<PAGE>

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

         (MARK ONE)
                  (X)      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
                  ENDED SEPTEMBER 30, 2003

                                       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 No. 1-6869

                             PRIME HOSPITALITY CORP.
             (Exact name of registrant as specified in its charter)

             Delaware                                    22-2640625
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
  incorporation or organization)

                 700 Route 46 East, Fairfield, New Jersey 07004
                    (Address of principal executive offices)
                                 (973) 882-1010
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).  Yes (X) No ( )

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes (X) No ( )

The registrant had 44,726,103 shares of common stock, $.01 par value,
outstanding as of November 12, 2003.

<PAGE>

                    PRIME HOSPITALITY CORP. AND SUBSIDIARIES
                                      INDEX

<TABLE>
<CAPTION>
                                                                                              PAGE
                                                                                             NUMBER
                                                                                             ------
<S>          <C>                                                                             <C>
PART I.      FINANCIAL INFORMATION

Item 1.      Financial Statements

             Consolidated Balance Sheets
                 September 30, 2003 (Unaudited) and December 31, 2002...................        1

             Consolidated Statements of Operations
                 Three and Nine Months Ended September 30, 2003 and 2002 (Unaudited)....        2

             Consolidated Statements of Cash Flows
                 Nine Months Ended September 30, 2003 and 2002 (Unaudited) .............        3

             Notes to Interim Consolidated Financial Statements (Unaudited).............        4

Item 2.      Management's Discussion and Analysis of
             Financial Condition and Results of Operations..............................       10

Item 3.      Quantitative and Qualitative
             Disclosures About Market Risk..............................................       16

Item 4.      Disclosure
             Controls and Procedures....................................................       16

PART II.     OTHER INFORMATION

Item 1.      Legal Proceedings..........................................................       17

Item 2.      Changes in Securities and Use of Proceeds..................................       17

Item 3.      Defaults upon Senior Securities............................................       17

Item 4.      Submission of Matters to a Vote of Security Holders........................       17

Item 5.      Other Information..........................................................       18

Item 6.      Exhibits and Reports on Form 8-K...........................................       18

Signatures   ...........................................................................       18
</TABLE>

<PAGE>

                      PRIME HOSPITALITY CORP. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS
                         (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                             SEPTEMBER 30,   DECEMBER 31,
                                                                                                 2003            2002
                                                                                             -------------   ------------
                                                                                              (Unaudited)
<S>                                                                                          <C>             <C>
                                            ASSETS

Current assets:
    Cash and cash equivalents ............................................................   $     18,386    $     25,850
    Accounts receivable (net of allowances of $1,100 and $611
           in 2003 and 2002, respectively) ...............................................         20,020          18,178
    Restricted cash ......................................................................          1,865           5,140
    Hotel inventories ....................................................................         10,455          11,989
    Income tax receivable ................................................................         11,270          10,923
    Other current assets .................................................................          3,974          10,534
                                                                                             ------------    ------------
              Total current assets .......................................................         65,970          82,614

Property, equipment and leasehold improvements,
    net of accumulated depreciation and amortization .....................................        916,588         949,730
Assets held for sale .....................................................................          8,787           8,787
Investments in unconsolidated joint ventures .............................................         12,016          23,140
Mortgages and notes receivable, net of
    current portion ......................................................................         12,367          13,021
Other assets .............................................................................         28,098          42,357
                                                                                             ------------    ------------

              TOTAL ASSETS ...............................................................   $  1,043,826    $  1,119,649
                                                                                             ============    ============

                           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable and accrued expenses ................................................   $     20,359    $     21,189
    Current portion of debt ..............................................................          1,102           1,052
    Current portion of deferred income ...................................................          3,542           3,527
    Other current liabilities ............................................................         19,925          20,985
                                                                                             ------------    ------------
              Total current liabilities ..................................................         44,928          46,753

Long-term debt, net of current portion ...................................................        242,550         284,017
Deferred income ..........................................................................         10,641          13,338
Deferred income taxes ....................................................................         61,362          61,362
Other liabilities ........................................................................          2,106           7,503
                                                                                             ------------    ------------

              Total liabilities ..........................................................        361,587         412,973

Commitments and contingencies

Stockholders' equity:
    Preferred stock, par value $.10 per share;
           20,000,000 shares authorized; none issued
    Common stock, par value $.01 per share;
           75,000,000 shares authorized;
           56,606,381 shares issued and outstanding
           at September 30, 2003 and December 31, 2002 ...................................            566             566
    Capital in excess of par value .......................................................        527,792         527,787
    Retained earnings ....................................................................        270,865         293,292
    Treasury stock (11,880,878 and 11,522,878 shares
           at September 30, 2003 and December 31, 2002, respectively) ....................       (116,984)       (114,969)
                                                                                             ------------    ------------
              Total stockholders' equity .................................................        682,239         706,676
                                                                                             ------------    ------------

              TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $  1,043,826    $  1,119,649
                                                                                             ============    ============
</TABLE>

      See Accompanying Notes to Interim Consolidated Financial Statements.

                                       -1-

<PAGE>

                    PRIME HOSPITALITY CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
             THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                  THREE MONTHS ENDED        NINE MONTHS ENDED
                                                                                     SEPTEMBER 30,             SEPTEMBER 30,
                                                                                   2003         2002         2003         2002
                                                                                ----------   ----------   ----------   ----------
<S>                                                                             <C>          <C>          <C>          <C>
Revenues:
    Hotel revenues ..........................................................   $   83,311   $   95,350   $  263,263   $  288,599
    Management, franchise and other fees ....................................        5,511        3,502       16,404       10,534
    Rental and other revenues ...............................................          386          903        1,393        2,508
                                                                                ----------   ----------   ----------   ----------
              Total revenues ................................................       89,208       99,755      281,060      301,641

Costs and expenses:
    Hotel operating expenses ................................................       45,760       53,479      150,538      157,229
    Rent and other occupancy ................................................       15,290       19,922       57,939       60,581
    Brand and administrative ................................................        9,988        7,690       29,562       21,898
    Depreciation and amortization ...........................................       10,254        9,530       30,549       29,235
                                                                                ----------   ----------   ----------   ----------
              Total costs and expenses ......................................       81,292       90,621      268,588      268,943

Operating income ............................................................        7,916        9,134       12,472       32,698

Investment income ...........................................................          103          637          974        1,820
Interest expense ............................................................       (4,908)      (6,709)     (15,901)     (22,075)
Gains (losses) on retirement of debt ........................................            -       (6,449)       1,622      (19,341)
Other income (loss) .........................................................         (110)         302      (35,456)      (4,198)
                                                                                ----------   ----------   ----------   -----------

Income (loss) before equity in earnings of unconsolidated joint
     ventures, income taxes and discontinued operations .....................        3,001       (3,085)     (36,289)     (11,096)

Equity in earnings of unconsolidated joint ventures .........................          322            -          775            -
                                                                                ----------   ----------   ----------   ----------

Income (loss) before income taxes and discontinued operations ...............        3,323       (3,085)     (35,514)     (11,096)
Provision (benefit) for income taxes ........................................        1,296       (1,203)     (13,850)      (4,327)
                                                                                ----------   ----------   ----------   ----------

Income (loss) before discontinued operations ................................        2,027       (1,882)     (21,664)      (6,769)

Discontinued operations:
    Income (loss) from discontinued operations, net of income taxes .........            -          346         (181)       1,094
    Gain (loss) on disposal, net of income taxes ............................            -        4,320         (582)       4,748
                                                                                ----------   ----------   ----------   ----------

Net income (loss) ...........................................................   $    2,027   $    2,784  ($   22,427) ($      927)
                                                                                ==========   ==========   ==========   ==========

Earnings (loss) per common share:
Basic:

    Income (loss) before discontinued operations ............................   $     0.05  ($     0.04) ($     0.48) ($     0.15)
    Income (loss) from discontinued operations,
           net of income taxes ..............................................            -         0.10        (0.02)        0.13
                                                                                ----------   ----------   ----------   ----------
Net income (loss) ...........................................................   $     0.05   $     0.06  ($     0.50) ($     0.02)
                                                                                ==========   ==========   ==========   ==========

Diluted:

    Income (loss) before discontinued operations ............................   $     0.05  ($     0.04) ($     0.48)  ($    0.15)
    Income (loss) from discontinued operations,
           net of income taxes ..............................................            -         0.10        (0.02)        0.13
                                                                                ----------   ----------   ----------   ----------
Net income (loss) ...........................................................   $     0.05   $     0.06  ($     0.50)  ($    0.02)
                                                                                ==========   ==========   ==========   ==========
</TABLE>

      See Accompanying Notes to Interim Consolidated Financial Statements.

                                       -2-

<PAGE>

                    PRIME HOSPITALITY CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                      2003            2002
                                                                                                  ------------    ------------
<S>                                                                                               <C>             <C>
Cash flows from operating activities:
    Net income (loss) .........................................................................   $    (22,427)   $       (927)
    Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
        Depreciation and amortization .........................................................         30,645          29,992
        Amortization of deferred financing costs ..............................................            917           1,994
        Income tax benefit ....................................................................        (14,339)           (302)
        Non-cash portion of other income (loss) ...............................................         35,015               -
        (Gains) losses on retirement of debt ..................................................         (1,622)         19,333
        Amortization of deferred income .......................................................         (2,983)         (2,645)
        Equity in earnings of unconsolidated joint ventures ...................................           (775)              -
        (Gains) losses on disposals of discontinued operations ................................            954          (8,326)
        Increase (decrease) from changes in other operating assets and liabilities:
           Accounts receivable ................................................................         (1,842)         (2,740)
           Other current assets ...............................................................          4,731            (479)
           Other liabilities ..................................................................           (490)        (15,065)
                                                                                                  ------------    ------------

           Net cash provided by operating activities ..........................................         27,784          20,835

Cash flows from investing activities:
    Proceeds from mortgages and notes receivable ..............................................            986             382
    Disbursements for mortgages and notes receivable ..........................................           (631)           (792)
    Proceeds from sales of property, equipment and leasehold improvements .....................         17,400          56,026
    Construction and conversion of hotels .....................................................              -          (5,085)
    Purchases of property, equipment and leasehold improvements ...............................        (18,759)        (15,443)
    Investments in unconsolidated joint ventures ..............................................         (6,580)              -
    Proceeds from sales and financings of interests in unconsolidated
        joint ventures ........................................................................         18,465               -
    Restricted cash and other .................................................................         (1,079)            845
                                                                                                  ------------    ------------

           Net cash provided by investing activities ..........................................          9,802          35,933

Cash flows from financing activities:
    Net proceeds from issuance of debt ........................................................         13,000         288,586
    Payments of debt ..........................................................................        (56,039)       (329,092)
    Purchase of common stock ..................................................................         (2,015)              -
    Proceeds from the exercise of stock options ...............................................              4           2,657
    Premium on early retirement of debt .......................................................              -         (12,705)
                                                                                                  ------------    ------------
           Net cash used in financing activities ..............................................        (45,050)        (50,554)
                                                                                                  ------------    ------------

    Net increase (decrease) in cash and cash equivalents ......................................         (7,464)          6,214

    Cash and cash equivalents at beginning of period ..........................................         25,850          26,475
                                                                                                  ------------    ------------
    Cash and cash equivalents at end of period ................................................   $     18,386    $     32,689
                                                                                                  ============    ============

OTHER CASH FLOW DISCLOSURES:
    Interest paid .............................................................................   $     11,513    $     23,323
    Income taxes paid .........................................................................              -    $        190
</TABLE>

      See Accompanying Notes to Interim Consolidated Financial Statements.

                                       -3-

<PAGE>

                    PRIME HOSPITALITY CORP. AND SUBSIDIARIES
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
             THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

         In the opinion of management, the accompanying interim unaudited
consolidated financial statements of Prime Hospitality Corp. and its
subsidiaries ("Prime" or the "Company") contain all material adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
financial position of the Company as of September 30, 2003 and the results of
its operations for the three and nine months ended September 30, 2003 and 2002
and cash flows for the nine months ended September 30, 2003 and 2002.

         The consolidated financial statements for the three and nine months
ended September 30, 2003 and 2002 were prepared on a consistent basis with the
audited consolidated financial statements for the year ended December 31, 2002.
Certain reclassifications have been made to the September 30, 2002 consolidated
financial statements to conform them to the September 30, 2003 presentation.

         The consolidated results of operations for the three and nine months
ended September 30, 2003 are not necessarily indicative of the results to be
expected for the full year. The hotel and leisure industry is seasonal in
nature; however, the periods during which the Company's properties experience
higher hotel revenue activities vary from property to property and depend
principally upon location. The Company's revenues historically have generally
been lower in the first and fourth quarters than in the second and third
quarters. These interim unaudited consolidated financial statements should be
read in conjunction with the audited consolidated financial statements included
in the Company's Annual Report on Form 10-K for the year ended December 31,
2002.

         The balance sheet at December 31, 2002 has been derived from the
audited financial statements at that date, but does not include all the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.

NOTE 2 - ACCOUNTING POLICIES

GAINS AND LOSSES FROM EXTINGUISHMENT OF DEBT

         In April 2002, the Financial Accounting Standards Board (the "FASB")
issued Statement No. 145 which rescinded FASB Statement No. 4, "Reporting Gains
and Losses from Extinguishment of Debt". FASB Statement No. 145 requires, among
other things, the reporting of gains and losses from the early extinguishments
of debt as a component of continuing operations. The Company adopted Statement
No. 145 on January 1, 2003 and reclassified prior years' extraordinary gains and
losses from early extinguishments of debt to continuing operations.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In November of 2002, the FASB issued Interpretation No. 45,
"Guarantors' Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". The Interpretation elaborates on
the disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in

                                       -4-

<PAGE>

issuing the guarantee. This Interpretation does not prescribe a specific
approach for subsequently measuring the guarantor's recognized liability over
the term of the related guarantee. The disclosure provisions of this
Interpretation were effective for the Company's December 31, 2002 financial
statements. The initial recognition and initial measurement provisions of this
Interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. In April 2003, the Company guaranteed a
portion of the debt of an unconsolidated joint venture (See Note 4). Based on
the guaranteed amount and other facts and circumstances, including an analysis
of the underlying collateral, the fair value of the obligation was not material.

         In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities". This Interpretation clarifies the application of
existing accounting pronouncements to certain entities in which equity investors
do not have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. The provisions of
the Interpretation are immediately effective for all variable interests in
variable interest entities created after January 31, 2003, and the Company will
need to apply its provisions to any existing variable interests in variable
interest entities by no later than December 31, 2003. The Company does not
believe that this Interpretation will have a significant impact on the Company's
financial statements.

NOTE 3 - ACCOUNTING FOR STOCK-BASED COMPENSATION

         In December 2002, the FASB issued Statement No. 148 to amend
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition,
Statement No. 148 amends the disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. However, the Company has
continued to account for options in accordance with the provision of APB Opinion
No. 25, "Accounting for Stock Issues to Employees" and related interpretations.
Accordingly, no compensation expense has been recognized for stock option plans.

         The following table sets forth the Company's pro forma information for
its common stockholders for the three and nine months ended September 30, 2003
and 2002 (in thousands except earnings per share data):

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED,           NINE MONTHS ENDED,
                                                                          SEPTEMBER 30,                SEPTEMBER 30,
                                                                       2003           2002           2003           2002
                                                                   ------------   ------------   ------------   ------------
<S>                                                                <C>            <C>            <C>            <C>
Net income (loss) as reported                                      $      2,027   $      2,785   $    (22,427)  $       (927)
Add: Stock option expense included in net income (loss) ........              -              -              -              -

Less: Stock option expense determined under fair value
           recognition method for all awards ...................           (865)          (919)        (2,789)        (2,849)
                                                                   ------------   ------------   ------------   ------------
Pro forma net income (loss) ....................................   $      1,162   $      1,866   $    (25,216)  $     (3,776)
                                                                   ------------   ------------   ------------   ------------

Net income (loss) per share as reported:
     Basic .....................................................   $       0.05   $       0.06   $      (0.50)  $      (0.02)
     Diluted ...................................................   $       0.05   $       0.06   $      (0.50)  $      (0.02)

Pro forma net income (loss) per share:
     Basic .....................................................   $       0.03   $       0.04   $      (0.56)  $      (0.08)
     Diluted ...................................................   $       0.03   $       0.04   $      (0.56)  $      (0.08)
</TABLE>

         The fair value for those options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for the three and nine months ended September 30, 2003 and 2002:
risk-free interest rate of 5%; dividend yields of 0%; volatility factors of

                                       -5-

<PAGE>

the expected market price of the Company's common stock of 46.6% and a
weighted-average expected life of the option of 6.5 years.

         For purposes of pro forma disclosures, the estimated fair value of
stock options is amortized to expense over the options' vesting period.

NOTE 4 - INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

         In January 2003, Nova Scotia Company, an entity in which a subsidiary
of Prime held a 50% interest, acquired the Quebec City Holiday Inn Select (the
"Quebec Venture"). Prime's partner in the acquisition was a subsidiary of United
Capital Corp. ("UCC"), an entity in which A.F. Petrocelli, Prime's Chairman and
Chief Executive Officer, has a controlling ownership interest. Pursuant to the
operating agreement, all significant operating and capital decisions are made
jointly and operating profits and losses are allocated based on ownership
interest. In addition, Prime manages the hotel. In March 2003, subsidiaries of
Prime and UCC each sold a ten percent interest in the Quebec Venture at cost to
Ark Quebec Inc., an unrelated third party, decreasing each of their respective
equity interests to 40%. In July 2003, the Quebec Venture obtained an $8.2
million (CDN) first mortgage loan at a fixed rate of 6.26% due in 2008. The loan
is recourse to the hotel only. Prime received $2.5 million of the loan proceeds.

         In March 2003, subsidiaries of Prime and UCC each sold a ten percent
interest in East Rutherford Group, L.L.C., an entity which purchased the
Sheraton Meadowlands hotel in December 2002 (the "Meadowlands Venture"). The
interests were sold to Ark Meadowlands, Inc., an unrelated third party, at cost
decreasing Prime's and UCC's equity interests in the Meadowlands Venture to 40%
each. In April 2003, the Meadowlands Venture entered into a $25.0 million
mortgage loan secured by the hotel. The loan bears interest at LIBOR+2.75% and
is due in April 2006. The proceeds of the loan were distributed to the partners
based on their ownership interests with Prime receiving approximately $10.0
million in April 2003. Under a guaranty agreement, Prime and UCC jointly and
severally guaranteed $4.0 million which will be reduced by scheduled principal
payments.

NOTE 5 - HOTEL DISPOSITIONS

         During the nine months ended September 30, 2003, the Company sold one
AmeriSuites and one Wellesley Inn for total proceeds of $17.4 million. The
Company retained the franchise rights to the hotels under 20-year franchise
agreements and signed a management agreement on the AmeriSuites hotel.

         During the nine months ended September 30, 2002, the Company sold three
AmeriSuites, three Wellesley Inns and a Radisson Hotel for gross proceeds of
$59.0 million. The Company retained the franchise rights to the AmeriSuites and
Wellesley Inns hotels under 20-year franchise agreements and the management
agreements on two AmeriSuites.

         The operations and gains on sales of the hotels, net of tax, in which
Prime did not retain management are included in the Consolidated Statements of
Operations as part of discontinued operations.

NOTE 6 - DEBT

         During the nine months ended September 30, 2003, Prime purchased $21.3
million of its 8 3/8% Senior Subordinated Notes due 2012 (the "8 3/8 Notes") for
$19.7 million, realizing gains of $1.6 million.

                                      -6-

<PAGE>

NOTE 7 - LEASE AGREEMENTS

         Glen Rock Holding Corp, a subsidiary of the Company, did not make its
scheduled July 1 rent payment of approximately $2.0 million to Hospitality
Properties Trust (NYSE:HPT) and received a default notice from HPT. The lease
covers 24 AmeriSuites hotels owned by HPT. Over the past twelve months, cash
flow was negatively impacted by $11.5 million as rent payments exceeded
operating cash flow by $9.0 million and approximately $2.5 million was required
to be set aside for capital improvements. The termination of the lease would
result in the forfeiture of certain deposits and, accordingly, Prime has taken a
$35.0 million non-cash charge against the net book value of the assets
associated with the lease. Prime is managing the hotels in the interim as
AmeriSuites and the results of operations after July 1, 2003 are not
consolidated. HPT has the right to change the management and franchise
agreements on the hotels which are subordinated to the lease obligations to HPT.

         On April 3, 2003, a wholly owned subsidiary of the Company terminated
lease agreements on three hotels owned by ShoLodge, Inc. ("ShoLodge") due to
operating shortfalls which approximated $1.1 million in the past twelve months.
In accordance with the lease termination, Prime will forfeit its rights to
receive a $3.1 million payment in 2011 which was due at the end of the lease as
compensation for executing the lease agreement. ShoLodge has assumed management
of the hotels and is operating the hotels under new ten-year franchise
agreements with Prime, under the AmeriSuites flag. These franchise agreements
permit ShoLodge to terminate the agreements without termination fees upon proper
notice. The results of operations for these hotels are reflected in discontinued
operations, net of tax, in the accompanying financial statements. In addition, a
loss of $1.5 million, net of tax, was recorded in the three months ended March
31, 2003 in gain (loss) on disposal from discontinued operations for the net
assets associated with the lease.

NOTE 8 - COMMON STOCK

         During the nine months ended September 30, 2003, Prime repurchased
358,000 shares of its common stock at an average price of $5.63 per share.

NOTE 9 - EARNINGS PER COMMON SHARE

         Basic earnings per common share was computed based on the weighted
average number of common shares outstanding during each period. The weighted
average number of common shares used in computing basic earnings per common
share was 44.7 million and 45.1 million for the three months ended September 30,
2003 and 2002 and 44.7 million and 45.0 million for the nine months ended
September 30, 2003 and 2002.

         Diluted earnings per common share reflect adjustments to basic earnings
per common share for the dilutive effect of stock options. For the three months
ended September 30, 2003 and 2002, the weighted average number of diluted shares
was 45.1 million and 46.0 million, respectively. For the nine months ended
September 30, 2003 and September 30, 2002, stock options were antidilutive and
were not included in the calculation of diluted earnings per share.

NOTE 10 - GEOGRAPHIC AND BUSINESS INFORMATION

         The Company's hotels primarily operate in three major lodging industry
segments: the all-suites segment, under its AmeriSuites brand; the
limited-service segment, primarily under its Wellesley Inns &

                                      -7-

<PAGE>

Suites brand; and the full-service segment primarily under major national
franchises. The Company's AmeriSuites are upscale hotels located in 32 states
throughout the United States. The Wellesley Inns & Suites hotels compete in the
mid-price segment, and are primarily located in the Northeast, Texas and Florida
regions of the United States. The Company also operates full-service hotels,
with food and beverage service and banquet facilities primarily under franchise
agreements with national hotel brands in the upscale segment. The Company's
full-service hotels are primarily located in the northeastern region of the
United States.

         The Company evaluates the performance of its segments based primarily
on earnings before interest, taxes and depreciation and amortization ("EBITDA")
generated by the operations of its owned and leased hotels. Interest expense,
taxes and other income (loss) are not allocated at the segment level. The
following table presents revenues and other financial information for the owned
and leased hotels by business segment for the three and nine months ended
September 30, 2003 and 2002 (in thousands):

<TABLE>
<CAPTION>
                                             ALL-SUITES   LIMITED-SERVICE   FULL-SERVICE   CORPORATE/OTHER    CONSOLIDATED
                                             ----------   ---------------   ------------   ---------------   -------------
<S>                                          <C>          <C>               <C>            <C>               <C>
THREE MONTHS ENDED SEPTEMBER 30, 2003

Revenues .................................   $   45,345     $   21,979       $   15,987      $    5,897       $   89,208
EBITDA ...................................       10,505          4,921            4,656          (1,912)          18,170
Depreciation and amortization ............        4,824          3,864              808             758           10,254
Capital expenditures .....................        3,664            679              307             727            5,377
Property, equipment and leasehold
   Improvements ..........................      486,196        332,199           70,154          28,039          916,588

THREE MONTHS ENDED SEPTEMBER 30, 2002

Revenues .................................       59,178         21,435           14,737           4,405           99,755
EBITDA ...................................        8,459          5,264            4,952             (11)          18,664
Depreciation and amortization ............        4,711          3,109            1,302             408            9,530
Capital expenditures .....................        5,305            641              544           2,893            9,383
Property, equipment and leasehold
   Improvements ..........................      505,777        335,645           86,747          22,193          950,362

NINE MONTHS ENDED SEPTEMBER 30, 2003

Revenues .................................      155,518         64,604           43,141          17,797          281,060
EBITDA ...................................       20,406         13,684           11.032          (2,101)          43,021
Depreciation and amortization ............       14,572         10,622            3,186           2,169           30,549
Capital expenditures .....................        9,789          1,956            1,357           5,657           18,759
Property, equipment and leasehold
   Improvements ..........................      486,196        332,199           70,154          28,039          916,588

NINE MONTHS ENDED SEPTEMBER 30, 2002

Revenues .................................      180,572         63,999           44,028          13,042          301,641
EBITDA ...................................       28,792         15,057           13,420           4,664           61,933
Depreciation and amortization ............       14,776          9,440            4,140             879           29,235
Capital expenditures .....................        9,908          2,059            1,233           7,328           20,528
Property, equipment and leasehold
   Improvements ..........................      505,777        335,645           86,747          22,193          950,362
</TABLE>

                                       -8-

<PAGE>

         The following table reconciles EBITDA to income (loss) before
discontinued operations for the three and nine months ended September 30, 2003
and 2002 (in thousands):

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                  SEPTEMBER 30                    SEPTEMBER 30
                                                              2003            2002            2003            2002
                                                          ------------    ------------    ------------    ------------
<S>                                                       <C>             <C>             <C>             <C>
EBITDA ................................................   $     18,170    $     18,664    $     43,021    $     61,933
(Provision) benefit for income taxes ..................         (1,296)          1,203          13,850           4,327
Equity in earnings of joint ventures ..................            322               -             775               -
Other income (loss)  ..................................           (110)            302         (35,456)         (4,198)
Gains (losses) on retirement of debt ..................              -          (6,449)          1,622         (19,341)
Interest expense ......................................         (4,908)         (6,709)        (15,901)        (22,075)
Investment income .....................................            103             637             974           1,820
Depreciation and amortization .........................        (10,254)         (9,530)        (30,549)        (29,235)
                                                          ------------    ------------    ------------    ------------
Income (loss) before discontinued operations ..........   $      2,027    $     (1,882)   $    (21,664)   $     (6,769)
                                                          ============    ============    ============    ============
</TABLE>

NOTE 11 - LITIGATION

         The Company is involved in certain legal proceedings incidental to the
normal conduct of its business. The Company does not believe that its
liabilities relating to any of the legal proceedings to which it is a party are
likely to be, individually or in the aggregate, material to its consolidated
financial position or results of operations.

         On June 13, 2003, Southeast Texas Inns, Inc. ("Southeast Texas Inns")
filed a Complaint against the Company, May-Ridge, L.P. ("May-Ridge") and
Ridgewood Holdings Corp. ("Ridgewood"), which is now pending before the United
States District Court for the Middle District of Tennessee. The Complaint
alleges that May-Ridge has defaulted under a Lease Agreement, dated as of July
9, 2000, with Southeast Texas Inns pursuant to which May-Ridge leased three
properties located in Texas (the "Three Properties") that were operated as
AmeriSuites Hotels. On April 2, 2003, Southeast Texas Inns, as landlord,
terminated the Lease Agreement for default and May-Ridge surrendered the three
properties to Southeast Texas Inns. In the Complaint, Southeast Texas Inns seeks
actual and liquidated damages in an amount in excess of $10 million against
May-Ridge and Ridgewood, which is the sole general partner of May-Ridge.
Southeast Texas Inns also seeks to hold the Company jointly liable for all
damages under the Lease Agreement, to which the Company is not a party. The
Company filed a motion to dismiss the Complaint against the Company on August
19, 2003, which was granted subject to no new evidence being brought by
Southeast Texas Inns.

                                      -9-

<PAGE>

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

GENERAL

         Prime Hospitality Corp. ("Prime" or the "Company") is an owner,
operator and franchisor of hotels, with 247 hotels in operation containing
31,781 rooms located in 34 states (the "Portfolio") as of September 30, 2003.
Prime controls three hotel brands -- AmeriSuites (R), Wellesley Inn & Suites (R)
and Prime Hotels and Resorts (R) -- and operates a portfolio of full-service
hotels primarily under franchise agreements with national hotel chains.

         The following table sets forth information with respect to the
Portfolio as of September 30, 2003:

<TABLE>
<CAPTION>
                          HOTELS    ROOMS
                          ------    -----
<S>                       <C>      <C>
            AMERISUITES

                  Owned     62      8,024
                 Leased     24      2,923
                Managed     27      3,480
             Franchised     35      4,084
                           ---     ------
                  Total    148     18,511

WELLESLEY INNS & SUITES

                  Owned     56      6,906
                 Leased      -          -
                Managed      6        668
             Franchised     19      1,837
                           ---     ------
                  Total     81      9,411

 PRIME HOTELS & RESORTS

                  Owned      1        240
                           ---     ------
                  Total      1        240

 NON-PROPRIETARY BRANDS

                  Owned      4        860
                 Leased      1        160
                Managed     10      1,934
          Joint Venture      2        665
                           ---     ------
                  Total     17      3,619

        TOTAL PORTFOLIO

                  Owned    123     16,030
                 Leased     25      3,083
                Managed     43      6,082
             Franchised     54      5,921
          Joint Venture      2        665
                           ---     ------
                  Total    247     31,781
</TABLE>

         The Company's growth has been focused on the development of its
proprietary brands. Through the development of its proprietary brands, Prime has
transformed itself from an owner/operator into a more diversified company with
ownership, franchise and management interests and has positioned itself to
generate additional revenues with minimal capital investment. Prime's strategy
is also focused on opportunistic hotel acquisitions to take advantage of
depressed values while leveraging the Company's operating infrastructure. With
approximately 200 hotels under management, Prime believes it possesses the hotel
management expertise to maximize the profitability and value of its hotel
assets.

         The hotel and leisure industry is seasonal in nature; however, the
periods during which the Company's properties experience higher hotel revenue
activities vary from property to property and depend principally upon location.
The Company's revenues historically have generally been lower in the first and
fourth quarters than in the second and third quarters.

         Operating results for the three and nine months ended September 30,
2003 were impacted by the weakness in the economy which had a significant
negative impact on business travel and the demand for hotel rooms. Results were
further impacted by the war with Iraq and concerns about airline safety.

                                      -10-

<PAGE>

These factors have resulted in weaker pricing power which has caused the average
daily room rate ("ADR") to decline. As a result, for the three and nine months
ended September 30, 2003, revenues from comparable owned and leased hotels
increased by 0.3% for the three month period and decreased by 3.5% for the nine
month period and gross operating profits on these hotels declined by 4.4% and
12.7%, respectively. Overall, for the three and nine months ended September 30,
2003, revenue declined by $10.5 million and $20.6 million, respectively, and
EBITDA decreased by $0.5 million and $18.9 million, respectively, due to the
results of the comparable owned and leased hotels and the effect of asset sales
and lease terminations. See Note 10 of Notes to Interim Consolidated Financial
Statements for a reconciliation of EBITDA to net income (loss) from continuing
operations.

         Certain statements in this Form 10-Q constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance or achievements of the Company, or industry results, to differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements.

         Forward-looking statements include the information about Prime's
possible or assumed future results of operations and statements preceded by,
followed by or that include the words "believe," "except," "anticipate,"
"intend," "plan," "estimate," or similar expressions, or the negative thereof.
Actual results may differ materially from those expressed in these
forward-looking statements. Readers of this Form 10-Q are cautioned not to
unduly rely on any forward-looking statements.

         The following important factors, in addition to those discussed
elsewhere in this Form 10-Q or incorporated herein by reference, could cause
results to differ materially from those expressed in such forward-looking
statements: competition within each of the Company's business segments in areas
such as access, location, quality or accommodations and room rate structures;
the balance between supply of and demand for hotel rooms and accommodations; the
Company's continued ability to obtain new operating contracts and franchise
agreements; the Company's ability to develop and maintain positive relations
with current and potential hotel owners and other industry participants; the
level of rates and occupancy that can be achieved by such properties and the
availability and terms of financing; changes in travel patterns, taxes and
government regulations which influence or determine wages, prices, construction
procedures and costs; the effect of national and regional economic conditions
that will affect, among other things, demand for products and services at the
Company's hotels; government approvals, actions and initiatives including the
need for compliance with environmental and safety requirements, and change in
laws and regulations or the interpretation thereof and the potential effects of
tax legislative action; and other risks described from time to time in the
Company's filings with the SEC, including its Form 10-K.

         Although the Company believes the expectations reflected in these
forward-looking statements are based upon reasonable assumptions, no assurance
can be given that Prime will attain these expectations or that any deviations
will not be material. Except as otherwise required by the federal securities
laws, the Company disclaims any obligation or undertaking to disseminate any
updates or revisions to any forward-looking statement contained herein to
reflect any change in its expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.

                                      -11-

<PAGE>

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003
COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002

         The Company operates three product types: its proprietary AmeriSuites
which are upscale all-suites hotels; its proprietary Wellesley Inns & Suites
which are mid-price limited service hotels; and its full-service hotels which
are upscale hotels operated primarily under national franchise agreements.

         Hotel revenues consist of lodging revenues (which consist primarily of
room, telephone and vending revenues) and food and beverage revenues. Hotel
revenues decreased by $12.0 million and $25.3 million, or 12.6% and 8.8%,
respectively, for the three and nine months ended September 30, 2003 compared to
the same periods in 2002, primarily due to a decline in revenue per available
room ("REVPAR") at comparable hotels for the nine month period and the
de-consolidation of the HPT hotels which are currently managed on an interim
basis.

         The following table illustrates the REVPAR change, by segment for all
owned and leased hotels and for managed hotels where Prime has a significant
financial commitment, which were operated for comparable three and nine month
periods in 2003 and 2002.

<TABLE>
<CAPTION>
                                 THREE MONTHS ENDED                  NINE MONTHS ENDED
                                    SEPTEMBER 30,                      SEPTEMBER 30,
                            2003        2002      % CHANGE      2003        2002      % CHANGE
                            ----        ----      --------      ----        ----      --------
<S>                       <C>         <C>         <C>        <C>          <C>         <C>
            AMERISUITES
              Occupancy       68.7%       64.0%                   65.9%       63.4%
                    ADR   $  67.31    $  72.89               $   67.47    $  73.84
                 REVPAR   $  46.24    $  46.65      (0.9%)   $   44.45    $  46.84     (5.1%)

WELLESLEY INNS & SUITES
              Occupancy       63.1%       54.8%                   64.2%       56.0%
                    ADR   $  54.39    $  60.53               $   54.60    $  61.80
                 REVPAR   $  34.34    $  33.14       3.6%    $   35.03    $  34.58      1.3%

           FULL-SERVICE
              Occupancy       71.5%       69.5%                   65.7%       65.6%
                    ADR   $ 118.73    $ 122.34               $  109.57    $ 115.62
                 REVPAR   $  84.95    $  85.00      (0.1%)   $   71.96    $  75.87     (5.2%)

                  TOTAL
              Occupancy       66.9%       61.1%                   65.2%       61.0%
                    ADR   $  67.17    $  73.31               $   66.30    $  73.50
                 REVPAR   $  44.92    $  44.80       0.3%    $   43.25    $  44.82     (3.5%)
</TABLE>

         The slight REVPAR increase for the three months ended September 30,
2003 was attributed to increased leisure and group travel in July and August
partially offset by a decline in transient business travel. This resulted in
high occupancies but lower ADR. REVPAR increases were reported in Cincinnati,
Oklahoma City, Richmond and Phoenix with decreases in Chicago, Denver and the
Northeast.

         The REVPAR decrease for the nine months ended September 30, 2003 was
primarily attributed to weak business travel trends due to the sluggish economy
combined with the war with Iraq. The decline was driven by a decrease in ADR due
to competitive pressure on room rates. Key markets which

                                      -12-

<PAGE>

contributed to the revenue decline were Chicago, Dallas, Denver, Northern New
Jersey and South Florida. The hotels in the Houston and Phoenix markets reported
increases primarily due to increased occupancy at the Wellesley Inns & Suites
hotels.

         Management, franchise and other fees consist primarily of base and
incentive fees earned under management agreements, royalties earned under
franchise agreements and sales commissions earned by the Company's national
sales group. Management, franchise and other fees increased by $2.0 million and
$5.9 million, or 57.4% and 55.7%, respectively, for the three and nine months
ended September 30, 2003 compared to the same periods in 2002. The increase was
due to additional franchised and managed hotels arising from hotels sold to
franchisees and new hotel openings, termination fees on three AmeriSuites hotels
in the second quarter in 2003, interim management and franchise fees on the HPT
hotels in the third quarter of 2003 and fees charged to franchisees for
providing reservation services. In November 2002, Prime opened a new reservation
center near its headquarters in Fairfield, NJ. Previously, these reservation
services were provided by a third party.

         Rental and other revenues consists of rental income, interest on notes
receivable and other miscellaneous operating income. Rental and other revenues
for the three and nine months ended September 30, 2003 decreased by $0.5 million
and $1.1 million, or 57.3% and 44.5%, respectively, compared to the same periods
in 2002 due to condemnation proceeds and other miscellaneous revenue in 2002.

         Hotel operating expenses consist of all direct costs related to the
operation of the Company's properties (lodging, food & beverage, administration,
selling and advertising, utilities and repairs and maintenance). Hotel operating
expenses decreased by $7.7 million and $6.7 million, or 14.4% and 4.3%, for the
three and nine months ended September 30, 2003 compared to the same periods in
2002. For the comparable three and nine month periods, hotel operating expenses,
as a percentage of hotel revenues, were 56.1% and 54.5% in 2002 and 54.9% and
57.2%, respectively, in 2003. Margins were impacted by the increase in occupancy
and a decrease in reservation costs as Prime is now providing this service and
the costs are now recorded as brand and administrative expenses versus hotel
operating expenses in 2002.

         Rent and other occupancy expenses consist primarily of rent expense,
property insurance and real estate and other taxes. Rent and other occupancy
expenses decreased by $4.6 million and $2.6 million, or 23.3% and 4.4%,
respectively, for the three and nine months ended September 30, 2003 as compared
to the same periods in 2002, primarily due to the de-consolidation of the HPT
hotels partially offset by higher property insurance costs and costs of
terminating franchise agreements on five Ramada hotels which were converted to
the Wellesley brand in the second quarter of 2003.

         Brand and administrative expenses consist primarily of centralized
management expenses associated with operating the hotels, corporate expenses,
national brand advertising expenses and reservation costs. Brand and
administrative expenses increased by $2.3 million and $7.6 million, or 29.9% and
35.0%, for the three and nine months ended September 30, 2003 compared to the
same periods in 2002, due primarily to the timing of brand advertising
expenditures and the operation of the new reservation center which opened in
November 2002.

         Depreciation and amortization increased by $0.7 million, and $1.3
million, or 7.6% and 4.5%, for the three and nine months ended September 30,
2003 compared to the same periods in the prior year due to depreciation
associated with capital additions on existing hotels partially offset by hotel
sales.

         Investment income decreased by $0.5 million and $0.8 million, or 83.8%
and 46.5%, for the

                                      -13-

<PAGE>

three and nine months ended September 30, 2003 compared to the same periods in
2002 due to lower cash and security deposit balances and interest rates.

         Interest expense decreased by $1.8 million and $6.2 million, or 26.8%
and 28.0%, respectively, for the three and nine months ended September 30, 2003
compared to the same periods in 2002 primarily due to debt reductions and the
retirement of 9 1/4% First Mortgage Notes in August 2002 with borrowings under
the Company's $125 Million Revolving Credit Facility (the "Credit Facility") at
a lower interest rate.

         Gains (losses) on retirement of debt for the nine months ended
September 30, 2003 related to the retirement of $21.3 million of the 8?% Notes.
For the three and nine months ended, September 30, 2002, gains (losses) on
retirement of debt related to premiums on the retirement of the 9 3/4% Senior
Subordinated Notes (the "9 3/4% Notes") and the writeoff of deferred loan fees
on both the 9 3/4% Notes and the Company's former revolving credit facility.

         Other income (loss) for the nine months ended September 30, 2003 is
primarily comprised of a write-off of assets associated with the HPT lease. For
the nine months ended, June 30, 2002, other income (loss) relates to a
litigation charge.

         Equity in earnings from joint ventures for the three and nine months
ended September 30, 2003 related to the Meadowlands Venture and the Quebec
Venture.

         Discontinued operations for the three and nine months ended September
30, 2003 and 2002 reflect the operations of hotels no longer operated by Prime
and the associated gain or loss on the disposal of these hotels.

LIQUIDITY AND CAPITAL RESOURCES

         Sources. The Company's major sources of cash for the nine months ended
September 30, 2003 were operating cash flow of $27.8 million, asset sales of
$17.4 million, borrowings of $13.0 million and sales and financings of joint
venture interests of $18.5 million. The Company's major uses of cash during the
period were debt retirements of $56.0 million, capital expenditures of $18.8
million and an investment in a joint venture of $6.6 million.

         The Company had borrowings of $50.0 million under its Credit Facility
at LIBOR +2.50%, or approximately 3.6%, as of September 30, 2003. The Credit
Facility consists of a $125 million revolving line of credit which expires in
2006 and is secured by the equity interests of certain of Prime's subsidiaries.
The Credit Facility contains loan covenants customary for a credit facility of
this size and nature, including but not limited to, limitations on making
capital expenditures, selling or transferring assets, making certain investments
(including acquisitions), repurchasing shares and incurring liens. In addition,
the Credit Facility requires that the Company must maintain a debt to EBITDA
ratio of 4.25 times and an EBITDA to interest ratio of 2.50 times. As of
September 30, 2003, the Company's debt to EBITDA ratio was 4.00 times and its
EBITDA to interest ratio was 3.00 times and the Company was in compliance with
its covenants. However, there can be no assurance that the Company will continue
to be in compliance with these covenants.

         During the nine months ended September 30, 2003, the Company sold one
AmeriSuites and one Wellesley Inn for the total proceed of $17.4 million. The
Company retained the franchise rights to the hotels under 20-year franchise
agreements.

                                      -14-

<PAGE>

         In March 2003, subsidiaries of Prime and UCC each sold a ten percent
interest in the Quebec Venture at cost to Ark Quebec Inc., an unrelated third
party, decreasing each of their respective equity interests to 40%. In July
2003, the Quebec Venture obtained an $8.2 million (CDN) first mortgage loan at a
fixed rate of 6.26% due in 2008. The loan is recourse to the hotel only. Prime
received $2.5 million of the loan proceeds.

         In March 2003, subsidiaries of Prime and UCC each sold a ten percent
interest in the Meadowlands Venture. The interests were sold to Ark Meadowlands,
Inc., an unrelated third party, at cost decreasing Prime's and UCC's equity
interests in the Meadowlands Venture to 40% each. In April 2003, the Meadowlands
Venture entered into a $25.0 million mortgage loan secured by the hotel. The
loan bears interest at LIBOR+2.75% and is due in April 2006. The proceeds of the
loan were distributed to the partners based on their ownership interests with
Prime receiving approximately $10.0 million in April 2003. Under a guaranty
agreement, Prime and UCC jointly and severally guaranteed $4.0 million which
will be reduced by scheduled principal payments.

         Uses. The Company intends to continue the growth of its brands
primarily through franchising and, therefore, new construction spending will be
limited. There are currently no new construction projects underway. During the
nine months ended September 30, 2003, the Company spent $18.8 million on capital
additions which primarily consisted of capital improvements at its owned and
leased hotels. The Company plans to fund capital improvements at existing hotels
primarily with internally generated cash flow.

         During the nine months ended September 30, 2003, Prime purchased $21.3
million of its 8?% Notes for $19.7 million, realizing a gain of $1.6 million.

         During the nine months ended September 30, 2003, Prime repurchased
358,000 shares of its common stock at an average price of $5.63 per share.

         In January 2003, Nova Scotia Company, an entity in which a subsidiary
of Prime held a 50% interest, acquired the Quebec Venture. Prime's partner in
the acquisition was a subsidiary of UCC, an entity in which A.F. Petrocelli,
Prime's Chairman and Chief Executive Officer, has a controlling ownership
interest. Pursuant to the operating agreement, all significant operating and
capital decisions are made jointly and operating profits and losses are
allocated based on ownership interest. In addition, Prime manages the hotel.

         Glen Rock Holding Corp, a subsidiary of the Company, did not make its
scheduled July 1 rent payment of approximately $2.0 million to Hospitality
Properties Trust (NYSE:HPT) and received a default notice from HPT. The lease
covers 24 AmeriSuites hotels owned by HPT. Over the past twelve months, cash
flow was negatively impacted by $11.5 million as rent payments exceeded
operating cash flow by $9.0 million and approximately $2.5 million was required
to be set aside for capital improvements. The termination of the lease would
result in the forfeiture of certain deposits and, accordingly, Prime has taken a
$35.0 million non-cash charge against the net book value of the assets
associated with the lease. Prime is managing the hotels as AmeriSuites on an
interim basis. HPT has the right to change the management and franchise
agreements on the hotels which are subordinated to the lease obligations to HPT.

         On April 3, 2003, a wholly owned subsidiary of the Company terminated
lease agreements on three hotels owned by ShoLodge, Inc. ("ShoLodge") due to
operating shortfalls which approximated $1.1 million in the past twelve months.
In accordance with the lease termination, Prime forfeited its rights to receive
a $3.1 million payment in 2011 which was due at the end of the lease as
compensation for

                                      -15-

<PAGE>

executing the lease agreement. ShoLodge has assumed management of the hotels and
is operating the hotels under new ten-year franchise agreements with Prime,
under the AmeriSuites flag. These franchise agreements permit ShoLodge to
terminate the agreements without termination fees upon proper notice.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to changes in interest rates from its floating
rate debt arrangements. At September 30, 2003, the Company had $243.7 million of
debt outstanding of which $193.7 million bears interest at fixed rates. The
interest rate on the Company's Credit Facility, under which $50.0 million was
outstanding at September 30, 2003, is variable at a rate of LIBOR + 2.50%. A
hypothetical 100 basis point adverse move (increase) on short-term interest
rates on the floating rate debt outstanding at September 30, 2003 would
adversely affect Prime's annual interest cost by approximately $0.5 million
assuming borrowed amounts under the Credit Facility remained at $50.0 million.

SUMMARY OF INDEBTEDNESS

Combined aggregate principal maturities of debt as of September 30, 2003, are as
follows (in thousands):

<TABLE>
<CAPTION>
               8 3/9%       CREDIT      SCHEDULED
                NOTES      FACILITY    AMORTIZATION      TOTAL
             ----------   ----------   ------------   -----------
<S>          <C>          <C>          <C>            <C>
      2003   $            $            $        617   $       617
      2004                                    1,102         1,102
      2005                                      229           229
      2006                    50,000            250        50,250
      2007                                      272           272
THEREAFTER      178,725                      12,457       191,182
             ----------   ----------   ------------   -----------
             $  178,725   $   50,000   $     14,927   $   243,652
             ==========   ==========   ============   ===========
</TABLE>

ITEM 4. CONTROLS AND PROCEDURES

         Within the 90-day period prior to the filing of this Quarterly Report
on Form 10-Q, the Company under the supervision and with the participation of
management, including the Chief Executive Officer and the Chief Financial
Officer, evaluated the effectiveness of the Company's disclosure controls and
procedures (as defined in Rules 13a-14 and 15d-14 under the Exchange Act). Based
upon that evaluation, the Company's Chief Executive and the Chief Financial
Officer have concluded that the Company's disclosure controls and procedures are
effective to timely alert them to material information relating to the Company
(including its consolidated subsidiaries) required to be included in Company's
Exchange Act filings.

         There have been no significant changes in our internal controls
subsequent to the date the Company completed its evaluation.

                                      -16-

<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         The Company is involved in certain legal proceedings incidental to the
normal conduct of its business. The Company does not believe that its
liabilities relating to any of the legal proceedings to which it is a party are
likely to be, individually or in the aggregate, material to its consolidated
financial position or results of operations.

         On June 13, 2003, Southeast Texas Inns, Inc. ("Southeast Texas Inns")
filed a Complaint against the Company, May-Ridge, L.P. ("May-Ridge") and
Ridgewood Holdings Corp. ("Ridgewood"), which is now pending before the United
States District Court for the Middle District of Tennessee. The Complaint
alleges that May-Ridge has defaulted under a Lease Agreement, dated as of July
9, 2000, with Southeast Texas Inns pursuant to which May-Ridge leased three
properties located in Texas (the "Three Properties") that were operated as
AmeriSuites Hotels. On April 2, 2003, Southeast Texas Inns, as landlord,
terminated the Lease Agreement for default and May-Ridge surrendered the three
properties to Southeast Texas. In the Complaint, Southeast Texas Inns seeks
actual and liquidated damages in an amount in excess of $10 million against
May-Ridge and Ridgewood, which is the sole general partner of May-Ridge.
Southeast Texas Inns also seeks to hold the Company jointly liable for all
damages under the Lease Agreement, to which the Company is not a party. The
Company filed a motion to dismiss the Complaint as against the Company on about
August 19, 2003, which was granted subject to no new evidence being brought by
Southeast Texas Inns.

         On August 18, 1999, plaintiff Nick Pourzal, a former employee of the
Company, filed a complaint against the Company in the United States District
Court for the Virgin Islands. The complaint alleges that the Company contracted
in 1978 to pay plaintiff ten percent of the pre-tax earning on any use or sale
of a 16.354-acre property on St. Thomas, U.S. Virgin Islands known as the
"Gilbert Land," and that the Company breached this contract by making commercial
use of the Gilbert Land without paying the plaintiff. On January 13, 2003,
plaintiff filed a motion for leave to file a second amended complaint, to add
claims for (i) conspiracy to violate the Virgin Islands Plant Closing Act, (ii)
prima facie tort and (iii) confirmation of arbitration award relating to the
Company's termination of plaintiff's employment in 1999. The complaint seeks
compensatory, incidental and consequential damages, interest and costs, a
declaratory judgment that the Company is liable for payment of ten percent of
pre-tax earnings on the use or sale of the Gilbert Land, and attorneys' fees and
expenses. The Company believes that the plaintiff's action is without merit and
intends to vigorously defend this case.

ITEM 2.           CHANGES IN SECURITIES AND USE OF PROCEEDS

                  None.

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES

                  None.

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  None.

                                      -17-

<PAGE>

ITEM 5.           OTHER INFORMATION

                  None.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

Exhibit 31.1      Certification of CEO pursuant to Section 302 of the
                  Sarbanes - Oxley Act of 2002

Exhibit 31.2      Certification of CFO pursuant to Section 302 of the
                  Sarbanes - Oxley Act of 2002

Exhibit 32.1      Certification of CEO pursuant to Section 906 of the
                  Sarbanes - Oxley Act of 2002

Exhibit 32.2      Certification of CFO pursuant to Section 906 of the
                  Sarbanes - Oxley Act of 2002

         (b)      Reports on Form 8-K

                  On July 31, 2003, the Company issued a press release regarding
                  earnings for the second quarter of 2003.

                                      -18-

<PAGE>

                                   SIGNATURES

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

                                        PRIME HOSPITALITY CORP.

Date: November 13, 2003                      By: /s/ A.F. Petrocelli
                                                 -------------------
                                             A. F. Petrocelli
                                             A.F. Petrocelli
                                             President and Chief Executive
                                             Officer

Date: November 13, 2003                      By: /s/ Richard T. Szymanski
                                                 ------------------------
                                                 Richard T. Szymanski
                                                 Senior Vice President and Chief
                                                 Financial Officer

                                      -19-