         12/96
                                                                           Meeting Space:           11,500 sq. ft.
Little Rock, AR               Embassy Suites                 251           Atrium;                                          8/97
                                                                           Meeting  Space           14,000 sq. ft.
Springdale, AR                Holiday Inn                    206           Atrium;                                          7/89
                                                                           Meeting Space:           18,000 sq. ft.
                                                                           Convention Center:       29,280 sq. ft.

Springdale, AR                Hampton Inn & Suites           102           Meeting Space:              400 sq. ft.         10/95
Bakersfield, CA               Holiday Inn Select             259           Meeting Space:            9,735 sq. ft.  (c)     6/95
Monterey, CA                  Embassy Suites                 225           Meeting Space:           13,700 sq. ft.         11/95
Sacramento, CA                Holiday Inn                    364           Meeting Space:            9,000 sq. ft.          8/79
San Francisco, CA             Holiday Inn                    279           Meeting Space:            9,000 sq. ft.          6/72
</TABLE>

                                       11
<PAGE>

<TABLE>
<S>                           <C>                            <C>           <C>                      <C>                    <C>
Denver, CO(a)                 Holiday Inn (International     256           Atrium;                                         10/82
                              Airport)                                     Trade Center:            66,000 sq. ft.  (b)

Denver, CO                    Holiday Inn (Northglenn)       236           Meeting Space:           20,000 sq. ft.         12/80
Fort Collins, CO              Holiday Inn                    259           Atrium;                                          8/85
                                                                           Meeting Space:           12,000 sq. ft.
Coral Springs, FL             Radisson Plaza                 224           Atrium                    5,326 sq. ft.          5/99
                                                                           Convention Center:       12,800 sq. ft.          5/98
St. Augustine, FL             World Golf Village Resort      300           Atrium;
                                                                           Convention Center:       40,000 sq. ft.
Tampa, FL                     Embassy Suites                 247           Atrium;                                          1/98
                                                                           Meeting Space:           18,000 sq. ft.
Cedar Rapids, IA              Collins Plaza                  221           Atrium;                                          9/88
                                                                           Meeting Space:           11,250 sq. ft.
Davenport, IA                 Radisson                       221           Meeting Space:            7,800 sq. ft.  (c)    10/95
Des Moines, IA                Embassy Suites                 234           Atrium;                                          9/90
                                                                           Meeting Space:           13,000 sq. ft.
Des Moines, IA                Holiday Inn                    288           Atrium;                                          1/87
                                                                           Meeting Space:           15,000 sq. ft.
Topeka, KS                    Capitol Plaza                  224           Atrium;                                          8/98
                                                                           Convention Center:       26,000 sq. ft.
Bowling Green, KY             University Plaza               218           Meeting Space:            4,000 sq. ft.  (c)     8/95
Branson, MO                   Chateau on the Lake            301           Atrium; Meeting                                  5/97
                                                                           Space:                   40,000 sq. ft.
Jefferson City, MO            Capitol Plaza                  255           Atrium;                                          9/87
                                                                           Meeting Space:           14,600 sq. ft.
Joplin, MO                    Holiday Inn                    262           Atrium;                                          6/79
                                                                           Meeting Space:            8,000 sq. ft.
                                                                           Trade Center:            32,000 sq. ft.  (b)

Kansas City, MO(a)            Embassy Suites                 236           Atrium;                                          4/89
                                                                           Meeting Space:           12,000 sq. ft.
Kansas City, MO               Homewood Suites                117           Extended Stay                                    5/97
Springfield, MO               Holiday Inn                    188           Atrium;                                          9/87
                                                                           Meeting Space:            3,020 sq. ft.
Omaha, NE                     Embassy Suites                 249           Atrium;                                          1/97
                                                                           Meeting Space:           13,000 sq. ft.
Reno, NV                      Holiday Inn                    283           Meeting Space:            8,700 sq. ft.          2/74
Albuquerque, NM               Holiday Inn                    311           Atrium;                                         12/86
                                                                           Meeting Space:           12,300 sq. ft.
Charlotte, NC                 Renaissance Suites             275           Atrium;
                                                                           Meeting Space:           17,400 sq. ft.         12/99
</TABLE>

                                       12
<PAGE>

<TABLE>
<S>                           <C>                            <C>           <C>                      <C>                     <C>
Greensboro, NC(a)             Embassy Suites                 219           Atrium;                                          1/89
                                                                           Meeting Space:           10,250 sq. ft.
Greensboro, NC(a)             Homewood Suites                104           Extended Stay                                    8/96
Raleigh-Durham, NC            Embassy Suites                 273           Atrium;                                          9/97
                                                                           Meeting Space:           20,000 sq. ft.
Portland, OR(a)               Holiday Inn                    286           Atrium;                                          4/79
                                                                           Trade Center:            37,000 sq. ft.  (b)
Portland, OR(a)               Embassy Suites                 251           Atrium;                                          9/98
                                                                           Meeting Space:           11,000 sq. ft.
Columbia, SC                  Embassy Suites                 214           Atrium;                                          3/88
                                                                           Meeting Space:           13,000 sq. ft.
Greenville, SC                Embassy Suites                 268           Atrium;                                          4/93
                                                                           Meeting Space:           20,000 sq. ft.
Beaumont, TX                  Holiday Inn                    253           Atrium;                                          3/84
                                                                           Meeting Space:           12,000 sq. ft.
Dallas/Ft. Worth Airport,     Embassy Suites                 329           Atrium;
TX (a)                                                                     Meeting Space:           18,900 sq. ft.          8/99

Houston, TX(a)                Radisson                       288           Atrium;                                         12/85
                                                                           Meeting Space:           14,300 sq. ft.
Mesquite, TX                  Hampton Inn Suites             160           Meeting Space:           21,200 sq. ft.          4/99
                                                                           Convention Center:       35,100 sq. ft.  (c)
Charleston, WV                Embassy Suites                 253           Atrium;                                         12/97
                                                                           Meeting Space:           14,600 sq. ft.
Madison, WI                   Marriott                       292           Atrium;                                         10/85
                                                                           Meeting Space:           15,000 sq. ft.  (b)
                                                                           Convention Center:       50,000 sq. ft.

</TABLE>

________________________

(a)  Airport location
(b)  The trade or convention center is located adjacent to hotel and is owned by
     Mr. Hammons, except the convention centers in Madison, Wisconsin and
     Denver, Colorado, which are owned by the Company.
(c)  Large civic center is located adjacent to hotel.

Managed Hotels

     The Managed Hotels consist of five hotels (three Holiday Inns, one
Sheraton, and one Days Inn, which closed in December, 1999) located in two
states (Missouri and South Dakota), and contain a total of 1,136 guest rooms.
Mr. Hammons directly owns four of these five hotels. The remaining hotel is
owned by an entity controlled by Mr. Hammons in which he has a 50% interest.
Jacqueline Dowdy, a director and officer of the General Partner, and Lonnie A.
Funk, an employee of the General Partner, each own a 25% interest in this
entity. Mr. Funk acquired his interest in April, 1999 from Daniel L. Earley.
There is a convention and trade center adjacent to three of the Managed Hotels.

                                       13

<PAGE>

     The Company provides management services to the Managed Hotels within the
guidelines contained in annual operating and capital plans submitted to the
hotel owner for review and approval during the final 30 days of the preceding
year.  The Company is responsible for the day-to-day operations of the Managed
Hotels.  While the Company is responsible for the implementation of major
refurbishment and repairs, the actual cost of such refurbishments and repairs is
borne by the hotel owner.  The Company earns a fee based on the size of the
project.  The Company earns annual management fees of 3-5% of the hotel's gross
revenues.  Each of the Managed Hotels' management contracts is for an initial
term of 20 years, which automatically extends for four periods of five years,
unless otherwise canceled.  The Company has received an option from Mr. Hammons
or entities controlled by him to purchase each of the Managed Hotels.

Item 3.  Legal Proceedings.

     The Company is not presently involved in any litigation which if decided
adversely to the Company would have a material effect on the Company's financial
condition.  To the Company's knowledge, there is no litigation threatened other
than routine litigation arising in the ordinary course of business which would
be covered by liability insurance.

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

     None.

                                    PART II


Item 5.  Market for Registrant's Common Equity and Related Shareholder Matters.

     Not Applicable


Item 6.  Selected Financial Data.

     The selected consolidated financial information of the Company for the
1999, 1998, 1997, 1996, and 1995 Fiscal Years has been derived from and should
be read in conjunction with the audited consolidated financial statements of the
Company, which statements have been audited by Arthur Andersen LLP, independent
public accountants.  The information presented below also should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included under Item 7.   The Company's fiscal year
ends on the Friday nearest December 31.  Consequently, the Company's 1996 Fiscal
Year included 53 weeks of operations while the 1995, 1997, 1998 and 1999 Fiscal
Years included 52 weeks of operations.

                                       14
<PAGE>

Selected Consolidated Financial Information
-------------------------------------------
                 (in thousands, except per share amounts, ratios and hotel data)

<TABLE>
<CAPTION>
                                                                      FISCAL YEAR-ENDED
                                                       1999           1998           1997         1996          1995
<S>                                                  <C>            <C>            <C>          <C>            <C>
REVENUES
  Rooms (a)                                          $229,807       $211,989       $195,296     $171,206       $148,432
  Food and beverage                                   101,231         91,982         86,183       79,580         70,840
  Meeting room rental and other (b)                    25,410         22,159         20,795       18,061         15,907
                                                     --------       --------       --------     --------       --------
   Total revenues                                     356,448        326,130        302,274      268,847        235,179
                                                     --------       --------       --------     --------       --------

OPERATING EXPENSES
  Direct operating costs and expenses (c)
   Rooms                                               59,507         54,600         50,265       43,610         38,543
   Food and beverage                                   68,799         64,174         62,383       57,956         54,228
   Other                                                3,667          3,389          3,385        2,929          2,521
  General, administrative, sales and management
   service expenses (d,e)                             104,876         95,500         85,766       74,646         64,234
  Repairs and maintenance                              15,059         13,438         12,578       11,528         10,131
  Depreciation and amortization                        45,669         45,580         34,781       24,034         18,346
                                                     --------       --------       --------     --------       --------
   Total operating expenses                           297,577        276,681        249,158      214,703        188,003
                                                     --------       --------       --------     --------       --------

INCOME FROM OPERATIONS                                 58,871         49,449         53,116       54,144         47,176

OTHER (INCOME) EXPENSES
  Interest expense and amortization of deferred
   Financing fees, net                                 62,209         57,286         44,325       35,620         28,447
  Gain on sales of property and equipment (f)          (2,365)        (8,175)            --           --             --
                                                     --------       --------       --------     --------       --------

INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM  AND CUMULATIVE EFFECT OF CHANGE IN             $   (973)      $    338       $  8,791     $ 18,524       $18,729
 ACCOUNTING PRINCIPLE (g)(h)                         ========       ========       ========     ========       ========

BALANCE SHEET DATA
  Total Assets                                       $934,312       $876,486       $816,733     $658,072       $542,371
  Total Debt, including current portion               828,843        759,716        695,791      531,143        458,094
</TABLE>

(a)  Includes revenues derived from rooms.
(b)  Includes meeting room rental, management fees for providing management
     services  to the Managed Hotels and other.
(c)  Includes expenses incurred in connection with rooms, food and beverage, and
     telephones.
(d)  Includes expenses incurred in connection with franchise fees,
     administrative, marketing and advertising, utilities, insurance, property
     taxes, rent and other.
(e)  Includes expenses incurred providing management services to the Managed
     Hotels.
(f)  Gain on sales includes six hotels sold February 6, 1998 and one hotel sold
     December 31, 1998 and one hotel sold on June 16, 1999.
(g)  The 1995 Fiscal Year does not include a $0.3 million  extraordinary charge
     related to prepayment fees on Stock Offering.  The 1998 and 1999 Fiscal
     Years do not include a $2.2 million and a $0.2 million, respectively,
     extraordinary charge related to early extinguishment of debt.
(h) The Company adopted a new accounting pronouncement in 1999 which requires
    cost of start up activities, including pre-opening expenses, to be expensed
    as incurred. The 1999 Fiscal Year does not include a $1.8 million charge
    related to the change in accounting.

                                       15
<PAGE>

Supplemental Financial Information Relating to the 1994 and 1995 Collateral
Hotels

     The following tables set forth, as of December 31, 1999, unaudited selected
financial information with respect to the 17 hotels collateralizing the 1994
Notes (the "1994 Collateral Hotels") and the eight hotels collateralizing the
1995 notes (the "1995 Collateral Hotels") and the Company, excluding
Unrestricted Subsidiaries (as defined in the indentures relating to the 1994
Notes and the 1995 Indentures) (the "Restricted Group").  Under the heading
"Management Operations," information with respect to revenues and expenses
generated by the Company as manager of the 1994 Collateral Hotels, the 1995
Collateral Hotels, the other Owned Hotels owned by John Q. Hammons Hotels Two,
L.P. ("L.P. Two"), and the Managed Hotels is provided.

<TABLE>
<CAPTION>
                                                 Trailing 12 Months Ended December 31, 1999
                                               1994               1995      Management
                                         Collateral         Collateral      Operations               Total
                                             Hotels             Hotels           Group          Restricted
                                         ----------           --------       ---------          ----------
<S>                                      <C>                  <C>            <C>                <C>
Statement of Operations Data:
Operating Revenues                         $146,148            $50,368          $8,208(a)         $204,724

Operating Expenses:
Direct operating costs and expenses          52,440             18,846              --              71,286

General Administrative, Sales
and Mgmt expenses (b)                        39,570             16,286            (473)(c)          55,383
 Repairs and Maintenance                      5,779              2,382              --               8,161

 Depreciation and Amortization               12,902              5,173             395              18,470
                                           --------            -------          ------            --------
      Total Operating Expense               110,691             42,687             (78)            153,300
                                           --------            -------          ------            --------
Income from Operations                     $ 35,457            $ 7,681          $8,286            $ 51,424
                                           ========            =======          ======            ========
Operating Data:

   Occupancy                                   68.0%              60.9%

   Average Daily Room Rate                 $  90.79            $ 80.51

   RevPAR                                  $  61.74            $ 49.03
</TABLE>

                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                                   12 Months Ended January 1, 1999
                                                    1994              1995           Management
                                              Collateral        Collateral           Operations              Total
                                                  Hotels            Hotels                Group         Restricted
                                              ----------        ----------           ----------         ----------
<S>                                           <C>               <C>                  <C>                <C>
Statement of Operations Data:
Operating Revenues                              $139,721           $57,528               $6,783 (a)       $204,032

Operating Expenses:
Direct operating costs and expenses               51,997            21,611                   --             73,608

General Administrative,  Sales
and Mgmt expenses (b)                             39,292            18,617                 (917)(c)         56,992
 Repairs and Maintenance                           5,448             1,549                   --              6,998

 Depreciation and Amortization                    11,922             5,402                  412             17,736
                                                --------           -------               ------           --------
      Total Operating Expense                    108,659            47,179                 (505)           155,334
                                                --------           -------               ------           --------
Income from Operations                          $ 31,062           $10,349               $7,287           $ 48,698
                                                ========           =======               ======           ========
Operating Data:

   Occupancy                                        66.0%             61.6%

   Average Daily Room Rate                      $  87.51           $ 80.16

   RevPAR                                       $  56.70           $ 49.34
</TABLE>

(a) Represents management revenues derived from the Owned Hotels owned by Two
L.P. and the Managed Hotels.
(b) General, administrative, sales and management expenses for the 1994 and 1995
Collateral Hotels includes management expenses allocated to the respective
hotels.
(c) General, administrative, sales and management expenses for the 1994 and 1995
Collateral Hotels includes management revenues allocated to the 1994 and 1995
Collateral Hotels.

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

General

     The following discussion and analysis primarily addresses results of
operations of the Company for the fiscal years ended December 31, 1999 ("1999"),
January 1, 1999 ("1998") and January 2, 1998 ("1997"). The following discussion
should be read in conjunction with the selected consolidated financial
information of the Company and the consolidated financial statements of the
Company included elsewhere herein.

                                       17
<PAGE>

     The Company's consolidated financial statements include revenues from the
Owned Hotels and management fee revenues for providing management services to
the Managed Hotels. References to the JQH Hotels include both the Owned Hotels
and the Managed Hotels. Revenues from the Owned Hotels are derived from rooms,
food and beverage, meeting rooms and other revenues. The Company's beverage
revenues include only revenues from the sale of alcoholic beverages, while
revenues from the sale of non-alcoholic beverages are shown as part of food
revenues. Direct operating costs and expenses include expenses incurred in
connection with the direct operation of rooms, food and beverage and telephones.
General, administrative, sales and management services expenses include expenses
incurred from franchise fees, administrative, sales and marketing, utilities,
insurance, property taxes, rent, management services and other expenses.

     From 1995 through 1999, the Company's total revenues grew at an annual
compounded growth rate of 10.9%, from $235.2 million to $356.4 million.
Occupancy for the Owned Hotels during that period decreased 4.2 percentage
points from 67.1% to 62.9%. However, the Owned Hotels' average daily room rate
(ADR) increased by 32.4% from $71.68 to $94.87 during that period. Room revenue
per available room (RevPAR) increased by 24.0% from $48.09 to $59.64.

     In general, hotels opened during the period from 1995 to 1999 decreased
overall occupancy but increased the overall average room rate. The Company
tracks the performance of the Owned Hotels in two groups. One group of hotels
are those opened by the Company during the current and prior fiscal years (New
Hotels). During 1999, the New Hotels included four hotels opened in 1999 and
four hotels opened in 1998. The remainder of the Owned Hotels, excluding the New
Hotels, are defined as Mature Hotels. In 1999, the Mature Hotels included 37
hotels opened prior to 1998. New hotels typically generate positive cash flow
from operations before debt service in the first year, generate cash sufficient
to service mortgage debt in the second year and create positive cash flow after
debt service in the third year.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                         FISCAL YEAR-ENDED
-----------------------------------------------------------------------------------------------------------------------------
                                                   1999             1998             1997               1996            1995
-----------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>              <C>                <C>             <C>
OWNED HOTELS
-----------------------------------------------------------------------------------------------------------------------------
 Average Occupancy                                 62.9%            62.1%            62.9%              64.7%           67.1%
-----------------------------------------------------------------------------------------------------------------------------
 Average Daily Room Rate (ADR)               $    94.87       $    91.38       $    82.38         $    76.16      $    71.68
-----------------------------------------------------------------------------------------------------------------------------
 Room Revenue per Available Room
    (RevPAR)                                 $    59.64       $    56.79       $    51.84         $    49.24      $    48.09
-----------------------------------------------------------------------------------------------------------------------------
 Available Rooms (a)                          3,853,403        3,733,166        3,767,387          3,476,279       3,087,700
-----------------------------------------------------------------------------------------------------------------------------
 Number of Hotels                                    45               42               45                 39              37
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
MATURE HOTELS
-----------------------------------------------------------------------------------------------------------------------------
 Average Occupancy                                 64.7%            64.1%            63.8%              64.8%           67.1%
-----------------------------------------------------------------------------------------------------------------------------
 Average Daily Room Rate (ADR)               $    93.60       $    86.50       $    79.80         $    76.06      $    71.68
-----------------------------------------------------------------------------------------------------------------------------
 Room Revenue per Available Room
   (RevPAR)                                  $    60.57       $    55.41       $    50.90         $    49.24      $    48.09
-----------------------------------------------------------------------------------------------------------------------------
 Available Rooms (a)                          3,332,718        3,012,845        3,388,896          3,454,899       3,087,700
-----------------------------------------------------------------------------------------------------------------------------
 Number of Hotels                                    37               32               37                 37              37
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       18
<PAGE>

<TABLE>
<S>                                           <C>              <C>              <C>                <C>                  <C>
--------------------------------------------------------------------------------------------------------------------------------
NEW HOTELS
--------------------------------------------------------------------------------------------------------------------------------
 Average Occupancy                                  51.0%            54.1%            55.3%              42.2%             --
--------------------------------------------------------------------------------------------------------------------------------
 Average Daily Room Rate (ADR)                $   105.25       $   115.55       $   108.97         $   100.49              --
--------------------------------------------------------------------------------------------------------------------------------
 Room Revenue per Available Room
   (RevPAR)                                   $    53.70       $    62.54       $    60.21         $    42.42              --
--------------------------------------------------------------------------------------------------------------------------------
 Available Rooms (a)                             520,685          720,321          378,491             21,380              --
--------------------------------------------------------------------------------------------------------------------------------
 Number of Hotels                                      8               10                8                  2              --
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
PERCENTAGES OF TOTAL REVENUES
--------------------------------------------------------------------------------------------------------------------------------
REVENUES
--------------------------------------------------------------------------------------------------------------------------------
 Rooms                                              64.5%            65.0%            64.6%              63.7%           63.1%
--------------------------------------------------------------------------------------------------------------------------------
 Food and beverage                                  28.4%            28.2%            28.5%              29.6%           30.1%
--------------------------------------------------------------------------------------------------------------------------------
 Meeting room rental and other                       7.1%             6.8%             6.9%               6.7%            6.8%
                                              ----------       ----------       ----------         ----------      ----------
--------------------------------------------------------------------------------------------------------------------------------
   Total revenues                                  100.0%           100.0%           100.0%             100.0%          100.0%
                                              ----------       ----------       ----------         ----------      ----------
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
--------------------------------------------------------------------------------------------------------------------------------
 Direct operating costs and expenses
--------------------------------------------------------------------------------------------------------------------------------
   Rooms                                            16.7%            16.7%            16.6%              16.2%           16.4%
--------------------------------------------------------------------------------------------------------------------------------
   Food and beverage                                19.3%            19.7%            20.6%              21.6%           23.0%
--------------------------------------------------------------------------------------------------------------------------------
   Other                                             1.0%             1.0%             1.1%               1.1%            1.1%
--------------------------------------------------------------------------------------------------------------------------------
 General, administrative, sales and
--------------------------------------------------------------------------------------------------------------------------------
   Management service expenses                      29.4%            29.3%            28.4%              27.8%           27.3%
--------------------------------------------------------------------------------------------------------------------------------
 Repairs and maintenance                             4.2%             4.1%             4.2%               4.3%            4.3%
--------------------------------------------------------------------------------------------------------------------------------
 Depreciation and amortization                      12.8%            14.0%            11.5%               8.9%            7.8%
                                              ----------       ----------       ----------         ----------      ----------
--------------------------------------------------------------------------------------------------------------------------------
   Total operating expenses                         83.4%            84.8%            82.4%              79.9%           79.9%
                                              ----------       ----------       ----------         ----------      ----------
--------------------------------------------------------------------------------------------------------------------------------
 Income from Operations                             16.6%            15.2%            17.6%              20.1%           20.1%
                                              ==========       ==========       ==========         ==========      ==========
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Available rooms represent the number of rooms available for rent multiplied
by the number of days in the prior reported or, in the case of New Hotels, the
number of days the hotel was opened during the period reported.  The Company's
1996 Fiscal Year contained 53 weeks or 371 days, while its 1995, 1997 1998 and
1999 Fiscal Years each contained 52 weeks, or 364 days.

1999 FISCAL YEAR COMPARED TO 1998 FISCAL YEAR

Total revenues increased to $356.4 million in 1999 from $326.1 million in 1998,
an increase of $30.3 million, or 9.3%. Of total revenues recognized in 1999,
64.5% were revenues from rooms, compared to 65.0% in 1998. Revenues from food
and beverage represented 28.4% of total revenues recognized in 1999, compared to
28.2% in 1998, and revenues from meeting room rental and other represented 7.1%
of total revenues compared to 6.8% in 1998.

Rooms revenues increased to $229.8 million in 1999 from $212.0 million in 1998,
an increase of $17.8 million, or 8.4%, as a result of the addition of four
hotels opened in 1999, a full year of operation for the four hotels opened in
1998, and an increase in the average daily room rate (ADR) of the Mature Hotels.
Average daily room rates (ADR) of Mature Hotels increased to $93.60 in 1999 from
$86.50 in 1998. The occupancy in the Mature Hotels was a 0.6 percentage point
increase to 64.7% in 1999, compared to 64.1% in 1998. The Mature Hotels' room
revenue

                                       19
<PAGE>

per available room (RevPAR) improved to $60.57 in 1999 from $55.41 in 1998, an
increase of $5.16 or 9.3%. In 1999, the New Hotels included eight hotels, which
generated a revenue per available room (RevPAR) of $53.70, down 14.1% from the
1998 revenue per available room (RevPAR) of $62.54, when ten New Hotels were
open. In general, management believes the New Hotels are more insulated from the
effects of new hotel supply than are the Mature Hotels, since the New Hotels
utilize franchise brands that are considered to be more upscale in nature, and
the New Hotels have higher-quality guest rooms and public spaces.

Food and beverage revenues increased to $101.2 million in 1999 from $92.0
million in 1998, an increase of $9.2 million, or 10.0%. This increase was
primarily due to revenues associated with the New Hotels.

Meeting room rental and other revenues increased to $25.4 million in 1999 from
$22.2 million in 1998, an increase of $3.2 million, or 14.4%. This increase was
primarily due to the additional meeting space in the New Hotels.

Direct operating costs and expenses for rooms increased to $59.5 million in 1999
from $54.6 million in 1998, an increase of $4.9 million, or 9.0%. As a
percentage of rooms revenue, these expenses increased slightly to 25.9% in 1999
from 25.8% in 1998. The increased expense was associated with the New Hotels.
These costs generally represent a higher percentage of rooms revenue in newer
hotels until these hotels reach stabilized occupancy levels.

Direct operating costs and expenses for food and beverage increased to $68.8
million in 1999 from $64.2 million in 1998, an increase of $4.6 million, or
7.2%, but decreased slightly as a percentage of food and beverage revenues to
68.0%, from 69.8% in 1998. The dollar increase was due to costs associated with
the higher volume of sales associated with the New Hotels.

Direct operating costs and expenses for other were $3.7 million in 1999 and $3.4
million in 1998, an 8.8% increase. As a percentage of meeting room rental and
other revenues, these expenses were 14.4% in 1999 and 15.3% in 1998.

General, administrative, sales and management service expenses increased to
$104.9 million in 1999 from $95.5 million in 1998, an increase of $9.4 million,
or 9.8%. Increases in these expenses were primarily attributable to the
Company's adoption of a new accounting pronouncement in 1999 which requires cost
of start up activities, including pre-opening expenses, to be expensed as
incurred.  Pre-opening expenses approximated $4.2 million in 1999.  In addition,
a large portion of expenses associated with New Hotel openings are fixed costs
in nature. As a result, these expenses rise faster than revenues in the first
one to two years of operation.  As a percentage of total revenues, these
expenses increased slightly to 29.4% in 1999, from 29.3% in 1998.

Repairs and maintenance expenses increased to $15.1 million in 1999 from $13.4
million in 1998, an increase of $1.7 million, or 12.7%, and increased slightly
as a percentage of revenues to 4.2% from 4.1% in 1998.

Depreciation and amortization increased slightly by $0.1 million, or 0.2%, to
$45.7 million in 1999 from $45.6 million in 1998. As a percentage of total
revenues, these expenses decreased to

                                       20
<PAGE>

12.8% in 1999 from 14.0% in 1998. The dollar increase was a direct result of the
increased level of capital expenditures for the newer hotels.

Income from operations increased to $58.9 million in 1999 from $49.4 million in
1998, an increase of $9.5 million, or 19.2%. As a percentage of total revenues,
income from operations was 16.6% in 1999 compared to 15.2% in 1998, due
primarily to the higher proportion of the non-cash expense of depreciation and
amortization in 1998.

Interest expense and amortization of deferred financing fees, net increased to
$65.4 million in 1999 from $57.3 million in 1998, an increase of $8.1 million or
14.1%. The increase was attributable to debt associated with the financing of
the New Hotels.

Income (loss) before extraordinary item and cumulative effect of change in
accounting principle was a $1.0 million loss in 1999 compared to $0.3 million of
income in 1998. The 1999 results include a $2.4 million gain on the sale of one
Holiday Inn in June of 1999, and a $0.2 million extraordinary item (cost of
early extinguishment of debt).  The 1998 results include an $8.2 gain on the
sale of property and equipment in connection with the sale of six Holiday Inns
in February of 1998 and one Holiday Inn in December of 1998 and a $2.2 million
extraordinary item.

1998 FISCAL YEAR COMPARED TO 1997 FISCAL YEAR

Total revenues increased to $326.1 million in 1998 from 302.3 million in 1997,
an increase of $23.8 million, or 7.9%.  Of the total revenues reported in 1998,
65.0% were revenues from rooms, 28.2% were revenues from food and beverage and
6.8% were revenues from meeting room rental and other, compared with 64.6%,
28.5% and 6.9%, respectively, during 1997.

Rooms revenues increased to $212.0 million in 1998 from $195.3 million in 1997,
an increase of $16.7 million, or 8.6%, as a result of the operation of two
hotels which opened in 1996 and six hotels opened in 1997, and the increase in
average daily room rate (ADR). Average daily room rates (ADR) of Mature Hotels
increased to $86.50 in 1998 from $79.80 in 1997. The occupancy in the mature
hotels was a 0.3 percentage point increase to 64.1% in 1998, compared to 63.8%
in 1997. The Mature Hotels' room revenue per available room (RevPAR) improved to
$55.41 in 1998 from $50.90 in 1997, an increase of $4.51 or 8.9%. In 1998, the
New Hotels included ten hotels, which generated a revenue per available room
(RevPAR) of $62.54, up 3.9% from the 1997 revenue per available room (RevPAR) of
$60.21, when eight New Hotels were open. In general, management believes the New
Hotels are more insulated from the effects of new hotel supply than are the
Mature Hotels, since the New Hotels utilize franchise brands that are considered
to be more upscale in nature, and the New Hotels have higher-quality guest rooms
and public spaces.

Food and beverage revenues increased to $92.0 million in 1998 from $86.2 million
in 1997, an increase of $5.8 million, or 6.7%.  This increase was due to
revenues associated with newly opened hotels.

Meeting room rental and other revenues increased to $22.2 million in 1998 from
$20.8 million in 1997, an increase of $1.4 million, or 6.7%. This increase was
due to the addition of meeting space in the New Hotels.

                                       21
<PAGE>

Direct operating costs and expenses for rooms increased to $54.6 million in 1998
from $50.3 million in 1997, an increase of $4.3 million, or 8.5%.  As a
percentage of rooms revenue, these expenses remained stable, at 25.8%.

Direct operating costs and expenses for food and beverage increased to $64.2
million in 1998 from $62.4 million in 1997, an increase of $1.8 million, or
2.9%, but decreased as a percentage of food and beverage revenues, to 69.8% from
72.4% in 1997.  The dollar increase was due to costs associated with the higher
volume of sales.

Direct operating costs and expenses for other remained stable in 1998 at $3.4
million, but decreased as a percentage of meeting room rental and other revenues
to 15.3% from 16.3% in 1997.

General administrative, sales and management service expenses increased to $95.5
million in 1998 from $85.8 million in 1997, an increase of $9.7 million, or
11.3%.  Increases in these expenses are primarily attributable to expenses
associated with the opening of new hotels in 1997 and 1998.  As a percentage of
total revenues, these expenses increased to 29.3 % in 1998 from 28.4% in 1997.

Repairs and maintenance expenses increased to $13.4 million in 1998 from $12.6
million in 1997, by $0.8 million or 6.3%, but decreased slightly as a percentage
of total revenues, to 4.1% from 4.2% in 1997.

Depreciation and amortization increased to $45.6 million in 1998 from $34.8
million in 1997, by $10.8 million, or 31.0%.  As a percentage of total revenues,
these expenses increased to 14.0% in 1998 from 11.5% in 1997.  The increase was
a direct result of the increased level of capital expenditures for the newly
opened hotels.

Income from operations decreased to $49.4 million 1998 from $53.1 million in
1997, a decrease of $3.7 million, or 7.0%.  The decrease was due to higher
costs, including depreciation expense related to the building of new hotels.  As
a percentage of total revenues, income from operations was 15.2% in 1998 and
17.6% in 1997.

Interest expense and amortization of deferred financing fees, net increased to
$57.3 million in 1998 from $44.3 million in 1997, an increase of $13.0 million,
or 29.3%.  The increase was attributable to borrowing for new hotel
construction.

Income before extraordinary item decreased to $0.3 million in 1998 from $8.8
million in 1997, a decrease of $8.5 million, or 96.6%. The 1998 results include
an $8.2 million gain on sales of property and equipment in connection with the
sale of six Holiday Inns in February of 1998 and one Holiday Inn in December of
1998.

LIQUIDITY AND CAPITAL RESOURCES

     In general, the Company has financed its operations through internal cash
flow, loans from financial institutions, the issuance of public debt and equity
and the issuance of industrial

                                       22
<PAGE>

revenue bonds. The Company's principal uses of cash are to pay operating
expenses, to service debt and to fund capital expenditures, new hotel
development and permitted distributions to fund some of the taxes allocable to
the partners.

     At December 31, 1999, the Company had $49.7 million of cash and equivalents
and also had $5.0 million of marketable securities, compared to $46.2 million in
cash and cash equivalents and $6.5 million of marketable securities at the end
of 1998. Such amounts are available for completion of new hotels and other
working capital requirements of the Company.

     Net cash provided by operating activities decreased to $41.3 million at the
end of 1999 from $43.5 million at the end of 1998, a decrease of $2.2 million,
or 5.1%, primarily as the Company decreased its trade payables.

     The Company incurred net capital expenditures of $123.6 million and $131.2
million, respectively, for 1999 and 1998. Capital expenditures typically include
capital improvements on existing hotel properties and expenditures for
development of new hotels. Capital expenditures in 1999 included $107.5 million
for new hotel development and $16.1 million for existing hotels. During 1998,
capital expenditures for existing hotels and new hotel development were $19.7
million and $111.5 million, respectively. During 2000, the Company expects
capital expenditures to approximate $48.7 million, representing approximately
$19.1 million for capital improvements on existing hotels and approximately
$29.6 million for continued new hotel development.

     At the end of 1999, total debt was $828.8 million compared with $759.7
million in 1998. The increase is attributable to the hotels opened during 1999
as well as two Scheduled Hotels under construction at the end of 1999. The
current portion of long-term debt was $16.6 million at the end of 1999, compared
with $42.3 million at the end of 1998.

     On June 16, 1999, the Holiday Inn Express Hotel and Conference Center in
Joliet, Illinois was sold to an unrelated party for $6.5 million, resulting in a
gain of approximately $2.4 million.  This hotel served as collateral under the
1994 first mortgage notes.  Under the terms of the indenture, the Company must
provide replacement collateral of equivalent value or apply the proceeds from
the sale to amounts outstanding.  The Company provided replacement collateral in
accordance with the indenture provisions.

     The Company estimates that building, pre-opening and other costs of the two
Scheduled Hotels will require aggregate funding of approximately $24.4 million
from the Company (net of $52.9 million included in construction in progress and
other assets at year end). The Company has obtained loans and commitments of
approximately $51.0 million (approximately $30.0 million of which had been drawn
at year end) on the Scheduled Hotels and expects the remaining 2000 capital
requirements to be funded by cash, cash flow from operations and refinancing of
certain existing hotels.

     Based upon current plans relating to the timing of new hotel development
and loan draw schedules, the Company anticipates that its capital resources will
be adequate to satisfy its 2000 capital requirements for the currently planned
projects and normal recurring capital improvement projects.

                                       23
<PAGE>

     Consistent with the authorization by the partner's Board of Directors, the
Company advanced $3 million to the General Partner to purchase 744,200 shares of
its outstanding Class A Common Stock during 1999, at an approximate average
price of $4.03 per share.  The Board of Directors of the General Partner has
authorized the purchase of an additional $3 million of shares of Class A Common
Stock during 2000.

     The Company did not distribute or accrue any amounts in 1999 to its
partners for income taxes, but distributed or accrued $10.6 million in 1998 to
partners for income taxes. Distributions by the Company  must be made in
accordance with the provisions of the Indentures.

Year 2000

     The Company implemented a program over the past several years to define and
minimize the risks related to transitioning to the year 2000 and beyond.  The
program developed appropriate action steps, while instituting a series of
management processes to coordinate and manage the process.  The process included
corporate oversight and provided for consistent attention to progress made
against planned activities with periodic assessments made by independent parties
and reports to the Board of Directors.  The Company's approach was to subdivide
the program into five distinct areas: 1) Corporate Systems; 2) Hotel Systems; 3)
Embedded Systems; 4) Time Keeping and Payroll Systems and 5) Vendor Compliance.
Each of these categories was broken into several subcategories (hardware and
software systems, critical and non-critical systems and compliance testing)  The
Company analyzed and monitored progress in each subcategory of each category.

     To date the program has been successful and the Company has transitioned
all of its systems to the new millennium. No significant problems were
identified in any of the five areas, and the Company believes the risk related
to future exposure for Year 2000 issues is minimal. The cost associated with the
Year 2000 initiative in 1999 was approximately $0.6 million, including the cost
for scheduled hardware and software upgrades.

Seasonality

     Demand is affected by normally recurring seasonal patterns. For most of the
JQH Hotels, demand is higher in the spring and summer months (March through
October) than during the remainder of the year. Accordingly, the Company's
operations are seasonal in nature, with lower revenue, operating profit and cash
flow in the first and fourth quarters due to decreased travel during the winter
months.

Inflation

     The rate of inflation as measured by changes in the average consumer price
index has not had a material effect on the revenues or operating results of the
Company during the three most recent fiscal years.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

                                       24
<PAGE>

The Company is exposed to changes in interest rates primarily as a result of its
investing and financing activities.  Investing activity includes operating cash
accounts and investments, with an original maturity of three months or less, and
certain balances of various money market and common bank accounts.  The
financing activities of the Company are comprised of long-term fixed and
variable rate debt obligations utilized to fund business operations and maintain
liquidity.   The following table presents the principle cash repayments and
related weighted average interest rates by maturity date for the Company's long-
term fixed and variable rate debt obligations as of December 31, 1999:

                            Expected Maturity Date
                                 (in millions)

<TABLE>
<CAPTION>
                                       2000        2001        2002        2003        2004     Thereafter    Total   Fair Value (d)
<S>                                    <C>        <C>         <C>         <C>         <C>       <C>           <C>     <C>
Long-Term Debt(a)
   $300 Million 1/st/ Mortgage Notes   $  -       $   -       $   -       $   -       $ 300       $  --        $300       $313
   Average interest rate (b)            8.9%        8.9%        8.9%        8.9%        8.9%         --         8.9%
   $90 Million 1/st/ Mortgage Notes    $  -       $   -       $   -       $   -       $   -       $  90        $ 90       $ 94
   Average interest rate(b)             9.8%        9.8%        9.8%        9.8%        9.8%        9.8%        9.8%
   Other fixed-rate debt
    obligations                        $  6       $  14       $  31       $  38       $   6       $ 224        $319       $319
   Average interest rate(b)             8.4%        8.2%        8.7%        8.8%        8.5%        8.6%        8.6%
   Other variable-rate debt
    obligations                        $ 10       $  33       $   1       $  16       $  29       $  31        $120       $120
   Average interest rate(c)             8.8%        8.8%        8.8%        8.8%        8.8%        8.8%        8.8%
</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  December 31, 1999,  that is maturing in the year
reported.  The weighted average interest rate excludes the effect of the
amortization of deferred financing costs.
(d)  The fair values of long-term debt obligations approximate their
respective historical carrying amounts except with respect to the $300 million
1/st/ Mortgage Notes and the $90 million 1/st/ Mortgage Notes. The fair value of
the first mortgage note issues is estimated by obtaining quotes from brokers.

Item 8.  Financial Statements and Supplementary Data.

     Reference is made to the Index to Consolidated Financial Statements and the
Financial Statements following such index in Item 14.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

     None.

                                       25
<PAGE>

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant.

     The Company does not have any directors or officers.  The General Partner
in its capacity as general partner, manages and controls the activities of the
Company.  The following sets forth certain information concerning the directors
and director nominees of the General Partner who are not also officers of the
General Partner.  Information required by this item with respect to officers of
the General Partner is provided in Item 1 of this report.  See "Management."
Finance Corp. and Finance Corp. II each have the same directors and officers as
the General Partner, except that Messrs. Dempsey, Earley, Hart, Lopez-Ona, Moore
and Sullivan are not directors of Finance Corp. or Finance Corp. II.

     Donald H. Dempsey, age 55, became a director of the Company in August 1999.
Mr. Dempsey currently serves as Executive Vice President and Chief Financial
Officer of Equity Inns, Inc., where he also serves on its board of directors.
Equity Inns, Inc. is a large lodging real estate investment trust headquartered
in Germantown, Tennessee, which owns 100 hotels in 36 states.  Mr. Dempsey has
more than 30 years' experience in corporate and financial management within the
hotel industry.  Prior to joining Equity Inns in July 1998, Mr. Dempsey served
as Executive Vice President and Chief Financial Officer of Choice Hotel
Corporation, a publicly traded hotel franchiser, manager and owner of hotels
whose brands include Hampton Inn, Homewood Suites and Embassy Suites.  Mr.
Dempsey was named Senior Vice President and Chief Financial Officer in 1995 of
The Promus Companies Incorporated ("PCI"); from 1993 to 1995, he served as
Senior Vice President of Finance and Administration of the Hotel Division.
From1983 to 1993, he was Vice President of Franchising and Development for the
Hampton Inn Division of PCI.  Mr. Dempsey also held various corporate and
financial management and administrative positions with Holiday Inns from 1969 to
1983.

     Daniel L. Earley, age 57, has been a director of the General Partner since
February 1994.  Since 1985, Mr. Earley has been President, Chief Executive
Officer and a director of Clermont Savings Bank, FSB, a community bank located
Milford, Ohio, which is owned by Mr. Hammons.

     William J. Hart, age 59, has been a director of the General Partner since
December 1993.  He is a partner in the law firm of Husch & Eppenberger, LLC
formerly Farrington & Curtis, P.C., a position he has held since 1970.  Mr.
Hart's firm performs legal services on a regular basis for the Company and
personally for Mr. Hammons.  Mr. Hart has also been a director since 1981 of
Johnston Industries, Inc., a commercial textiles company listed on the New York
Stock Exchange.

     John E. Lopez-Ona, age 42, became a director of the General Partner in May
1996.  Mr. Lopez-Ona was a Managing director of Kidder Peabody & Company, Inc.
an investment banking firm, from March 1990 through March 1995.  Since June 1995
Mr. Lopez-Ona has been the President of Anvil Capital, Inc., a firm owned by
him, which specializes in principal investments.

     James F. Moore, age 58, became a director of the General Partner in May
1995.  Since 1987, Mr. Moore has been Chairman, Chief Executive Office and a
Director of Champion Products, Incorporated, a privately owned manufacturing
company serving the telecommunications industry located in Strafford, Missouri.
Prior to 1987, Mr. Moore had served

                                       26
<PAGE>

as President of the Manufacturing Division of Service Corporation International,
a company listed on the New York Stock Exchange.

     David C. Sullivan, age 60, became a director of the Company in May, 1999.
Mr. Sullivan has been Chairman, Chief Executive Officer and a Director of Resort
Quest International, a company listed on the New York Stock Exchange that
provides vacation rental and property management services, since May 1998.  From
April 1995 to December 1997, Mr. Sullivan was Executive Vice President and Chief
Operating Officer of Promus Hotel Corporation, a publicly traded hotel
franchiser, manager and owner of hotels whose brands include Hampton Inn,
Homewood Suites and Embassy Suites.  From 1993 to 1995, Mr. Sullivan was the
Executive Vice President and Chief Officer  of the Hotel Division of The Promus
Companies Incorporated ("PCI"),  He was the Senior Vice President of Development
and Operations of the Hampton Inn/Homewood Suites Division of PCI from 1991 to
1993.  From 1990 to 1991, Mr. Sullivan was the Vice President of Development of
the Hampton Inn Hotel Division of PCI.

     Compensation of Directors. Each non-employee director was entitled to
receive the following payments for service on the Board during the fiscal year
ended December 31, 1999: (1) $1,000 for each regular Board meeting attended and
(2) $500 for each regular committee meeting attended ($750 per meeting for the
committee chair). In addition, each non-employee director was entitled to
receive on the day following the 1999 annual shareholder meeting: (1) a cash
payment of $10,000, (2) 2,580 shares of the Company's Class A Common Stock with
a fair market value equal to $10,000 on the date of payment and (3) an option to
purchase 10,000 shares of the Company's Class A Common Stock. The stock and
options were issued pursuant to the 1999 Non-Employee Director Stock and Stock
Option Plan. Employee directors are not compensated for their services as
directors or committee members.

Item 11.  Executive Compensation.

Cash Compensation

     The following table sets forth the salary, cash bonus and certain other
forms of compensation paid by the General Partner and its subsidiaries for
services rendered in all capacities during the 1999, 1998 and 1997 fiscal years
to the Chief Executive Officer of the General Partner and the four most highly
compensated executive officers of the General Partner other than the Chief
Executive Officer serving at the end of the 1999 fiscal year (the "named
executive officers").

                          Summary Compensation Table

<TABLE>
<CAPTION>


                                                                                                 Long Term Compensation
                                              Annual Compensation                                        Awards
                                   Fiscal     -------------------          All Other                     ------
Name and Principal Positions        Year     Salary ($)  Bonus ($)     Compensation ($)     Securities Underlying Options (#)
----------------------------       ------    ----------  ---------    ------------------    ---------------------------------
<S>                                <C>       <C>         <C>          <C>                   <C>
</TABLE>

                                       27
<PAGE>

<TABLE>
<S>                                <C>    <C>         <C>            <C>                       <C>
John Q. Hammons                    1999   $250,000    $90,000        $       --                    --
Chairman of the Board and          1998    200,000     50,000                --                200,000 (b)
Chief Executive Officer            1997    150,000         --                --                    --

Kenneth J. Weber (a)               1999    260,000     72,000             1,300(c)                 --
Executive Vice President and       1998    169,840     57,500                --                100,000 (b)
Chief Financial Officer            1997         --         --                --                    --

Lonnie A. Funk                     1999    145,000     50,000             1,675(c)                 --
Senior Vice President              1998    125,000     22,500             1,449(c)              40,000 (b)
Operations                         1997    112,500     20,000             1,453(c)                 --

Debra M. Shantz                    1999    140,000     50,000             2,709(c)                 --
Corporate Counsel                  1998    135,000     47,500             1,544(c)              70,000 (b)
                                   1997     97,500     40,000             1,139(c)                 --

Steven E. Minton                   1999    135,000     50,000             1,787(c)                 --
Senior Vice President,             1998    130,000     45,000             1,563(c)              40,000 (b)
Architecture                       1997    118,000     40,000             1,275(c)                 --
</TABLE>

_________________
(a)  Mr. Weber joined the Company in April of 1998.
(b)  Comprised of options with an exercise price of $7.375 per share.
(c)  Matching contributions to Company's 401(k) Plan.



<TABLE>
<CAPTION>
Option Holdings
                                      Fiscal Year-End Option Values
                                          Number of Unexercised                                 Value of Unexercised
                                                 Options                                        In-the-Money Options
Name                              Exercisable            Unexercisable                  Exercisable           Unexercisable
----                              -----------            -------------                  -----------           -------------
<S>                               <C>                    <C>                            <C>                   <C>
John Q. Hammons                     50,000                 150,000                          --                     --
Kenneth J. Weber                    25,000                  75,000                          --                     --
Lonnie Funk                         10,000                  30,000                          --                     --
Debra M. Shantz                     17,500                  52,500                          --                     --
Steven A. Minton                    10,000                  30,000                          --                     --
</TABLE>

     The $7.375 exercise price per share of the stock options granted on June 5,
1998 (which comprise all of the options held by the Named Executive Officers) is
greater than the $3.875 closing price of the Company's Class A Common Stock as
reported on the New York Stock Exchange on December 31, 1999, thus no options
are "In the Money."  The remaining options vest  in three equal annual
installments on June 5, 2000, 2001 and 2002.

401(k) Plan

     Effective January 1, 1996, the General Partner adopted a contributory
retirement plan (the "401(k) Plan") for its employees age 21 and over with at
least one year of service to the General Partner.  The 401(k) Plan is designed
to provide tax-deferred income to the General Partner's employees in accordance
with the provisions of Section 401(k) of the Internal Revenue Code of

                                       28
<PAGE>

1986. The 401(k) Plan provides that the General Partner will make a matching
contribution to each participant's account equal to 50% of such participant's
eligible contributions up to a maximum of 3% of such participant's annual
compensation.

Employment Agreements

     The General Partner entered into an employment agreement with Kenneth J.
Weber, effective April 27, 1998. Under that agreement, Mr. Weber's annual base
salary is $260,000, plus a discretionary bonus of up to 35% of his base salary,
with such annual increases in compensation as may be determined by the
Compensation Committee of the General Partner. The agreement contains
significant non-competition provisions extending for a period of one year
following termination of the agreement. The initial term of the agreement is for
three years.

     The General Partner entered into an employment agreement with Debra M.
Shantz, dated as of May 1, 1995 as amended on October 31, 1997. Under the
agreement, Ms. Shantz's annual base salary is $135,000, plus a discretionary
bonus, with such annual increases in compensation as may be determined by the
Compensation Committee of the General Partner. The agreement terminates October
31, 2000.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

     Mr. Hammons is the beneficial owner of all 16,043,900 limited partnership
units of the Company, representing 71.69% of the total equity in the Company.
The General Partner owns all 6,336,100 general partner units of the Company,
representing 28.31% of the total equity of the Company.

Item 13. Certain Relationships and Related Transactions.

     Mr. Hammons and Anvil Capital, an investment and consulting firm owned by
Mr. Lopez-Ona, a  director of the General Partner, formed a limited liability
company to provide personal financial advisory services, through which they have
invested in securities of one or more companies in industries unrelated to the
Company's business.

     Mr. Hart is a non-employee director of the General Partner, and is a
partner in the law firm of Husch & Eppenberger, LLC, which performs legal
services on a regular basis for the Company and personally for Mr. Hammons.  The
Company paid such firm approximately $276,000 in legal fees during the fiscal
year ended December 31, 1999.

     The Company is controlled by Mr. Hammons through his control of the General
Partner, the sole general partner of the Company.  His equity interest in the
Company (based on his beneficial ownership of 244,300 shares of Class A Common
Stock of the General Partner, all 294,100 shares of Class B Common Stock of the
General Partner and all 16,043,900 limited partnership units of the Company (the
"LP Units") is 76.8%.  There are significant potential conflicts of interests
between Mr. Hammons as a limited partner of the Company, and the holders of
Class A Common Stock of the General Partner, which conflicts may be resolved in
favor of Mr. Hammons.

                                       29
<PAGE>

     Holders of LP Units have the right to require the redemption of their LP
Units.  This redemption right will be satisfied, at the sole option of the
General Partner, by the payment of the then cash equivalent thereof or by the
issuance of shares of Class A Common Stock on a one-for-one basis.  Mr. Hammons
beneficially owns all 16,043,900 LP Units.  If Mr. Hammons, as a holder of LP
Units, requires the Company to redeem LP Units, the non-employee directors of
the General Partner would decide, consistent with their fiduciary duties as to
the best interests of the Company, whether to redeem the LP Units for cash or
for shares of Class A Common Stock.  Mr. Hammons would not vote or otherwise
participate in the decision of the non-employee directors.  Mr. Hammons has
informed the Company that he has no current plan to require the Company to
redeem his LP Units.

     During 1999, the Company provided management services to five hotels not
owned by the Company (the "Managed Hotels") pursuant to management contracts
(the "Management Contracts"). Four of the Managed Hotels are owned by Mr.
Hammons and one is owned 50% by Mr. Hammons; 25% by Jacqueline A. Dowdy, the
Secretary and a director of the General Partner; and 25% by Lonnie A. Funk, an
employee of the General Partner. Mr. Funk acquired his interest in April, 1999
from Daniel L. Earley. Management fees of 3% to 5% of gross revenues were paid
to the Company by the Managed Hotels in the aggregate amount of $845,000 in the
fiscal year ended December 31, 1999. Each of the Management Contracts is for an
initial term of 20 years, which automatically extends for four periods of five
years, unless otherwise canceled. In addition to the management fees paid by the
Managed Hotels to the Company in that year, the Managed Hotels reimbursed the
Company for a portion of the salaries paid by the Company to its five regional
vice presidents, whose duties include management services related to the Managed
Hotels, and for certain marketing and other expenses allocated to the Managed
Hotels. Such reimbursed services and expenses aggregated $132,000 in the fiscal
year ended December 31, 1999.

     The Company has an option granted by Mr. Hammons or persons or entities
controlled by him to purchase the Managed Hotels.  The options are effective
until February 2009.  If an option is exercised, the purchase price is based on
a percentage of the fair market value of the Managed Hotel as determined by an
appraisal firm of national standing.  One hotel owned by the Company and two
Managed Hotels are located in Springfield, Missouri.  These hotels are
potentially competing with one another for customers.  The Company, however,
believes that these hotels do not significantly compete with one another due to
their respective locations and attributes.

     Mr. Hammons has a 45% ownership interest in Winegardner & Hammons, Inc.
("WHI").  All of the hotels owned by the Company (the "Owned Hotels") have
contracted with WHI to provide accounting and other administrative services.
The accounting and administrative charges expensed by the Owned Hotels were
approximately $1,440,000 in the fiscal year ended December 31, 1999.  The fee
may increase if the number of hotels for which accounting and administrative
services are performed drops below 35 hotels.  The accounting services contract
expired in June of 2002.

     The Company leases space in the John Q. Hammons Building for its
headquarters from a Missouri general partnership, of which Mr. Hammons is a 50%
partner and the remaining 50% is collectively held by other employees, including
Jacqueline A. Dowdy, the Secretary and a director of the General Partner, who is
a 9.5% partner. Pursuant to four lease agreements,

                                       30
<PAGE>

expiring December 31, 2001, the Company paid monthly rental payments of
approximately $19,500 in 1999. The Company made aggregate annual lease payments
to the Missouri general partnership of approximately $234,000 in 1999.

     Mr. Hammons also owns trade centers adjacent to three of the Owned Hotels
(the "JQH Trade Centers"). The Company leases the convention space in the JQH
Trade Center located in Portland, Oregon from Mr. Hammons pursuant to a long-
term lease expiring in 2004, requiring annual payments of approximately
$300,000. With respect to the other two JQH Trade Centers, the Company makes
nominal annual lease payments to Mr. Hammons. The Company has assumed
responsibility for all operating expenses of the JQH Trade Centers.

     The Company leases the real estate for the Company's Chateau on the Lake
Resort, opened in mid-1997, in Branson, Missouri, from Mr. Hammons.  Annual rent
was $150,000 in 1999, an amount based on adjusted gross revenues from room sales
on the property. The lease term is 50 years, with an option to renew for an
additional 10 years.  The Company also has an option to purchase the land after
March 1, 2118 at a proposed transfer price of the greater of $3,000,000 or the
current appraised value.

     The Company also leases the real estate for the Company's Embassy Suites
hotel in Little Rock, Arkansas which opened in the fall of 1997, from Mr.
Hammons. Annual rent is $120,000 per year until the end of 2001. Rent thereafter
is adjusted based on movement in the Consumer Price Index. The lease term is 40
years. The Company has an option to purchase the land at any time during the
first 10 years of the lease term, for the greater of $1,900,000 or the current
appraised value.

     The Company also leases the real estate for the Company's Renaissance
Suites Hotel in Charlotte, NC, which opened in December of 1999 from Tulsa Hills
Investments, Inc., an Ohio corporation, of which Mr. Hammons is a 99% owner and
Jacqueline A. Dowdy is a 1% owner.  The lease term is 99 years.  Commencing
October 15, 1997, annual rent is $80,000 in years one and two, $120,000 in years
three through five, $124,800 in years six through ten with cost of living
adjustments for each year thereafter.

     Mr. Hammons owns parcels of undeveloped land throughout the United States.
Although there are no current plans to do so, the Company may purchase or lease
one or more of these parcels in the future in order to develop hotels.  Since
Mr. Hammons controls the Company, such transactions would not be arms-length
transactions but will be subject to restrictions contained in the  indentures
relating to the Company's outstanding mortgage notes due in 2004 and 2005.

     The General Partner receives no management fee or similar compensation in
connection with its management of the Company.  The General Partner receives the
following remuneration from the Company:  (i) distributions, if any, in respect
of its equity interest in the Company; and (ii) reimbursement for all direct and
indirect costs and expenses incurred by the General Partner for or on behalf of
the Company and all other expenses necessary or appropriate to the conduct of
the business of, and allocable to, the Company.

                                       31
<PAGE>

     The Company is unaware of any other transactions to which the Company is a
party in which any director or executive officer of the Company has or will have
a direct or indirect material interest.

                                    PART IV

Item 14. Exhibits, Financial Schedules, and Reports on Form 8-K.

14(a)(1)  Financial Statements

     Reference is made to the Index to Consolidated Financial Statements and the
Consolidated Financial Statements following such index.

14(a)(2)  Financial Statement Schedules

     All schedules have been omitted because the required information in such
schedules is not present in amounts sufficient to require submission of the
schedule or because the required information is included in the consolidated
financial statements or is not required.

14(a)(3)  Exhibits

     Exhibits required to be filed by Item 601 of Regulation S-K are listed in
the Exhibit Index attached hereto, which is incorporated by reference. Set forth
below is a list of management contracts and compensatory plans and arrangements
required to be filed as exhibits by Item 14(c).

      10.5  Form of Option Purchase Agreement
      10.8  Employment Agreement between the General Partner and Debra M. Shantz
            dated as of May 1, 1995 as amended on October 31, 1997.
     10.13  Employment Agreement between the General Partner and Kenneth J.
            Weber dated as of April 27, 1998
     10.18  1994 Stock Option Plan of the General Partner
     10.19  1999 Non-Employer Director Stock and Stock Option Plan of the
            General Partner

14(b)     Reports on Form 8-K

     No reports on Form 8-K were filed during the quarter ended December 31,
1999.

14(c)     Exhibits

     Reference is made to the exhibit index which has been filed with the
exhibits.

14(d)     Financial Statements

                                       32
<PAGE>

                                  SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized, in the City of
Springfield, Missouri, on the 29th day of March, 2000.


                                  JOHN Q. HAMMONS HOTELS, L.P.

                                  By:  John Q. Hammons Hotels, Inc.,
                                    its general partner


                                  By: /s/ John Q. Hammons
                                     ------------------------
                                    John Q. Hammons
                                    Chairman and Founder


                                  JOHN Q. HAMMONS HOTELS FINANCE
                                  CORPORATION

                                  By: /s/ John Q. Hammons
                                      -----------------------
                                    John Q. Hammons
                                    Chairman and Founder

                                  JOHN Q. HAMMONS HOTELS FINANCE
                                  CORPORATION II


                                  By: /s/ John Q. Hammons
                                      -----------------------
                                    John Q. Hammons
                                    Chairman and Founder

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
in their capacities at John Q. Hammons Hotels, Inc. as general partner of John
Q. Hammons Hotels, L.P., and in the capacities indicated for John Q. Hammons
Hotels Finance Corporation, and John Q Hammons Hotels Finance Corporation II, on
March 29, 2000.

                                       33
<PAGE>

<TABLE>
<CAPTION>
       Signatures                                              Title
       ----------                                              -----
<S>                             <C>
/s/ John Q. Hammons             Chairman and Founder of John Q. Hammons Hotels, Inc., John Q.
--------------------------      Hammons Hotels Finance Corporation and John Q. Hammons Finance
John Q. Hammons                 Corporation II (Principal Executive Officer)

/s/ Kenneth J. Weber            Director, Chief Financial Officer of John Q. Hammons Hotels, Inc.
--------------------------      [John Q. Hammons Hotels Financial Corporation and John Q. Hammons Finance
Kenneth J. Weber                Corporation II] (Principal Financial and Accounting Officer)

/s/ Jacqueline A. Dowdy         Director, Secretary of John Q. Hammons Hotels, Inc., John Q. Hammons
--------------------------      Hotels Finance Corporation and John Q. Hammons Finance Corporation II
Jacqueline A. Dowdy

/s/ William J. Hart             Director of John Q. Hammons Hotels, Inc.
--------------------------
William J. Hart

/s/ Daniel L. Earley            Director of John Q. Hammons Hotels, Inc.
--------------------------
Daniel L. Earley

/s/ James F. Moore              Director of John Q. Hammons Hotels, Inc.
--------------------------
James F. Moore

/s/ John E. Lopez-Ona           Director of John Q. Hammons Hotels, Inc.
--------------------------
John E. Lopez-Ona

/s/ Donald H. Dempsey           Director of John Q. Hammons Hotels, Inc.
--------------------------
Donald H. Dempsey
</TABLE>

                                      34
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
No.          Title                                                                                                 Page
----         -----                                                                                                 ---
<S>          <C>                                                                                                   <C>
     *3.1    Second Amended and Restated Agreement of Limited Partnership of the Company (the "Partnership
             Agreement")
      3.2    Amendment No. 1 to Partnership Agreement (incorporated by reference to the Company's Annual
             Report on Form 10-K for the fiscal year ended December 30, 1994)
    **3.3    Amendment No. 2 to Partnership Agreement
  ****3.4    Certificate of Limited Partnership of the Company filed with the Secretary of State of the State
             of Delaware
     *3.5    Restated Certificate of Incorporation of the General Partner
   ***3.6    Certificate of Incorporation of John Q. Hammons Hotels Finance Corporation II
   **10.1    1994 Note Indenture
   **10.2    1995 Note Indenture
   **10.3    Embassy Suites License Agreement
   **10.4    Form of Option Purchase Agreement
    *10.5    Collective Bargaining Agreement between East Bay Hospitality Industry Association, Inc. and
             Service Employee's International Union
     10.6    Collective Bargaining Agreement between Hotel Employee and Restaurant Employee Union Local 49 and
             Holiday Inn Sacramento--Capitol Plaza, for 06/01/98 to 5/31/01
    *10.7    Letter Agreement re: Hotel Financial Services for Certain Hotels Owned and Operated by John Q.
             Hammons or JQH Controlled Companies
     10.8    Employment Agreement between John Q. Hammons Hotels, Inc. and Debra M. Shantz dated as of May
             1,1995 as amended on October 31, 1997 (incorporated by reference to the Company's Annual Report
             on Form 10-K for the fiscal year ended January 1, 1999)
 ***10.9a    John Q. Hammons Building Lease Agreement - 9th Floor (6000 sq. ft.)
 ***10.9b    John Q. Hammons Building Lease Agreement - 7th Floor (2775 sq. ft.)
 ***10.9c    John Q. Hammons Building Lease Agreement - 7th Floor (2116 sq. ft.)
 ***10.9d    John Q. Hammons Building Lease Agreement - 8th Floor (6000 sq. ft.)
   *10.10    Triple Net Lease
   *10.11    Lease Agreement between John Q. Hammons and John Q. Hammons Hotels, L.P.
    10.13    Employment Agreement between John Q. Hammons Hotels, Inc. and Kenneth J. Weber dated as of April
             27, 1998 (incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal
             year ended January 1, 1999)
 ***10.14    Ground lease between John Q. Hammons and John Q. Hammons-Branson, L.P. - (Chateau on the Lake,
             Branson, Missouri)
 ***10.15    Ground lease between John Q. Hammons and John Q. Hammons-Hotels Two, L.P. - (Little Rock,
             Arkansas)
   *10.16    Operating Agreement of Rivercenter Plaza Development Co., L.C., an Iowa limited liability company
   *10.17    Agreement of Limited Partnership of John Q. Hammons Hotels, L.P. Two
   *10.18    1994 Stock Option Plan
****10.19    Agreement of Limited Partnership of John Q. Hammons Hotels--Montgomery L.P.
    10.20    1999 Non-Employee Director Stock and Stock Option Plan of the General Partner (incorporated by
             reference to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1999)
     12.1    Computations of Ratio of Earnings to Fixed Charges of the Company
       27    Financial Data Schedule
</TABLE>

     ________________________

        *  Incorporated by reference to the General Partner's Registration
           Statement on Form S-1, No. 33-84570.
       **  Incorporated by reference to the Company's Registration Statement on
           Form S-4, No. 33-73340.


                                       35
<PAGE>

      ***  Incorporated by reference to the Company's Annual Report on Form 10-K
           for the Fiscal Year Ended January 3, 1997.

     ****  Incorporated herein by reference to the Company's Registration
           Statement (Registration No. 33-99614) previously filed with the
           Commission.

                                       36
<PAGE>

                                 EXHIBIT 12.1


                          JOHN Q. HAMMONS HOTELS, L.P
                 HISTORICAL RATIO OF EARNINGS TO FIXED CHARGES
                                (000's omitted)

<TABLE>
<CAPTION>
                                                   1995           1996           1997           1998            1999
                                               -------------  -------------  -------------  -------------  --------------
<S>                                            <C>            <C>            <C>            <C>            <C>
HISTORICAL EARNINGS:
Net income (loss) before minority interest,
 provision for income taxes, extraordinary
 item and cumulative effect of change in
 accounting principle                                $18,729        $18,524        $ 8,791        $   338        $  (973)

Add:
Interest, amortization or deferred
 financing fees and other fixed  charges
 (excluding interest capitalized)                     28,904         36,337         45,086         58,257         63,456
                                                     -------        -------        -------        -------        -------
   Historical earnings                               $47,633        $54,861        $53,877        $58,595        $62,483
                                                     =======        =======        =======        =======        =======
FIXED CHARGES:
Interest expense and
 amortization of deferred
 financing fees                                      $28,447        $35,620        $44,325        $57,286        $62,209

Interest capitalized                                   5,270          7,162         10,259          6,163          6,770

Interest element of rentals                              457            717            761            971          1,247
                                                     -------        -------        -------        -------        -------
   Fixed charges                                     $34,174        $43,499        $55,345        $64,420        $70,226
                                                     -------        -------        -------        -------        -------
RATIO OF EARNINGS TO FIXED CHARGES
 (A)                                                    1.39           1.26           0.97           0.91           0.89
                                                     =======        =======        =======        =======        =======
</TABLE>

(A) In computing the ratio of earnings to fixed charges, earnings have been
    based on income from operations before income taxes and fixed charges
    (exclusive of interest capitalized) and fixed charges consist of interest
    and amortization of deferred financing fees (including amounts capitalized)
    and the estimated interest portion of rents (deemed to be one-third of
    rental expense).

                                       37
<PAGE>

John Q. Hammons Hotels, L.P.



Consolidated Financial Statements
As of December 31, 1999 and January 1, 1999

Together with Auditors' Report
<PAGE>

Report of Independent Public Accountants
----------------------------------------


To the Partners of
     John Q. Hammons Hotels, L.P.:


We have audited the accompanying consolidated balance sheets of John Q. Hammons
Hotels, L.P. (Note 1) as of December 31, 1999 and January 1, 1999 and the
related consolidated statements of operations, changes in equity and cash flows
for each of the three fiscal years ended December 31, 1999, January 1, 1999 and
January 2, 1998.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of John Q.
Hammons Hotels, L.P. (Note 1) as of December 31, 1999 and January 1, 1999 and
the results of their operations and their cash flows for each of the three
fiscal years ended December 31, 1999, January 1, 1999 and January 2, 1998 in
conformity with generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, effective in
the first quarter of fiscal 1999, the Partnership changed its method of
accounting for costs of start-up activities, including preopening expenses.



Cincinnati, Ohio,                                            Arthur Andersen LLP
     February 10, 2000
<PAGE>

John Q. Hammons Hotels, L.P. (Note 1)

Consolidated Balance Sheets
(000's omitted)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                 Fiscal           Fiscal
                                                                                  1999              1998
                                                                                 Yearend          Yearend
                                                                               ----------         ---------
<S>                                                                            <C>                <C>
ASSETS
------
CASH AND EQUIVALENTS (Restricted cash of $1,323 and $860 in 1999 and
 1998, respectively) (Note 2)                                                  $   49,727         $  46,233

MARKETABLE SECURITIES (Note 2)                                                      4,982             6,533

RECEIVABLES:
  Trade, less allowance for doubtful accounts of $226 and $206 in 1999
   and 1998, respectively                                                          11,677             8,852
  Management fees (Note 3)                                                             63                62
  Construction reimbursements and other                                             2,370             5,269

INVENTORIES                                                                         1,349             1,205

PREPAID EXPENSES AND OTHER                                                          1,699             1,089
                                                                               ----------         ---------
          Total current assets                                                     71,867            69,243
                                                                               ----------         ---------

PROPERTY AND EQUIPMENT, at cost (Notes 2, 5 and 6):
  Land and improvements                                                            55,818            47,982
  Buildings and improvements                                                      683,462           605,586
  Furniture, fixtures and equipment                                               270,146           239,648
  Construction in progress                                                         53,462            63,078
                                                                               ----------         ---------
                                                                                1,062,888           956,294
  Less- Accumulated depreciation and amortization                                (227,411)         (194,860)
                                                                               ----------         ---------
                                                                                  835,477           761,434

DEFERRED FINANCING COSTS, FRANCHISE FEES
 AND OTHER, net (Notes 2, 4 and 5)                                                 26,968            45,809
                                                                               ----------         ---------
                                                                               $  934,312         $ 876,486
                                                                               ==========         =========
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
<PAGE>

John Q. Hammons Hotels, L.P. (Note 1)

Consolidated Balance Sheets
(000's omitted)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                Fiscal            Fiscal
                                                                                 1999              1998
                                                                                Yearend           Yearend
                                                                                --------          --------
<S>                                                                             <C>               <C>
LIABILITIES AND EQUITY
----------------------
LIABILITIES:
  Current portion of long-term debt (Note 5)                                    $ 16,569          $ 42,256
  Accounts payable, including construction payables of approximately
   $350 and $2,203, respectively                                                  11,877            13,141

  Accrued expenses-
     Payroll and related benefits                                                  7,720             6,843
     Sales and property taxes                                                     10,368             9,558
     Insurance (Notes 2 and 3)                                                     7,576            10,061
     Interest                                                                     12,873            12,540
     Utilities, franchise fees and other                                           6,546             5,568
  Accrued dividends                                                                    -             2,936
                                                                                --------          --------
          Total current liabilities                                               73,529           102,903

  Long-term debt (Note 5)                                                        812,274           717,460
  Other obligations and deferred revenue                                           9,402            10,883
                                                                                --------          --------
          Total liabilities                                                      895,205           831,246
                                                                                --------          --------

COMMITMENTS AND CONTINGENCIES (Note 6)

EQUITY (Note 1):
  Contributed capital                                                             96,436            96,436
  Partners' and other deficits, net                                              (57,329)          (51,196)
                                                                                --------          --------
          Total equity                                                            39,107            45,240
                                                                                --------          --------
                                                                                $934,312          $876,486
                                                                                ========          ========
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
<PAGE>

John Q. Hammons Hotels, L.P. (Note 1)

Consolidated Statements of Operations
(000's omitted)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                      Fiscal Year Ended
                                                                         ---------------------------------------------
                                                                           1999              1998               1997
                                                                         --------          --------           --------
<S>                                                                      <C>               <C>                <C>
REVENUES (Note 8):
  Rooms                                                                  $229,807          $211,989           $195,296
  Food and beverage                                                       101,231            91,982             86,183
  Meeting room rental and other                                            25,410            22,159             20,795
                                                                         --------          --------           --------
          Total revenues                                                  356,448           326,130            302,274
                                                                         --------          --------           --------

OPERATING EXPENSES (Notes 3, 4 and 6):
  Direct operating costs and expenses-
     Rooms                                                                 59,507            54,600             50,265
     Food and beverage                                                     68,799            64,174             62,383
     Other                                                                  3,667             3,389              3,385
  General, administrative, sales and management service expenses          104,876            95,500             85,766
  Repairs and maintenance                                                  15,059            13,438             12,578
  Depreciation and amortization (Note 8)                                   45,669            45,580             34,781
                                                                         --------          --------           --------
          Total operating expenses                                        297,577           276,681            249,158
                                                                         --------          --------           --------

INCOME FROM OPERATIONS (Note 8)                                            58,871            49,449             53,116

OTHER (INCOME) EXPENSE:
  Interest expense and amortization of deferred financing fees,
   net of $3,161, $3,794 and $1,279 of interest income in 1999,
   1998 and 1997, respectively (Note 2(e))                                 62,209            57,286             44,325
  Gain on sales of property and equipment (Note 8)                         (2,365)           (8,175)                 -
                                                                         --------          --------           --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT
  OF CHANGE IN ACCOUNTING PRINCIPLE                                          (973)              338              8,791

  Extraordinary item; cost of early extinguishment of debt
   (Note 5)                                                                  (194)           (2,249)                 -
                                                                         --------          --------           --------

INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE                                                                (1,167)           (1,911)             8,791

  Cumulative effect of change in accounting principle (Note 2)             (1,819)                -                  -
                                                                         --------          --------           --------

NET INCOME (LOSS) (Note 2(j))                                            $ (2,986)         $ (1,911)          $  8,791
                                                                         ========          ========           ========
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
<PAGE>

John Q. Hammons Hotels, L.P. (Note 1)

Consolidated Statements of Changes in Equity (1)
(000's omitted)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                Partners and
                                            Contributed Capital             Other Equity (Deficit)
                                        -------------------------        --------------------------
                                         General          Limited          General          Limited
                                         Partner          Partner          Partner          Partner          Total
                                        --------          -------        ---------         --------         --------
<S>                                     <C>               <C>            <C>               <C>              <C>
Balance, Yearend 1996                   $ 96,436          $     -        $ (80,236)        $ 33,662         $ 49,862
Distributions (Note 1(b))                      -                -             (150)            (565)            (715)
Net income                                     -                -            2,489            6,302            8,791
                                        --------          -------        ---------         --------         --------
Balance, Yearend 1997                     96,436                -          (77,897)          39,399           57,938
Distributions (Note 1(b))                      -                -             (150)         (10,637)         (10,787)
Net loss                                       -                -             (541)          (1,370)          (1,911)
                                        --------          -------        ---------         --------         --------
Balance, Yearend 1998                     96,436                -          (78,588)          27,392           45,240
Distributions (Note 1(b))                      -                -             (150)               -             (150)
Advances to General Partner to
 purchase treasury stock (Note
 1(b))                                         -                -           (2,997)               -           (2,997)
Net loss                                       -                -             (845)          (2,141)          (2,986)
                                        --------          -------        ---------         --------         --------
Balance, Yearend 1999                   $ 96,436          $     -        $ (82,580)        $ 25,251         $ 39,107
                                        ========          =======        =========         ========         ========
</TABLE>

(1)  For periods presented, there are no elements of other comprehensive income
     as defined by the Financial Accounting Standards, No. 130 Reporting
                                                               ---------
     Comprehensive Income.
     --------------------

The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
<PAGE>

John Q. Hammons Hotels, L.P. (Note 1)

Consolidated Statements of Cash Flows
(000's omitted)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                          Fiscal Year Ended
                                                                           -----------------------------------------------
                                                                              1999               1998               1997
                                                                           ---------          ---------          ---------
<S>                                                                        <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                        $  (2,986)         $  (1,911)         $   8,791
  Adjustments to reconcile net income (loss) to cash
  provided by operating activities-
     Depreciation, amortization and loan cost amortization                    47,655             48,448             37,662
     Extraordinary item (Note 5)                                                 194              2,249                  -
     Cumulative effect of change in accounting principle
     (Note 2)                                                                  1,819                  -                  -
     Gain on sales of property and equipment (Note 8)                         (2,365)            (8,175)                 -
  Changes in certain assets and liabilities-
     Receivables                                                                  73             (2,742)            (4,826)
     Inventories                                                                (144)              (112)              (187)
     Prepaid expenses and other                                                 (610)               297                542
     Accounts payable                                                         (1,264)             1,909            (18,745)
     Accrued expenses                                                            513                698              3,805
     Other obligations and deferred revenue                                   (1,481)             2,983                877
                                                                           ---------          ---------          ---------
          Net cash provided by operating activities                           41,404             43,644             27,919
                                                                           ---------          ---------          ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment, net                                  (123,620)          (131,183)          (179,385)
  Proceeds from sales of property and equipment (Note 8)                       6,500             43,577                  -
  Franchise fees and other                                                    15,353            (11,528)            (3,499)
  (Purchase) sale of marketable securities, net                                1,551              6,209            (10,387)
                                                                           ---------          ---------          ---------
          Net cash used in investing activities                             (100,216)           (92,925)          (193,271)
                                                                           ---------          ---------          ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Loan financing fees                                                           (738)            (2,521)            (3,069)
  Proceeds from borrowings                                                   104,477            260,771            186,684
  Repayments of debt                                                         (35,350)          (196,846)           (22,036)
  Distributions to partners                                                   (3,086)            (7,851)              (715)
  Advances to general partner to purchase treasury stock                      (2,997)                 -                  -
                                                                           ---------          ---------          ---------
          Net cash provided by financing activities                           62,306             53,553            160,864
                                                                           ---------          ---------          ---------
          Increase (decrease) in cash and equivalents                          3,494              4,272             (4,488)

CASH AND EQUIVALENTS, beginning of period                                     46,233             41,961             46,449
                                                                           ---------          ---------          ---------

CASH AND EQUIVALENTS, end of period                                        $  49,727          $  46,233          $  41,961
                                                                           =========          =========          =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  cash paid for interest, net of amounts capitalized                       $  63,312          $  58,733          $  43,399
                                                                           =========          =========          =========

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITES:
  Note receivable from sale of property and equipment (Note 8)             $       -          $  11,900          $       -
                                                                           =========          =========          =========
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)
--------------------------------------------------------------------------------

(1)  Basis of Presentation-
     ---------------------

     (a) Entity Matters--The accompanying consolidated financial statements
         --------------
         include the accounts of John Q. Hammons Hotels, L.P. and its wholly-
         owned subsidiaries (the Partnership), John Q. Hammons Hotels Finance
         Corporation, a corporation with nominal assets and no operations, the
         catering corporations, which consist of separate corporations for each
         hotel location chartered to own the respective food and liquor licenses
         as well as operate the related food and beverage facilities and certain
         wholly-owned subsidiaries which consist of certain hotel operations. As
         of fiscal yearend 1999, 1998 and 1997, the Partnership had 45, 42 and
         45, respectively, hotels in operation of which 29 in 1999, 28 in 1998
         and 35 in 1997 operate under the Holiday Inn and Embassy Suites trade
         names. The Partnership's hotels are located in 19 states throughout the
         United States.

         In conjunction with a public offering of debt securities in February,
         1994 and a public offering of equity securities in November, 1994 by
         John Q. Hammons Hotels, Inc., J.Q.H. Hotels, L.P., which owned and
         operated ten hotel properties, obtained through transfers or
         contributions from Mr. John Q. Hammons (Mr. Hammons) or enterprises
         which he controlled, twenty-one additional operating hotel properties,
         equity interests in two hotels under construction, the stock of the
         catering corporations and management contracts relating to all of Mr.
         Hammons' hotels. Upon consummation of these transactions J.Q.H. Hotels,
         L.P. changed its name to John Q. Hammons Hotels, L.P. and the
         allocation of income or loss was modified from 1% to its general
         partner and 99% to its limited partner to 10% and 90%, respectively,
         upon completion of the public debt offering and to 28.31% to its
         general partner and 71.69% to its limited partner upon completion of
         the public equity offering.

         The Partnership is directly or indirectly owned and controlled by Mr.
         Hammons, as were all enterprises which transferred or contributed net
         assets to the Partnership. Accordingly, the accompanying financial
         statements present, as a combination of entities under common control
         as if using the pooling method of accounting, the financial position
         and related results of operations of all entities on a consolidated
         basis for all periods presented. All significant balances and
         transactions between the entities and properties have been eliminated.

     (b) Partnership Matters--A summary of selected provisions of the
         -------------------
         Partnership agreement and other matters are as follows:

         General and Limited Partner: John Q. Hammons Hotels, Inc. was formed in
         ----------------------------
         September 1994 and had no operations or assets prior to its initial
         public offering of 6,042,000 Class A common shares at $16.50 per share
         on November 23, 1994. Immediately prior to the initial public offering,
         Mr. Hammons contributed approximately $5 million in cash in exchange
         for 294,100 shares of Class B common stock (which represents
         approximately 72% of the voting control of the company). John Q.
         Hammons Hotels, Inc. contributed the approximate $96 million of the net
         proceeds from the Class A and Class B common stock offerings to the
         Partnership in exchange for an approximate 28% general partnership
         interest.

         As a result of the public equity offering, John Q. Hammons Hotels, Inc.
         became the sole general partner and John Q. Hammons Revocable Living
         Trust and Hammons, Inc., entities beneficially owned and controlled by
         Mr. Hammons, became its limited partners.
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)                                                                2
--------------------------------------------------------------------------------

       Allocation of Income, Losses and Distributions: Income, losses and
       ----------------------------------------------
       distributions of the Partnership will generally be allocated between the
       general partner and the limited partners based on their respective
       ownership interests of approximately 28% and 72%.

       In the event the Partnership has taxable income, distributions are to be
       made to the partners in an aggregate amount equal to the amount that the
       Partnership would have paid for income taxes had it been a C corporation
       during the applicable period.  Aggregate tax distributions will first be
       allocated to the general partner, if applicable, with the remainder
       allocated to the limited partners.  There were no distributions to the
       limited partner for taxes for the fiscal year ended 1999.  Distributions
       to the limited partner for taxes approximated $10,637 and $565 for the
       fiscal years ended 1998 and 1997, respectively.

       In 1998 and 1999, the Board of Directors of John Q. Hammons Hotels, Inc.
       authorized the purchase of up to $3.0 million of its stock during fiscal
       1999 and 2000.  As of December 31, 1999, $2,997 of stock had been
       purchased.  For financial reporting purposes, the advances by the
       partnership to its general partner to purchase stock have been reflected
       as a reduction of equity in the accompanying consolidated balance sheet
       and statement of changes in equity.

       Additional Capital Contributions: In the event proceeds from the sale of
       --------------------------------
       the original twenty hotel properties (or applicable replacement
       collateral) which secure the $300 million first mortgage notes (1994
       notes) (Note 5) are insufficient to satisfy amounts due on the 1994
       notes, Mr. Hammons and Hammons, Inc. (as general partners at the time the
       1994 notes were secured) are severally obligated to contribute up to $135
       million and $15 million, respectively, to satisfy amounts due, if any.
       In the event proceeds from the sale of the original eight hotel
       properties (or applicable replacement collateral) which secure the $90
       million first mortgage notes (1995 notes) (Note 5) are insufficient to
       satisfy amounts due on the 1995 notes, Mr. Hammons is obligated to
       contribute up to $45 million to satisfy amounts due, if any.  In
       addition, with respect to the original eleven hotel properties
       contributed by Mr. Hammons concurrent with the public equity offering,
       Mr. Hammons is obligated to contribute up to $50 million in the event
       proceeds from the sale of these hotel properties (or applicable
       replacement collateral) are insufficient to satisfy amounts due on the
       then outstanding mortgage indebtedness related to these properties.

       Redemption of Limited Partner Interests: Subject to certain limitations,
       ---------------------------------------
       the limited partners have the right to require redemption of their
       limited partner interests at any time subsequent to November 1995.  Upon
       redemption, the limited partners receive, at the sole discretion of the
       general partner, one share of John Q. Hammons Hotels, Inc.'s Class A
       common stock for each limited partner unit tendered or the then cash
       equivalent thereof.

       Additional General Partner Interests: Upon the issuance by the general
       ------------------------------------
       partner of additional shares of its common stock, including shares issued
       upon the exercise of its stock options, the general partner will be
       required to contribute to the Partnership the net proceeds received and
       the Partnership will be required to issue additional general partner
       units to the general partner in an equivalent number to the additional
       shares of common stock issued.
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)                                                                3
--------------------------------------------------------------------------------

(2) Summary of Major Accounting Policies-
    ------------------------------------

    (a) Cash and Equivalents--Cash and equivalents include 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.

        Restricted cash consists of certain funds maintained in escrow for
        property taxes and certain other obligations.

    (b) Marketable Securities--Marketable securities consist of available-for-
        ---------------------
        sale commercial paper and government agency obligations which mature or
        will be available for use in operations in 2000. These securities are
        valued at current market value, which approximates cost. Realized gains
        and losses in 1999 and 1998, determined using the specific
        identification method, were nominal.

    (c) Inventories--Inventories consist of food and beverage items. These items
        -----------
        are stated at the lower of cost, as determined by the first-in, first-
        out valuation method, or market.

    (d) Deferred Financing Costs, Franchise Fees and Other--Franchise fees paid
        --------------------------------------------------
        to the respective franchisors of the hotel properties are amortized on a
        straight-line basis over 10 to 20 years which approximates the terms of
        the respective agreements. Costs of obtaining financing are capitalized
        and amortized over the respective terms of the debt.

        The components of deferred financing costs, franchise fees and other are
        summarized as follows:

<TABLE>
<CAPTION>
                                                                                           Fiscal Yearend
                                                                                     -------------------------
                                                                                       1999             1998
                                                                                     --------         --------
             <S>                                                                     <C>               <C>
             Deferred financing costs                                                $ 23,647         $ 23,534
             Franchise fees                                                             5,142            5,254
             Less- Accumulated amortization                                           (12,874)         (10,851)
                                                                                     --------         --------
                                                                                       15,915           17,937
             Note receivable, related to sale of hotel and a component of
              replacement collateral for 1994 first mortgage notes (Note 8)                 -           11,900

             Restricted cash deposits, interest bearing, related to sales of
              hotels and a component of replacement collateral for 1994 and
              1995 first mortgage notes (Note 8)                                          102            6,266
             Deposits                                                                  10,738            7,017
             Preopening expenses (Note 2(p))                                                -            1,819
             Other, net                                                                   213              870
                                                                                     --------         --------
                                                                                     $ 26,968         $ 45,809
                                                                                     ========         ========
</TABLE>

        In October 1997, the Partnership entered into an irrevocable stand-by
        letter of credit agreement with a bank for approximately $5.6 million.
        The letter of credit replaced the restricted cash deposit which was
        required by and maintained with an insurance carrier. In November 1999,
        the letter of credit amount was amended to approximately $1.9 million.
        The letter of credit expires in October 2000.
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)                                                                4
--------------------------------------------------------------------------------

   (e) Property and Equipment--Property and equipment are stated at cost
       ----------------------
       (including interest, real estate taxes and certain other costs incurred
       during development and construction) less accumulated depreciation and
       amortization.  Buildings and improvements are depreciated using the
       straight-line method while all other property is depreciated using both
       straight-line and accelerated methods.  The estimated useful lives of the
       assets are summarized as follows:

                                                   Lives In Years
                                                   --------------
             Land improvements                          5-25
             New buildings and improvements             5-40
             Purchased buildings                          25
             Furniture, fixtures and equipment          3-10

       Construction in progress includes development and construction costs of
       certain hotel developments.  Costs associated with hotel development
       construction in progress approximated $53 million in 1999 and $59 million
       in 1998, with the remainder representing refurbishments of operating
       hotels.

       The Partnership periodically reviews the carrying value of these assets
       and other long-lived assets and impairments are recognized when the
       expected undiscounted future cash flows are less than the carrying amount
       of the asset.  Based on its most recent analysis, the Partnership
       believes no impairment exists at December 31, 1999.

       Interest costs, construction overhead and certain other carrying costs
       are capitalized during the period hotel properties are under
       construction.  Interest costs capitalized were $6,770, $6,163 and $10,259
       for the fiscal years ended 1999, 1998 and 1997, respectively.
       Construction in progress is recorded at the lower of cost or market.
       Costs incurred for prospective hotel projects ultimately abandoned are
       charged to operations in the period such plans are finalized.  Costs of
       significant improvements are capitalized, while costs of normal recurring
       repairs and maintenance are charged to expense as incurred.

       The accompanying 1999 consolidated financial statements include the land
       costs for 33 of the operating hotel properties.  Land for 10 of the
       remaining 12 operating hotel properties is leased by the Partnership from
       unrelated parties over long-term leases.  Land for the remaining two
       operating hotel properties is leased by the Partnership from a related
       party over long-term leases.  Rent expense for all land leases was
       $1,109, $1,008 and $464 for the fiscal years ended 1999, 1998 and 1997,
       respectively.

   (f) Par Operating Equipment--A hotel's initial expenditures for the purchase
       -----------------------
       of china, glassware, silverware, linens and uniforms are capitalized into
       furniture, fixtures and equipment and amortized on a straight-line basis
       over a three to five year life.  Costs for replacement of these items are
       charged to operations in the period the items are placed in service.

   (g) Advertising--The Partnership expenses the cost of advertising associated
       -----------
       with operating hotels as incurred.  Advertising expense for 1999, 1998
       and 1997 was approximately $26,834, $23,571 and $21,405, respectively.
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)                                                                5
--------------------------------------------------------------------------------

   (h) Pensions and Other Benefits--The Partnership contractually provides
       ---------------------------
       retirement benefits for certain union employees at two of its hotel
       properties under a union-sponsored defined benefit plan and a defined
       contribution plan.  Contributions to these plans, based upon the
       provisions of the respective union contracts, approximated $77, $70 and
       $66, for the fiscal years ended 1999, 1998 and 1997, respectively.

       Effective January 1996, the Partnership implemented an employee savings
       plan (a 401(k) plan).  The Partnership matches a percentage of an
       employee's contribution.  The Partnership's matching contributions are
       funded currently.  The cost of the matching program and administrative
       costs charged to income were approximately $258, $591 and $381 in 1999,
       1998 and 1997, respectively.  The Partnership does not offer any other
       post-employment or post-retirement benefits to its employees.

   (i) Self-Insurance--The Partnership became fully-insured for liability and
       --------------
       workers' compensation effective November 1999 and October 1998,
       respectively.  The Partnership became self-insured for medical coverage
       effective January 1999.  Estimated costs of these self-insurance programs
       are accrued based on known claims and projected settlements of unasserted
       claims.  Subsequent changes in, among others, assumed claims, claim
       costs, claim frequency, as well as changes in actual experience, could
       cause these estimates to change.

   (j) Income Taxes--Prior to 1994, the entities and properties included in the
       ------------
       accompanying consolidated financial statements consisted of a
       Partnership, S Corporations and a sole proprietorship.  Accordingly, the
       Partnership generally is not responsible for payment of income taxes.
       Rather, the respective partner, stockholder or sole proprietor, as
       applicable, is taxed on the Partnership's taxable income at the
       respective individual federal and state income tax rates.  Therefore, no
       income taxes have been provided in the accompanying consolidated
       financial statements.

       As described in Note 1, the Partnership and its general partner, as
       applicable, completed public offerings of first mortgage notes and equity
       securities.  Prior to the consummation of these offerings, the S
       Corporation status of the catering companies was terminated, and,
       accordingly, the Partnership is subject to federal and state income taxes
       on taxable income, if any, earned by the catering companies after the
       effective date of the securities registrations.  There were nominal, if
       any, earnings attributable to the catering companies after the applicable
       public offerings and there were no undistributed earnings of the S
       Corporations at the time of termination.

   (k) Revenue Recognition--The Partnership recognizes revenues from its rooms,
       -------------------
       catering and restaurant facilities as earned on the close of business
       each day.

   (l) Use of Estimates--The preparation of financial statements in conformity
       ----------------
       with generally accepted accounting principles requires management to make
       estimates and assumptions that affect the reported amounts of assets and
       liabilities at the date of the financial statements and the reported
       amounts of revenues and expenses during the reporting period.  Actual
       results could differ from those estimates.
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)                                                                6
--------------------------------------------------------------------------------

     (m) Fiscal Year--The Partnership's fiscal year ends on the Friday nearest
         -----------
         December 31 which includes 52 weeks in 1999, 1998 and 1997.

         The periods ended in the accompanying consolidated financial statements
         are summarized as follows:

                        Year                        Fiscal Yearend
                        ----                       -----------------
                        1999                       December 31, 1999
                        1998                        January 1, 1999
                        1997                        January 2, 1998

     (n) Segments--The Partnership operates in one reportable segment,
         --------
         hospitality services.

     (o) Reclassifications--Certain reclassifications have been reflected in
         -----------------
         1997 to conform with the current period presentation.

     (p) Accounting Pronouncements-- In April 1998, the American Institute of
         -------------------------
         Certified Public Accountants issued Statement of Position 98-5,
         "Reporting on the Costs of Start-Up Activities" (SOP 98-5), which
         requires costs of start-up activities, including preopening expenses,
         to be expensed as incurred. Prior to January 1, 1999, the Partnership's
         practice was to defer these expenses until a hotel had commenced
         operations, at which time the costs, other than advertising costs which
         were expensed upon opening, were amortized over a one-year period. The
         Partnership adopted the provisions of this statement in the first
         quarter of fiscal 1999 and, as a result, cumulative unamortized
         preopening costs of approximately $1.8 million were charged to expense.
         Preopening expenses in 1999 approximated $4,161 and are included in
         general, administrative, sales and management service expenses in the
         accompanying consolidated statement of operations.

         In June 1998, the Financial Accounting Standards Board (FASB) issued
         Statement of Financial Accounting Standards No. 133, "Accounting for
         Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133
         establishes accounting and reporting standards requiring that every
         derivative instrument (including certain derivative instruments
         embedded in other contracts) be recorded in the balance sheet as either
         an asset or liability measured at its fair value. This statement
         requires that changes in the derivative's fair value be recognized
         currently in earnings unless specific hedge accounting criteria are
         met. In June 1999, the FASB issued Statement of Financial Accounting
         Standards No. 137, "Accounting for Derivative Instruments and Hedging
         Activities --Deferral of the Effective Date of SFAS 133" (SFAS 137).
         SFAS 137 amends SFAS 133's effective date. SFAS 137 is effective for
         fiscal years beginning after June 15, 2000. Upon adoption of this
         statement, the Partnership anticipates no impact on its reported
         consolidated financial position, results of operations, cash flows or
         related disclosures.

(3)  Related Party Transactions-
     --------------------------

     (a) Hotel Management Fees--In addition to managing the hotel properties
         ---------------------
         included in the accompanying consolidated financial statements, the
         Partnership provides similar services for other hotel properties
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)                                                                7
--------------------------------------------------------------------------------

         owned or controlled by Mr. Hammons which included five properties at
         December 31, 1999. A management fee of approximately 3% to 5% of gross
         revenues (as defined) is paid to the Partnership by these hotels which
         aggregated approximately $844, $715 and $643 for the fiscal years ended
         1999, 1998 and 1997, respectively.

     (b) Accounting and Administrative Services--The hotels have contracted for
         --------------------------------------
         accounting and other administrative services with Winegardner &
         Hammons, Inc. (WHI), a company related by common ownership. The
         accounting and administrative charges expensed by the hotel properties,
         included in administrative expenses, were approximately $1,440, $1,388
         and $1,411 for the fiscal years ended 1999, 1998 and 1997,
         respectively.

         In 1999, the Partnership negotiated a new contract with WHI to continue
         to provide accounting and administrative services through June 2002.
         Charges for these services provided by WHI will approximate $35 per
         year for each hotel property for the duration of the agreement.

     (c) Insurance Coverage--To supplement the Partnership's self-insurance
         ------------------
         programs, umbrella, property, auto, commercial liability, workers'
         compensation and, commencing in 1999, medical insurance is provided to
         the hotel properties under a blanket commercial policy purchased by
         John Q. Hammons Hotels, Inc. or WHI, covering hotel properties owned by
         the Partnership, Mr. Hammons, or managed by WHI. Generally, premiums
         allocated to each hotel property are based upon factors similar to
         those used by the insurance provider to compute the aggregate group
         policy premium. Insurance expense for the properties included in
         operating expenses was approximately $1,088, $2,158 and $6,196 for the
         fiscal years ended 1999, 1998 and 1997, respectively. During fiscal
         1999 and 1998, the Partnership realized continued favorable trends in
         insurance expense as a result of claim's experience and rate
         improvements and favorable buyouts of several prior self-insured years.

     (d) Allocation of Common Costs--The Partnership incurs certain hotel
         --------------------------
         management expenses incidental to the operations of all hotels
         beneficially owned or controlled by Mr. Hammons. These costs
         principally include the compensation and related benefits of certain
         senior hotel executives. Commencing in May of 1993, these costs were
         allocated by the Partnership to hotels not included in the accompanying
         statements, based on the respective number of rooms of all hotels owned
         or controlled by Mr. Hammons. These costs approximated $132, $145 and
         $131 for the fiscal years ended 1999, 1998 and 1997, respectively.
         Management considers these allocations to be reasonable.

     (e) Transactions with Partners and Directors--Advances to Mr. Hammons as of
         ----------------------------------------
         December 31, 1999 approximated $366. No amounts were due from Mr.
         Hammons as of January 1, 1999.

         In fiscal 1998, Mr. Hammons assumed approximately $0.3 million in costs
         incurred associated with new developments. No such costs were assumed
         by JQH in fiscal 1999.

         During 1996, the Partnership entered into an agreement with a director
         relating to certain financial advisory services. The Partnership
         recognized approximately $17 and $180 in expense for the fiscal years
         ended 1998 and 1997 under this agreement. No such services were
         rendered in fiscal 1999.
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)                                                                8
--------------------------------------------------------------------------------

     (f) Summary of Related Party Expenses--The following summarizes expenses
         ---------------------------------
         reported as a result of activities with related parties:

<TABLE>
<CAPTION>
                                                                            Fiscal Yearend
                                                                    ---------------------------------------
                                                                     1999            1998            1997
                                                                    -------         -------         -------
<S>                                                                 <C>             <C>             <C>
Expenses included within general, administrative, sales
 and management service expenses:

  Accounting and administrative                                     $ 1,440         $ 1,388         $ 1,411

  Rental expenses (Note 6)                                              787             800             465

  Financial advisory services from a director                             -              17             180
                                                                    -------         -------         -------
                                                                    $ 2,227         $ 2,205         $ 2,056
                                                                    =======         =======         =======

Allocated insurance expense from the pooled coverage
 included within various operating categories:

  Insurance other than medical                                      $ 1,088         $ 2,158         $ 6,196
                                                                    =======         =======         =======

  Medical, self-insured commencing in 1999                          $ 5,368         $     -         $     -
                                                                    =======         =======         =======
</TABLE>

(4)  Franchise Agreements-
     --------------------

     As of yearend 1999 and 1998, 40 of the 45 and 36 of the 42, respectively,
     operating hotel properties included in the accompanying consolidated
     balance sheets have franchise agreements with national hotel chains which
     require each hotel to remit to the franchisor monthly fees equal to
     approximately 3% to 5% percent of gross room revenues, as defined.
     Franchise fees expensed under these contracts were $8,478, $8,110 and
     $7,165 for the fiscal years ended 1999, 1998 and 1997, respectively.

     As part of the franchise agreement, each hotel also pays additional
     advertising, reservation and maintenance fees to the franchisor which range
     from 1% to 3.5% of gross room revenues, as defined. The amount of expense
     related to these fees included in the consolidated statements of operations
     as a component of sales expenses was approximately $7,720, $7,083 and
     $6,497 for the fiscal years ended 1999, 1998 and 1997, respectively.
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)                                                                9
--------------------------------------------------------------------------------

(5)  Long-Term Debt-
     ---------------

     The components of long-term debt are summarized as follows:

<TABLE>
<CAPTION>
                                                                                           Fiscal Yearend
                                                                                     --------------------------
                                                                                       1999              1998
                                                                                     --------          --------
     <S>                                                                             <C>               <C>
     1994 first mortgage notes, interest at 8.875%, interest only payable
     February 15 and August 15, principal due February 15, 2004, secured by
     a first mortgage lien on the original 20 hotel properties (or
     applicable replacement collateral) and additional capital
     contributions of up to $150 million by Mr. Hammons and an entity under
     his control.  (Note 1(b))                                                       $ 300,000        $ 300,000

     1995 first mortgage notes, interest at 9.75%, interest only payable
     April 1 and October 1, principal due October 1, 2005, secured by a
     first mortgage lien on the original six hotel properties (or
     applicable replacement collateral), a second mortgage lien on the
     original two hotel properties and additional capital contributions of
     up to $45 million by Mr. Hammons.  (Note 1(b))                                     90,000           90,000

     Development bonds, variable interest rate approximates 85% of the bond
     equivalent yield of 13 week U.S. Treasury bills (not to exceed 12%),
     fixed interest rates at 7.125%, payable in scheduled installments
     through August 2015, certain of the obligations subject to optional
     prepayments by the bondholders, secured by certain hotel facilities,
     fixtures and an assignment of rents.                                               13,959           14,443

     Mortgage notes payable to banks, insurance companies and a state
     retirement plan, variable interest rates at prime to LIBOR plus 3.25%
     with certain instruments subject to a ceiling rate and a floor rate,
     fixed rates ranging from 7.57% to 9.5%, payable in scheduled
     installments through April 2027, secured by certain hotel facilities,
     fixtures, an assignment of rents, and certain other real property
     controlled by Mr. Hammons, with certain instruments subject to
     cross-collateralization provisions and, with respect to approximately
     $394,007 of mortgage notes, a personal guarantee of Mr. Hammons.                  416,130          344,369

     Other notes payable, variable interest rate at prime plus 1% and fixed
     rates ranging from 6.8% to 8.1%, payable in scheduled installments
     through March 2003, secured by certain hotel improvements, furniture,
     fixtures and related equipment and, with respect to approximately $750
     of notes, a personal guarantee of Mr. Hammons.                                      8,754           10,904
                                                                                     ---------        ---------
                                                                                       828,843          759,716
     Less- current portion                                                             (16,569)         (42,256)
                                                                                     ---------        ---------
                                                                                     $ 812,274        $ 717,460
                                                                                     =========        =========
</TABLE>
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)                                                               10
--------------------------------------------------------------------------------

     The indenture agreements relating to the 1994 and 1995 first mortgage notes
     include certain covenants which, among others, limit the ability of the
     Partnership and its restricted subsidiaries (as defined) to make
     distributions, incur debt and issue preferred equity interests, engage in
     certain transactions with its partners, stockholders or affiliates, incur
     certain liens, engage in mergers or consolidations and achieve certain
     interest coverage ratios, as defined. In addition, certain of the other
     credit agreements include subjective acceleration clauses and limit, among
     others, the incurrence of certain liens and additional indebtedness. The
     1994 and 1995 first mortgage notes and certain other obligations include
     scheduled prepayment penalties in the event the obligations are paid prior
     to their scheduled maturity.

     The Partnership paid off or refinanced approximately $28,000 and $133,000
     million of long-term debt in 1999 and 1998, respectively. In connection
     with these transactions, the Partnership incurred approximately $200 and
     $2,200, respectively, in charges related to the early extingushment of
     debt. These debt extinguishment charges have been reflected in the
     accompanying 1999 and 1998 consolidated statements of operations as an
     extraordinary item.

     Scheduled maturities of long-term debt are summarized as follows:

                                                          Yearend
         Year Ending                                        1999
         -----------                                     ---------
         2000                                            $  16,569
         2001                                               46,878
         2002                                               31,559
         2003                                               53,810
         2004                                              335,032
         Thereafter                                        344,995
                                                         ---------
                                                         $ 828,843
                                                         =========

(6)  Commitments and Contingencies-
     -----------------------------

     (a) Operating Leases--The hotel properties lease certain equipment and land
         ----------------
         from unrelated parties under various lease arrangements. In addition,
         the Partnership leases certain parking spaces at one hotel for the use
         of its patrons and is billed by the lessor based on actual usage. Rent
         expense for these leases was approximately $3,508, $2,715 and $1,819
         for the fiscal years ended 1999, 1998 and 1997, respectively, which has
         been included in general, administrative, sales and management service
         expenses.

         Included in the accompanying consolidated financial statements are the
         operating results of trade centers located in Joplin, Missouri and
         Portland, Oregon. Both of the trade centers are owned by Mr. Hammons.
         The lease agreement for the Joplin trade center stipulates nominal
         rentals for each of the fiscal years ended 1999, 1998 and 1997 and for
         each ensuing year through 2014. The lease agreement for the Portland
         facility extends through 2004 and requires minimum annual rents of $300
         to Mr. Hammons. In addition, the Partnership leases office space in
         Springfield, Missouri from a partnership (of which Mr. Hammons is a
         partner) for annual payments of approximately $234 through December
         2001. The Partnership has also entered into land leases with Mr.
         Hammons for
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)                                                               11
--------------------------------------------------------------------------------

         two operating hotel properties. Subject to the Partnership exercising
         purchase options provided under these agreements, these leases extend
         through 2036 and 2045, respectively, and require aggregate minimum
         annual payments of approximately $270. Rent expense for these related
         party leases was approximately $787, $800 and $465 for the fiscal years
         ended 1999, 1998 and 1997, respectively.

         The minimum annual rental commitments for these noncancellable
         operating leases at December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                 Fiscal Year
                   Ending          Mr. Hammons            Other               Total
                 -----------       -----------          --------            --------
                 <S>               <C>                  <C>                 <C>
                    2000            $    570            $  1,837            $  2,407
                    2001                 570               1,387               1,957
                    2002                 570                 882               1,452
                    2003                 570                 820               1,390
                    2004                 570                 803               1,373
                 Thereafter           10,235              52,070              62,305
                                    --------            --------            --------
                                    $ 13,085            $ 57,799            $ 70,884
                                    ========            ========            ========
</TABLE>

     (b) Hotel Development--In 2000, the Partnership plans to complete
         -----------------
         construction and open 2 new hotels. The total estimated aggregate
         development and construction costs for these hotels are expected to
         exceed $70 million.

     (c) Legal Matters--The Partnership is party to various legal proceedings
         -------------
         arising from its consolidated operations. Management of the Partnership
         believes that the outcome of these proceedings, individually and in the
         aggregate, will have no material adverse effect on the Partnership's
         consolidated financial position, results of operations or cash flows.

(7)  Fair Value of Financial Instruments-
     -----------------------------------

     The fair values of marketable securities and long-term debt approximate
     their historical carrying amounts except with respect to the 1994 and 1995
     first mortgage notes for which fair market value was approximately $408
     million at 1999 and 1998. The fair value of the first mortgage notes issued
     is estimated by obtaining quotes from brokers.

(8)  Sales of Property and Equipment-
     -------------------------------

     On February 6, 1998, the Partnership completed the sale of six hotels to an
     unrelated party for $39.4 million, resulting in a gain of approximately
     $0.2 million. The net book value of the hotels' property and equipment at
     the time of the sale was approximately $38.6 million. Certain of these
     hotels served as collateral under the 1994 and 1995 first mortgage notes
     (Note 5). Under the terms of these indentures, the Partnership provided
     replacement collateral in accordance with the indenture provisions.
<PAGE>

John Q. Hammons Hotels, L.P.

Notes To Consolidated Financial Statements
(000's omitted)                                                               12
--------------------------------------------------------------------------------

     On December 31, 1998, the Partnership completed the sale of a hotel
     property to an unrelated party for $16.1 million, resulting in a gain of
     approximately $8.0 million. The net book value of the hotel's property and
     equipment at the time of the sale was approximately $8.0 million. In
     addition to the cash received upon closing, the sales price included a note
     receivable for $11.9 million. Proceeds for the balance of the note
     receivable were received during fiscal 1999. This hotel served as
     collateral under the 1995 first mortgage notes (Note 5). Under the terms of
     this indenture, the Partnership provided replacement collateral in
     accordance with the indenture provisions.

     On June 16, 1999, the Partnership completed the sale of a hotel to an
     unrelated party for $6.5 million, resulting in a gain of approximately $2.4
     million. The net book value of the hotel's property and equipment at the
     time of the sale was approximately $3.6 million. The hotel served as
     collateral under the 1994 first mortgage notes (Note 5). Under the terms of
     this indenture, the Partnership provided replacement collateral in
     accordance with the indenture provisions.

     Summary unaudited operating results for the eight hotels sold for each of
     the three years ended 1999, 1998 and 1997, as applicable, are as follows:

<TABLE>
<CAPTION>
                                                                1999        1998        1997
                                                               -------    --------    --------
<S>                                                            <C>        <C>         <C>
Revenues                                                       $ 1,003    $ 12,122    $ 38,064
                                                               =======    ========    ========
Income (loss) from operations, including depreciation
 and amortization of $210, $1,315 and $3,578, respectively     $   (22)   $    439    $  2,264
                                                               =======    ========    ========
</TABLE>