<PAGE 1>
                                  
                                  
                 SECURITIES AND EXCHANGE COMMISSION
                                  
                        Washington, DC  20549
                                  
                                  
                             FORM 10-Q/A
                          (Amendment No. 1)
                                  
                                  
                                  
       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934
                                  
                                  
For the quarterly period ended March 31, 1998     Commission file
                                                    number  0-23732



                        WINSTON HOTELS, INC.
       (Exact name of registrant as specified in its charter)
                                  
    North Carolina                            56-1624289
(State of incorporation)                   (I.R.S. Employer
                                            Identification No.)


                         2209 Century Drive
                   Raleigh, North Carolina  27612
              (Address of principal executive offices)
                             (Zip Code)
                                  
                           (919) 510-6010
        (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   __


The number of shares of Common Stock, $.01 par value, outstanding on
April 30, 1998 was 16,298,980.


<PAGE 2>

                        WINSTON HOTELS, INC.
                                Index

The Registrant hereby amends and restates its Quarterly Report on
Form 10-Q for the period ended March 31, 1998, filed with the
Securities and Exchange Commission on May 15, 1998, to reflect a
change in accounting principle effective January 1, 1998.  This
change resulted from the Financial Accounting Standards Board's
Emerging Issues Task Force issuance on May 21, 1998 of EITF 98-9
"Accounting for Contingent Rent in Interim Financial Periods."

                                                                 Page
PART I.   FINANCIAL INFORMATION

Item 1.   WINSTON HOTELS, INC.

               Consolidated Balance Sheets as of March 31, 1998
                (unaudited)and December 31, 1997                   3

               Unaudited Consolidated Statements of Operations
                for the three months ended March 31, 1998 and
                1997                                               4

               Unaudited Consolidated Statements of Cash Flows for
                the three months ended March 31, 1998 and 1997     5

               Notes to Consolidated Financial Statements          6

          CAPSTAR WINSTON COMPANY, L.L.C.

               Balance Sheets as of March 31, 1998 (unaudited) 
                and December 31, 1997                              9

               Unaudited Statement of Income for the three months
                ended March 31, 1998                              10

               Unaudited Statement of Cash Flows for the three 
                months ended March 31, 1998                       11

               Note to Financial Statements                       12

          WINSTON HOSPITALITY, INC.

               Unaudited Statement of Income for the three months
                ended March 31, 1997                              13

               Unaudited Statement of Cash Flows for the three 
                months ended March 31, 1997                       14

               Note to Financial Statements                       15

Item 2.   Management's Discussion and Analysis of Financial 
           Condition and Results of Operations                    16

PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                        22

          Signature Page                                          23

<PAGE 3>
                        WINSTON HOTELS, INC.
                     CONSOLIDATED BALANCE SHEETS
              (in thousands, except per share amounts)
                                  
                             ASSETS
                                          Restated           
                                        (See Note 1)
                                        -------------
                                        March 31,1998    December 31, 1997
                                        -------------    -----------------
                                        (unaudited)                       
Investment in hotel properties:
   Land                                 $      31,993    $      27,504
   Buildings and improvements                 259,571          224,535
   Furniture and equipment                     26,658           22,528
                                        -------------    -----------------
   Operating properties                       318,222          274,567
   Less accumulated depreciation              (24,726)         (21,572)
                                        -------------    -----------------
                                              293,496          252,995
   Properties under development                21,377           26,490
                                        -------------    -----------------
     Net investment in hotel properties       314,873          279,485
Corporate FF&E, net                               139               23
Cash and cash equivalents                       1,041              164
Lease revenue receivable                        6,910            5,682
Deferred expenses, net                          1,596            1,403
Prepaid expenses and other assets               2,505            1,070
                                        -------------    -----------------
     Total Assets                       $     327,064    $     287,827

                   LIABILITIES AND SHAREHOLDERS' EQUITY

Due to banks                           $       86,881    $      44,081
Accounts payable and accrued expenses           1,700            3,527
Deferred revenue                                5,054               --
Distributions payable                           6,605            6,950
Minority interest in Partnership               14,754           15,779
                                        -------------    -----------------
     Total liabilities                        114,994           70,337
                                        -------------    -----------------
                                                          
Shareholders' equity:
  Preferred stock, $.01 par value,
   10,000 shares authorized, 3,000 shares
   issued and outstanding (liquidation
   preference of $76,734 and $77,100)              30               30
  Common stock, $.01 par value, 50,000                    
   shares authorized, 16,299 and 16,194
   shares issued and outstanding                  163              162
  Additional paid-in capita  l                224,598          223,427
  Unearned compensation                          (391)            (106)
  Distributions in excess of earnings         (12,330)          (6,023)
                                        -------------    -----------------
     Total shareholders' equity               212,070          217,490
                                        -------------    -----------------
     Total liabilities and shareholders' 
      equity                            $     327,064    $     287,827
                                        =============    =================

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


<PAGE 4>                                  
                        WINSTON HOTELS, INC.
           UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
              (in thousands, except per share amounts)
                                  
                                          Restated           
                                        (See Note 1)
                                        Three Months     Three Months
                                            Ended            Ended
                                        March 31,1998    March 31, 1997
                                        -------------    --------------
Revenue:
   Percentage lease revenue             $       5,019    $        7,148
   Interest and other income                       49                30
                                        -------------    --------------
               Total revenue                    5,068             7,178
                                        -------------    --------------

Expenses:
   Real estate taxes and property and
    casualty insurance                            979               565
   General and administrative                     599               370
   Interest                                       625               815
   Depreciation                                 3,158             2,222
   Amortization                                    87                40
                                        -------------    --------------
               Total expenses                   5,448             4,012
                                        -------------    --------------
                                                          
               Income (loss) before
                allocation to minority 
                interest                         (380)            3,166
Income (loss) before allocation to 
 minority interest                               (208)              230
                                        -------------    --------------
               Net income (loss)                 (172)            2,936
Preferred stock distribution                    1,734                --
                                        -------------    --------------
                                                          
               Net income (loss)
                applicable to common
                shareholders            $      (1,906)   $        2,936
                                        =============    ==============

Earnings per share:
   Net income (loss) per common share   $       (0.12)   $         0.19
                                        =============    ==============
                                                          
   Net income (loss) per common share
   assuming dilution                    $       (0.12)   $         0.18
                                        =============    ==============
                                                          
   Weighted average number of common
    shares                                     16,224            15,815
                                        =============    ==============
                                                          
   Weighted average number of common
    shares assuming dilution                   16,224            17,154
                                        =============    ==============


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

<PAGE 5>

                        WINSTON HOTELS, INC.
           UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                          ($ in thousands)
                                          Restated           
                                        (See Note 1)
                                        Three Months     Three Months
                                            Ended            Ended
                                        March 31,1998    March 31, 1997
                                        -------------    --------------
Cash flows from operating activities:
   Net income (loss)                    $        (172)   $        2,936
   Adjustments to reconcile net income
    (loss) to net cash provided by 
    operating activites:
      Minority interest                          (208)              230
      Depreciation                              3,158             2,222
      Amortization of franchise fees               30                22
      Amortization recorded as interest
       expense                                     91               112
      Unearned compensation amortization           57                18
   Change in assets and liabilities:
      Lease revenue receivable                 (1,228)             (153)
      Prepaid expenses and other assets            38              (219)
      Accounts payable and accrued
       expenses                                (1,827)             (337)
      Deferred revenue                          5,054                --
                                        -------------    --------------
            Net cash provided by
             operating activities               4,993             4,831
                                        -------------    --------------

Cash flows from investing activities:
   Deferred acquistion costs                     (100)              (32)
   Prepaid acquisition costs                   (1,548)               --
   Investment in hotel properties             (39,250)           (3,501)
   Sale of land parcel                            445                --
                                        -------------    --------------
            Net cash used in
             investing activities             (40,453)           (3,533)
                                        -------------    --------------

Cash flows from financing activites:
   Fees paid to increase and extend 
    line of credit                                 --                (6)
   Net proceeds from issuance of stock            485               200
   Payment of distributions to 
    shareholders                               (6,478)           (4,029)
   Payment of distributions to
    minority interest                            (470)             (323)
   Increase in line of credit borrowing        42,800             2,931
                                        -------------    --------------
            Net cash provided by
            (used in) financing
            activities                         36,337            (1,227)
                                        -------------    --------------
                                                         
Net increase in cash and cash 
 equivalents                                      877                71
Cash and cash equivalents at beginning
 of period                                        164               234
                                        -------------    --------------
Cash and cash equivalents at end of
 period                                 $       1,041    $          305
                                        =============    ==============

Supplemental disclosure:
      Cash paid for interest            $         780    $          384
                                        =============    ==============
                                                          
Summary of non-cash investing and                        
 financing activities:
   Investment in hotel properties 
    payable                             $           8    $        2,327
   Distributions declared but not paid          6,605             4,613
   Conversion of partnership units for
    common shares                                 152                --
   Unearned compensation                          339                --
   Minority interest payable adjustment                   
    due to the exercise of stock options
    and conversion of partnership units
    for common shares                             196                --


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

<PAGE 6>

                             WINSTON HOTELS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (amounts in thousands, except per share amounts)

1.   RESTATEMENT FOR ADOPTION OF EITF 98-9

     On May 21, 1998, the Financial Accounting Standards Board's
     Emerging Issues Task Force issued EITF 98-9 "Accounting for
     Contingent Rent in Interim Financial Periods" ("EITF 98-9").
     EITF 98-9 addresses the recognition of rental revenue during
     interim periods derived from leases which provide for percentage
     rent and requires that a lessor defer recognition of contingent
     rental income in interim periods until specified targets are
     met.  The Company has reviewed the terms of its percentage
     leases and has determined that the provisions of EITF 98-9
     materially impact the Company's revenue recognition on an
     interim basis, but will have no impact on the Company's annual
     percentage lease revenue, interim cash flow from its third party
     lessee, or the Company's ability to pay dividends.  The Company
     has accounted for EITF 98-9 as a change in accounting principle
     effective January 1, 1998 and accordingly, the March 31, 1998
     financial statements have been restated from the amounts
     previously stated to reflect the adoption.  The restatement has
     resulted in the following changes to the originally issued March
     31, 1998 financial statements: total revenue decreased from
     $10,122 to $5,068 resulting in a deferred revenue balance of
     $5,054, net income decreased from $4,377 to a net loss of $172,
     net income (loss) per common share and net income (loss) per
     common share assuming dilution decreased from $0.16 to ($0.12),
     and total shareholders' equity decreased from $216,619 to
     $212,070.  As a result of the adoption of EITF 98-9,
     substantially all of the percentage lease revenue recognized for
     the three month period ended March 31, 1998 consists of base
     rent.  Consistent with the provisions of EITF 98-9, the March
     31, 1997 financial statements have not been restated, however,
     the following pro forma amounts reflect the effect on the prior
     period as if EITF 98-9 had been in effect as of the beginning of
     that period:

                                           Three Months
                                               Ended
                                           March 31, 1997
                                           --------------
Total revenue                              $        3,606
Total expenses                                      4,012
                                           --------------
      Loss before allocation to minority 
       interest                                      (406)
Loss allocation to minority interest                  (29)
                                           --------------
         Net loss                                    (377)
Preferred stock distribution                           --
                                           --------------
         Net loss applicable to common
          shareholders                     $         (377)
                                           ==============

Earnings per share:
   Net loss per common share               $        (0.02)
                                           ==============
   Net loss per common share assuming
    dilution                               $        (0.02)
                                           ==============
   Weighted average number of common
    shares                                         15,815
                                           ==============
   Weighted average number of common
    shares assuming dilution                       15,815
                                           ==============

2.   ORGANIZATION

     Winston Hotels, Inc. (the "Company") operates so as to qualify
     as a real estate investment trust ("REIT") for federal income
     tax purposes.  The accompanying unaudited consolidated financial
     statements reflect, in the opinion of management, all
     adjustments necessary for a fair presentation of the interim
     financial statements.  All such adjustments are of a normal and
     recurring nature.  Due to the seasonality of the hotel business
     and the method by which revenue is recognized (see Note 1), the
     information for the three months ended March 31, 1998 and the
     information for the three months ended March 31, 1997 are not
     necessarily indicative of the results for a full year.

<PAGE 7>
                             WINSTON HOTELS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (amounts in thousands, except per share amounts)

3.   ACQUISITIONS AND DEVELOPMENT

     On March 3, 1998, the Company acquired the 168-suite Residence
     Inn by Marriott in Phoenix, Arizona for $15,700 in cash.  On
     March 17, 1998, the Company purchased the newly-built 164-room
     Hilton Garden Inn in Alpharetta, Georgia for $13,500 in cash.
     In addition, on March 10, 1998, the Company announced the
     opening of its first internally-developed hotel, a 137-suite
     Homewood Suites hotel in Raleigh, North Carolina.  The cost of
     the hotel was approximately $12,000.

4.   PRO FORMA FINANCIAL INFORMATION
     
     These unaudited pro forma condensed statements of operations of
     the Company are presented as if the September 1997 Preferred
     Stock offering had occurred January 1, 1997 and the Company had
     acquired all 41 of the hotels owned as of March 31, 1998 on the
     later of January 1, 1997, or the hotel opening date for the two
     hotels which opened in March 1998.  These unaudited pro forma
     condensed statements of operations are not necessarily indicative
     of what actual results of operations of the Company would have
     been assuming such transactions had been completed as of the dates
     described above, nor do they purport to represent the results of
     operations for future periods.  As discussed in Note 1, percentage
     lease revenue for the quarter ended March 31, 1998 has been
     calculated under a different method than percentage lease revenue
     for the quarter ended March 31, 1997, resulting in a significant
     reduction in the recognition of percentage lease revenue, as well
     as substantially all of the percentage lease revenue consisting of
     base rent, for the quarter ended March 31, 1998:
     
                                           Pro Forma for the
                                         Quarter Ended March 31,
                                         -----------------------
                                         (See Note 1)
                                             1998         1997
                                             ----         ----

      Percentage lease and other
       revenue                           $    5,310    $  10,250
                                         ----------    ---------
      Expenses:
      Real estate taxes and property
       and casualty insurance                 1,001          830
        General and administrative              601          390
        Depreciation                          3,243        2,863
        Amortization                             87           50
        Interest expense                        786          729
                                         ----------    ---------
          Total expense                       5,718        4,862
                                         ----------    ---------
          Income (loss) before 
           allocation to minority 
           interest                            (408)       5,388
      Income (loss) allocation to
       minority interest                       (211)         441
      Preferred stock distribution            1,734        1,734
                                         ----------    ---------
          Net income (loss) applicable
           to common shareholders        $   (1,931)   $   3,213
                                         ==========    =========
      Net income (loss) per common share $    (0.12)   $    0.20
                                         ==========    =========
      Net income (loss) per common share
       assuming dilution                 $    (0.12)   $    0.20
                                         ==========    =========
      Weighted average number of common
       shares                                16,224       15,815
                                         ==========    =========
      Weighted average number of common                
       shares assuming dilution              16,224       17,969
                                         ==========    =========


5.   EARNINGS PER SHARE

     The Company adopted Statement of Financial Accounting Standards
     (SFAS) No. 128, "Earnings Per Share," on December 31, 1997.
     SFAS No. 128 requires the Company to change its method of
     computing, presenting and 

<PAGE 8>
                             WINSTON HOTELS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (amounts in thousands, except per share amounts)

     disclosing earnings per share information. All prior period data 
     presented has been restated to conform to the provisions of SFAS
     No. 128.

     The following is a reconciliation of the net income applicable
     to common shareholders used in the net income per common share
     calculation to the income before allocation to minority interest
     used in the net income per common share - assuming dilution
     calculation.  A reconciliation is not shown for the quarter
     ended March 31, 1998 due to all Common Stock equivalents being
     anti-dilutive.
     
                                           Quarter ended
                                           March 31,1997
                                           -------------
      Net income                           $       2,936
      Less: preferred stock distribution              --
                                           -------------
      Net income applicable to common
       shareholders                                2,936
      Plus: income allocation to minority
       interest                                      230
                                           -------------
      Net income assuming dilution         $       3,166
                                           =============

     The following is a reconciliation of the weighted average shares
     used in the calculation of net income per common share to the
     weighted average shares used in the calculation of net income
     per common share - assuming dilution.  A reconciliation is not
     shown for the quarter ended March 31, 1998 due to all Common
     Stock equivalents being anti-dilutive.

                                           Quarter ended
                                           March 31,1997
                                           -------------
      Weighted average number of common
       shares                                     15,815
      Units with redemption rights                 1,265
      Stock options                                   74
                                           -------------
      Weighted average number of common
       shares assuming dilution                   17,154
                                           =============
                                  
6.   SUBSEQUENT EVENTS:

     On April 21, 1998, the Company purchased the 171-room Holiday
     Inn in Tinton Falls, New Jersey for approximately $5,700 in
     cash.  On May 5, 1998, the Company opened the 112-suite Homewood
     Suites hotel in Lake Mary, Florida which represents an
     investment of approximately $10,000.  On May 8, 1998, the
     Company purchased the 155-room Hilton Garden Inn hotel in
     Albany, New York for approximately $12,800 in cash.
     
7.   ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS:
     
     The Company adopted Statement of Financial Accounting Standards
     No. 130 "Reporting Comprehensive Income" ("SFAS 130") effective
     January 1, 1998.  SFAS 130 requires the Company to display an
     amount representing the total comprehensive income for the
     period in a financial statement which is displayed with the same
     prominence as other financial statements.  The Company does not
     have any items representing differences between net income
     (loss) and comprehensive income (loss) and therefore has not
     presented a Statement of Comprehensive Income in the
     accompanying financial statements.
     
     The Company will adopt Statement of Financial Accounting
     Standards No. 131 "Disclosure about Segments of an Enterprise
     and Related Information" ("SFAS 131") effective December 31,
     1998.  SFAS 131 requires the Company to report selected
     information about operating segments in its financial reports
     issued to shareholders.  It also establishes standards for
     related disclosures about products and services, geographic
     areas and major customers.  This statement is not expected to
     have a material impact on the Company's financial statements.

<PAGE 9>     
                   CAPSTAR WINSTON COMPANY, L.L.C.
                           BALANCE SHEETS
                          ($ in thousands)
                                  
                                   ASSETS
                                        March 31, 1998     December 31, 1997
                                        --------------     -----------------
Current assets:                           (unaudited)      
   Cash and cash equivalents             $        6,198     $         3,393
   Accounts receivable                            2,527               1,614
   Due from Winston Hospitality, Inc.               526               1,636
   Due from CapStar Management Company, L.P.        456                 385
   Deposits and other assets                        206                 197
                                         --------------     -----------------
     Total current assets                         9,913               7,225
                                                               
Furniture, fixtures and equipment, net of                       
 accumulated depreciation of $17 and $5             289                 241
Intangible assets, net of accumulated      
 amortization of $321 and $93                    33,915              34,088
Deferred franchise costs, net of accumulated
 amortization of $24 and $7                         585                 601
                                         --------------     -----------------
                                         $       44,702     $        42,155
                                         ==============     =================
                                  
                                  
                      LIABILITIES AND MEMBERS' CAPITAL
                                                               
Current liabilities:                                           
   Accounts payable                      $        1,688     $         1,459
   Accrued expenses                               3,196               2,920
   Percentage lease payable                       6,910               5,682
   Advance deposits                                 174                 135
                                         --------------     -----------------
     Total current liabilities                   11,968              10,196
                                                               
                                                               
Members' capital                                 32,734              31,959
                                         --------------     -----------------
                                         $       44,702     $        42,155
                                         ==============     =================
                                  
                                  
           See accompanying notes to financial statements.

<PAGE 10>
                   CAPSTAR WINSTON COMPANY, L.L.C.
                  UNAUDITED STATEMENT OF OPERATIONS
                For the quarter ended March 31, 1998
                          ($ in thousands)
                                  
Revenue:
   Rooms                                                   $  22,573
   Food and beverage                                             901
   Telephone and other operating departments                   1,170
                                                           ----------
      Total revenue                                           24,644
                                                           ----------

Operating costs and expenses:                           
   Rooms                                                       4,904
   Food and beverage                                             683
   Telephone and other operating departments                     473
Undistributed expenses:                                 
   Lease expense                                              10,073
   Administrative and general                                  2,482
   Sales and marketing                                           826
   Franchise fees                                              1,608
   Repairs and maintenance                                     1,222
   Energy                                                        895
   Other                                                         446
   Depreciation and amortization                                 257
      Total expenses                                          23,869
                                                           ----------
Net income                                                 $     775
                                                           ==========
                                  
                                  
                                  
           See accompanying notes to financial statements.
                                  

<PAGE 11>
                   CAPSTAR WINSTON COMPANY, L.L.C.
                  UNAUDITED STATEMENT OF CASH FLOWS
                For the quarter ended March 31, 1998
                          ($ in thousands)
                                  
Cash flows from operating activities:
   Net income                                               $    775
   Adjustments to reconcile net income to net cash     
    provided by operating activities:
      Depreciation and amortization                              257
      Increase in accounts receivable                           (913)
      Decrease in due from Winston Hospitality, Inc.           1,110
      Increase in due from CapStar Management Company, L.P.      (71)
      Increase in deposits and other assets                       (9)
      Increase in accounts payable and accrued expenses          505
      Increase in percentage lease payable to Winston
       Hotels, Inc.                                            1,228
      Increase in advance deposits                                39
                                                            ---------
Net cash provided by operating activities                      2,921
                                                            ---------

Cash flows from investing activities:               
   Additions of furniture, fixtures and equipment                (76)
   Proceeds from sale of fixed assets                             16
   Additions to intangible assets                                (56)
                                                            ---------
Net cash used in investing activities                           (116)
                                                            ---------
                                                    
Net increase in cash and cash equivalents                      2,805
Cash and cash equivalents at beginning of period               3,393
                                                            ---------
Cash and cash equivalents at end of period                  $  6,198
                                                            =========
                                                    
                                  
                                  
           See accompanying notes to financial statements.

<PAGE 12>

                   CAPSTAR WINSTON COMPANY, L.L.C.
                    NOTES TO FINANCIAL STATEMENTS
                                  
                                  
The accompanying unaudited financial statements are prepared by and
are the sole responsibility of CapStar Winston Company, L.L.C.  These
financial statements reflect, in the opinion of CapStar Winston Company, 
L.L.C. management, all adjustments necessary for a fair presentation of 
the interim financial statements.  All such adjustments are of a normal 
and recurring nature.

During November 1997, CapStar Management Company ("CMC") and CapStar
Hotel Company purchased substantially all of the assets and assumed
certain liabilities of Winston Hospitality, Inc., including 38 hotel
leases, certain operating assets and liabilities, and goodwill and
other intangible assets.  Concurrent with the purchase, CMC
contributed/assigned the assets purchased and liabilities assumed in
the transaction to CapStar Winston Company, L.L.C. (the "Lessee").


<PAGE 13>
                      WINSTON HOSPITALITY, INC.
                    UNAUDITED STATEMENT OF INCOME
                           ($ in thousands)
                                  
                                  

                                         Three Months
                                             Ended
                                         March 31, 1997
                                         --------------
Revenue:
   Room revenue                           $      16,325
   Food and beverage revenue                        631
   Other revenue, net                               304
   Interest income                                   22
                                         --------------
               Total revenue                     17,282
                                         --------------
                                         
Expenses:
   Property and operating expenses                6,218
   Property maintenance and repairs                 868
   Food and beverage expense                        455
   General and administrative                       594
   Franchise costs                                1,458
   Management fees                                  297
   Percentage lease payments                      7,148
                                         --------------
               Total expenses                    17,038
                                         --------------
                                         
               Net income                 $         244
                                         ==============

The accompanying note is an integaral part of the financial statements.

<PAGE 14>                     
                      WINSTON HOSPITALITY, INC.
                  UNAUDITED STATEMENT OF CASH FLOWS
                           ($ in thousands)


                                          Three Months
                                             Ended
                                         March 31, 1997
                                         --------------
Cash flows from operating activities:
   Net income                            $          244
   Adjustments to reconcile net income
    to net cash provided by operating
    activities:
      Depreciation                                   27
      Changes in assets and liabilities:   
         Accounts receivable - trade               (194)
         Prepaid expenses and other
          assets                                     35
         Accounts payable - trade                   (14)
         Percentage lease payable to
          Lessor                                    153
         Accrued expenses and other
          liabilities                               240
                                         --------------
                  Net cash provided by
                   operating activities             491
                                         --------------

Cash flows from investing activities:
   Purchases of furniture, fixtures and 
    equipment                                       (38)
   Advances to lessor, affiliates and 
    shareholders                                 (1,068)
                                         --------------
           Net cash used in
            investing activities                 (1,106)
                                         --------------
                                          
Net decrease in cash and cash equivalents          (615)
Cash and cash equivalents at beginning 
 of the period                                    5,463
                                         --------------
Cash and cash equivalents at end 
 of period                               $        4,848
                                         ==============

The accompanying note is an integral part of the financial statements.

<PAGE 15>
                      WINSTON HOSPITALITY, INC.
                    NOTE TO FINANCIAL STATEMENTS



The accompanying unaudited financial statements reflect, in the
opinion of management, all adjustments necessary for a fair
presentation of the interim financial statements.  All such
adjustments are of a normal and recurring nature.

During November 1997, CapStar Management Company ("CMC") and
CapStar Hotel Company purchased substantially all of the assets
and assumed certain liabilities of Winston Hospitality, Inc.,
including 38 hotel leases, certain operating assets and
liabilities, and goodwill and other intangible assets.
Concurrent with the purchase, CMC contributed/assigned the assets
purchased and liabilities assumed in the transaction to CapStar
Winston Company, L.L.C.

<PAGE 15>
Item 2 -  Management's Discussion and Analysis of Financial
          Condition and Results of Operations
          ($ amounts in thousands)

Overview

Winston Hotels, Inc. (the "Company"), which consummated an
underwritten initial public offering ("IPO") in June 1994, follow-on
Common Stock offerings in May 1995 and in June 1996, and a Preferred
Stock offering in September 1997, operates as a real estate
investment trust ("REIT") to invest in hotel properties.  The Company
owned 41 hotels (the "Current Hotels") as of March 31, 1998.  The
Company owned 16 hotels as of December 31, 1994 (the "1994 Hotels"),
purchased five hotels in May 1995 (the "1995 Acquired Hotels"),
acquired 10 hotels in 1996 (the "1996 Acquired Hotels"), acquired
seven hotels in 1997 (the "1997 Acquired Hotels") and acquired two
hotels and opened one internally developed hotel in the first quarter
of 1998 (the "1998 Hotels"). It currently leases all 41 Current
Hotels to CapStar Winston Company, L.L.C. (the "Lessee") pursuant to
leases that provide for rent payments based, in part, on revenues 
from the Current Hotels (the "Percentage Leases").  The Company 
acquired one additional full-service hotel in April 1998, one 
additional extended-stay hotel in May 1998 and one additional 
full-service hotel in May 1998.

RESULTS OF OPERATIONS

The table below outlines the Company's investment in hotel properties
for the periods ended March 31, 1998 and 1997.

                        First Quarter 1998         First Quarter 1997
                     ------------------------   ------------------------
                      Additions    Properties    Additions   Properties
                       during        owned        during       owned
                     the quarter  at March 31   the quarter  at March 31
                     -----------  -----------   -----------  -----------
Type of Hotel
Limited- service hotels    --          35            --           28
Extended-stay hotels        2           4            --            2
Full-service hotels         1           2            --            1 
                           --          --            --           --
Total                       3          41            --           31
                           ==          ==            ==           ==

In order to present a more meaningful comparison of operations, in
addition to the comparison of actual results of the Company and the
Lessee for the three months ended March 31, 1998 versus actual
results for the three months ended March 31, 1997, the Company has
also provided an analysis of the pro forma results of the Company for
the three months ended March 31, 1998 versus pro forma results for
the three months ended March 31, 1997.  These pro forma results are
shown as if the 1997 Preferred Stock offering and the 1997 and 1998
acquisitions had occurred on the later of January 1, 1997, or the
hotel opening date for the two hotels which opened in March 1998.

On May 21, 1998, the Financial Accounting Standards Board's Emerging
Issues Task Force issued EITF 98-9 "Accounting for Contingent Rent in
Interim Financial Periods" ("EITF 98-9").  EITF 98-9 addresses the
recognition of rental revenue during interim periods derived from
leases which provide for percentage rent and requires that a lessor
defer recognition of contingent rental income in interim periods
until specified targets are met.  The Company has reviewed the terms
of its Percentage Leases and has determined that the provisions of
EITF 98-9 materially impact the Company's revenue recognition on an 
interim basis, but will have no impact on the Company's annual percentage
lease revenue, interim cash flow from Lessee or the Company's ability 
to pay dividends.  The Company has accounted for EITF 98-9 as a change
in accounting principle effective January 1,1998, resulting in: (i) a 
deferred revenue balance of $5,054 as of March 31, 1998, as shown on 
the accompanying Consolidated Balance Sheets and (ii) substantially 
all of the percentage lease revenue consisting of base rent.  Accordingly, 
the operating results for the period ended March 31, 1998 and the period 
ended March 31, 1997 included in the accompanying discussion are not 
comparable as the results for the two periods have been accounted for 
under different revenue recognition methods.

The Company's Percentage Leases provide for the greater of (i) annual
fixed base rent or (ii) rent based on the revenue of hotels
("Percentage Rent") to be remitted to the Company annually.  The
leases contain annual room revenue thresholds used to calculate two
tiers of Percentage Rent.  These annual thresholds have been
allocated equally to each quarter, subject to consumer price index
adjustments, to determine the quarterly lessee Percentage Rent
payments.  The provisions of EITF 98-9 call for straight-line
recognition of the annual base rent throughout the year and for the
deferral of any additional lease amounts collected or due from the
Lessee until such amounts exceed the annual fixed base rent.  This
will generally result in base rent being recognized in the first and
second quarters and Percentage Rents, if any, collected or due from
the Lessees 

<PAGE 17>
during the first and second quarters being deferred and
then recognized in the third and fourth quarters due to the structure
of the Company's Percentage Leases and the seasonality of the hotel
operations.  Prior to the adoption of EITF 98-9, the Company has
recorded lease revenue in interim periods on the basis used to
determine quarterly lessee Percentage Rent payments, resulting in the
second and third quarters being the strongest quarters.

At March 31, 1998, deferred revenue of $5,054 represents Percentage
Rent collected or due from lessees under the terms of the leases in
excess of one quarter of base rent but less than the remaining base
rent, which the Company expects to recognize as lease revenue in the
future quarters of 1998.  The Company's quarterly distributions are
based on Percentage Rents collected as opposed to percentage lease
revenue recognized.

THE COMPANY

ACTUAL - THREE MONTHS ENDED MARCH 31, 1998 VS ACTUAL - THREE MONTHS
ENDED MARCH 31, 1997

The Company had revenues of $5,068 in 1998, consisting of $5,019 of
Percentage Lease revenues and $49 of interest and other income.
Percentage Lease revenues decreased by $2,129 to $5,019 in 1998 from
$7,148 in 1997.  This decrease was comprised of a decrease of $5,054
due to a change in accounting principle regarding revenue recognition
under EITF 98-9 , offset in part by increases of: (i) $483 due to the
1998 Hotels, (ii) $2,245 due to the 1997 Acquired Hotels owned for
the entire three-month period in 1998, and (iii) an increase of $197
in lease revenues generated from hotels acquired prior to 1997.

Real estate taxes and property insurance costs incurred in 1998 were
$979, an increase of $414 from $565 in 1997.  This increase was
primarily attributable to the 1997 Acquired Hotels that were not
owned in the first quarter of 1997, the 1998 Hotels, as well as
increased property tax assessments and tax rates from 1997 to 1998.
General and administrative expenses increased $229 to $599 in 1998
from $370 in 1997. The increase was attributable to the increase in
size and activities of the Company in 1998.  Interest expense
decreased by $190 to $625 in 1998 from $815 in 1997.  Although the
weighted average outstanding debt balance increased from 1997 to
1998, from $45,023 to $58,682, capitalized interest costs related to
development and renovation projects increased from $174 to $640,
resulting in a lower interest expense in 1998.  Interest rates
remained constant between the two quarters.  Depreciation increased
$936 to $3,158 in 1998 from $2,222 in 1997, primarily due to
depreciation related to the 1997 Acquired Hotels, the 1998 Hotels and
renovations completed during 1997 and 1998.

PRO FORMA - THREE MONTHS ENDED MARCH 31, 1998 VS PRO FORMA - THREE
MONTHS ENDED MARCH 31, 1997

The Company had revenues of $5,310 for the three months ended March
31, 1998, consisting of $5,261 of Percentage Lease revenues and $49
of interest and other income.  Percentage Lease revenues decreased
$4,915 to $5,261 in 1998 from $10,176 in 1997.  Of this decrease,
$5,385 was due to a change in accounting principle regarding revenue
recognition under EITF 98-9.  This decrease was offset in part by an
increase of $305 primarily attributable to an increase in room rates
in 1998 from 1997 and $165 attributable to the opening of two hotels
in 1998.

Real estate taxes and property insurance costs incurred in 1998 were
$1,001, an increase of $171 from $830 in 1997.  The increase was due
primarily to increased property tax assessments and tax rates from
1997 to 1998 as well as additional taxes paid due to the opening of
two hotels in 1998.  General and administrative expenses increased
$211 to $601 in 1998 from $390 in 1997.  The increase was primarily
attributable to payroll costs associated with the increase in
headcount from 1997 to 1998.  Interest expense increased by $57 to
$786 in 1998 from $729 in 1997.  The increase was attributable to
$561 of additional interest expense related primarily to borrowings
under the line of credit to fund acquisitions of the 1997 Acquired
Hotels and 1998 Hotels, offset by both the capitalization of
additional interest costs, totaling $467, in connection with the
development and certain renovation projects during the respective
periods, as well as a reduction in line of credit fees totaling $37.
Depreciation increased $380 to $3,243 in 1998 from $2,863 in 1997
primarily due to renovations and other capital expenditures during
1997 and 1998.

<PAGE 18>

THE LESSEE

ACTUAL - THREE MONTHS ENDED MARCH 31, 1998 VS ACTUAL - THREE MONTHS
ENDED MARCH 31, 1997

The following table sets forth certain historical financial
information for the Current Hotels for the periods indicated:

                              Three Months         Three Months
                                 Ended                Ended
                             March 31, 1998       March 31, 1997
                            ----------------     ----------------
Revenue:
   Rooms                    $  22,573  91.6%     $  16,325  92.3%
   Food and beverage              901   3.7%           624   3.5%
   Telephone and other
    operating departments       1,170   4.7%           742   4.2%
                            ----------------     ----------------
        Total revenue          24,644 100.0%        17,691 100.0%
                            ----------------     ----------------

Operating costs and expenses:
   Rooms                        4,904  19.9%         3,431  19.4%
   Food and beverage              682   2.8%           445   2.5%
   Telephone and other
    operating departments         473   1.9%           404   2.3%
Undistributed expenses:                                   
   Lease                       10,073  40.9%         7,148  40.4%
   Administrative and general   2,482  10.1%         2,234  12.6%
   Sales and marketing            826   3.4%           662   3.7%
   Franchise fees               1,609   6.5%         1,118   6.3%
   Repairs and maintenance      1,222   5.0%           915   5.2%
   Energy                         895   3.6%           695   3.9%
   Other                          446   1.8%           368   2.1%
   Depreciation and 
    amortization                  257   1.0%            27   0.2%
                            ----------------     ----------------
        Total expenses         23,869  96.9%        17,447   98.6%
                            ----------------     ----------------
        Net income          $     775   3.1%     $     244   1.4%
                            ================     ================

During November 1997, CapStar Management Company ("CMC") and CapStar
Hotel Company purchased substantially all of the assets and assumed
certain liabilities of Winston Hospitality, Inc., including 38 hotel
leases, certain operating assets and liabilities, and goodwill and
other intangible assets.  Concurrent with the purchase, CMC
contributed/assigned the assets purchased and liabilities assumed in
the transaction to CapStar Winston Company, L.L.C. (the "Lessee").

Since the Lessee was not operating prior to the purchase transaction,
no comparative data is available for the period January 1, 1997
through March 31, 1997.  However, for purposes of this management
discussion and analysis, the financial information of the Lessee for
the three months ended March 31, 1998 will be compared with the
financial information of Winston Hospitality, Inc. for the three
months ended March 31, 1997.  The Winston Hospitality financial
information for the three months ended March 31, 1997 contained in
the table above has been reclassified and grouped according to the
Lessee format in order to facilitate an accurate comparison of the
data.

The Lessee had room revenues of $22,573 in 1998, up $6,248 from
$16,325 in 1997. The increase in room revenues was due to an increase
in room revenues of (i) $490 for the 1994 Hotels, the 1995 Acquired
Hotels and the 1996 Acquired Hotels, (ii) $5,102 for the 1997
Acquired Hotels, and (iii) $656 for the 1998 Hotels.  Food and
beverage revenue increased $277, to $901 in 1998 from $624 in 1997,
primarily due to the 1997 Acquired Hotels and 1998 Hotels.  Telephone
and other operating departments revenue increased $428 to $1,170 in
1998 from $742 in 1997, primarily due to an increase in revenue
associated with long distance phone calls and in-room movies.

The Lessee had total expenses in 1998 of $23,869, up $6,422 from
$17,447 in 1997.  The increase, as shown above, in all expense
categories except depreciation and amortization expense, were
primarily attributable to the operation of a greater number of hotels
for the three months ended March 31, 1998 as compared with the same
period of 1997.  Although administrative and general expenses
increased in 1998 from 1997, these expenses decreased as a percentage
of total revenue from 1997 to 1998 as a result of efficiencies
developed within the management company, making the incremental cost
per hotel less expensive.  Depreciation and amortization expense
increased due to amortization being charged in 1998 

<PAGE 19>
as a result of goodwill and other intangible assets arising out of 
the purchase of Winston Hospitality, Inc. by CMC and CapStar Hotel 
Company.

LIQUIDITY AND CAPITAL RESOURCES

The Company finances its operations from operating cash flow, which
is principally derived from Percentage Leases. For the quarter ended
March 31, 1998, cash flow provided by operating activities was
$4,993.  Adjusted funds from operations, as defined below, was
$6,098. Under Federal income tax law provisions applicable to REITs,
the Company is required to distribute at least 95% of its taxable
income to maintain its tax status as a REIT.  In the quarter ended
March 31, 1998, the Company declared distributions of $6,605 to its
shareholders.  Because the Company's annual cash flow from operating
activities is expected to exceed its annual taxable income due to
depreciation and amortization expenses, the Company expects to be
able to meet its distribution requirements out of cash flow from
operating activities.

The Company's net cash used in investing activities for the three
months ended March 31, 1998 totaled $40,453, including $29,232
related to the acquisition of the 1998 Hotels, $2,877 for hotel
renovations and $7,141 for the development of six new extended-stay
hotels and one limited-service hotel, which are expected to cost
approximately $71,000.  The total cost of the 1998 Hotels was
$40,898, including $11,666 related to the development of the Homewood
Suites hotel in Raleigh, N.C.

The Company plans to spend approximately $7,000 to renovate certain
of its Current Hotels during the next twelve months.  These
expenditures are in addition to the reserve of 5% of room revenues
for its limited-service hotels and 7% of room revenues and food and
beverage revenues from its full-service hotels which the Company is
required to set aside under its Percentage Leases for periodic
capital improvements and the refurbishment and replacement of
furniture, fixtures and equipment at its Current Hotels.  In the
three months ended March 31, 1998, the Company set aside $1,190 for
such reserves.  These reserves are in addition to amounts spent on
normal repairs and maintenance which have approximated 5.4% and 5.3%
of room revenues for the three months ended March 31, 1998 and 1997,
respectively, and are paid by the Lessee.

The Company's net cash provided by financing activities during the
quarter ended March 31, 1998 totaled $36,337, including an increase
of $42,800 in the line of credit borrowings and $485 of net proceeds
from the issuance of common stock related to the exercise of stock
options, offset by the payment of distributions to shareholders of
$6,478 and the payment of distributions to minority interest holders
of $470.

The Company has collateralized a portion of its $125,000 line of
credit with 28 of its Current Hotels amounting to $96,401 as of March
31, 1998.  This amount is calculated quarterly, and increases if cash
flow attributable to the collateral hotels increases and/or the
Company adds additional hotels as collateral.  The total additional,
non-collateralized line availability accessible to the Company as of
March 31, 1998 was $28,599.  The Company's Articles of Incorporation
limit its total amount of indebtedness to 45% of the purchase prices
paid by the Company for its investments in hotel properties, as
defined.  As of March 31, 1998, the Company had additional borrowing
capacity under the debt limitation of approximately $126,000 assuming
it invests all borrowings in additional hotels.

Under an arrangement with Promus Hotels, Inc. ("Promus") the Company
has an agreement to acquire a 123-suite Homewood Suites hotel being
developed by Promus in Richmond, Virginia. The Company expects to
acquire this hotel upon its completion, which Promus estimates will
occur during the second quarter of 1998, for a purchase price
approximating Promus' development cost, estimated to be $8,600.
Conditions to the Company's obligation to purchase include its
approval of the building specifications and Promus' completion of
construction within certain cost limitations and by a specified
delivery date.  Pursuant to the arrangement, Promus has agreed to
invest $1,845 in the Company's Common Stock (at the then-current
market price per share), in connection with the purchase of this
hotel.

The Company intends to acquire and develop additional hotel
properties, including those described above, that meet its investment
criteria and is continually evaluating acquisition opportunities.  It
is expected that future hotel acquisitions will be financed, in whole
or in part, from additional follow-on offerings, from borrowings
under the line of credit, from joint venture agreements, and/or from
the issuance of other debt or equity securities.  There can be no
assurances that the Company will acquire any additional hotels, or
that any hotel development will be undertaken, or if commenced, that
it will be completed on schedule or on budget.  Further, there can be
no assurances that the Company will be able to obtain any additional
financing.

<PAGE 20>

SEASONALITY

The hotels' operations historically have been seasonal in nature,
reflecting higher REVPAR during the second and third quarters.  This
seasonality, the structure of the Percentage Leases, which provide
for a higher percentage of room revenues above the minimum equal
quarterly levels to be paid as Percentage Rent, as well as the
recognition of percentage lease revenue under the provisions of EITF
98-9 can be expected to cause significant fluctuations in the
Company's quarterly lease revenue under the Percentage Leases.

FUNDS FROM OPERATIONS

The Company considers Funds From Operations ("FFO") a widely used and
appropriate measure of performance for an equity REIT.  FFO, as
defined by the National Association of Real Estate Investment Trusts
("NAREIT"), is income (loss) before minority interest (determined in
accordance with generally accepted accounting principles), excluding
gains (losses) from debt restructuring and sales of property, plus
real estate related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures.  FFO
is presented to assist investors in analyzing the performance of the
Company.  The Company's method of calculating FFO may be different
from methods used by other REITs and accordingly, may not be
comparable to such other REITs.  FFO (i) does not represent cash
flows from operating activities as defined by generally accepted
accounting principles, (ii) is not indicative of cash available to
fund all cash flow and liquidity needs, including the Company's
ability to make distributions, and (iii) should not be considered as
an alternative to net income (as determined in accordance with
generally accepted accounting principles) for purposes of evaluating
the Company's operating performance.

The Company adopted EITF 98-9 effective January 1, 1998 and has
further presented "Adjusted FFO."  Adjusted FFO is FFO calculated as
described previously with an adjustment for percentage lease revenue
deferred in accordance with EITF 98-9.  The Company believes that
Adjusted FFO will enable readers of its financial statements to more
fully understand the cash flow of its business and operations.

The following presents the Company's calculation of FFO, Adjusted
FFO, FFO per share and Adjusted FFO per share (in thousands, except
per share data):

                           Three Months Ended  
                                March 31,
                          --------------------
                             1998       1997
                             ----       ----
Net income (loss) before                       
 allocation to minority   
 interest                 $  (380)    $  3,166
Plus: depreciation          3,158        2,222   
Less: preferred stock
 dividends                  1,734           --
                          -------     --------

FFO                         1,044        5,388
Deferred percentage
 lease revenue              5,054           --
                          -------     --------

Adjusted FFO              $ 6,098     $  5,388
                          =======     ========
                                              
Weighted average number                        
 of common shares 
 assuming dilution         18,042       17,154
                          -------     --------
FFO per share             $  0.06     $   0.31
                          =======     ========
Adjusted FFO per share    $  0.34     $   0.31
                          =======     ========


FORWARD LOOKING STATEMENTS

This report contains certain "forward looking" statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, including, but not limited to, those paragraphs relating to
development and acquisition of hotels in this section.  These
statements represent the Company's judgment and are subject to risks
and uncertainties that could cause actual operating results to differ
materially from those expressed or implied in the forward looking
statements.  

<PAGE 21>

Important factors that could cause actual results to
differ include, but are not limited to the following (i) risk
associated with the Company's acquisition of hotels with little or no
operating history, including the risk that such hotels will not
achieve the level of revenue assumed by the Company in calculating
the respective Percentage Rent formula; (ii) development risk,
including risk of construction delay, cost overruns, receipt of
zoning, occupancy and other required governmental permits and
authorizations and the incurrence of development costs in connection
with projects that are not pursued through completion; and (iii)
factors identified in the Company's filings with the Securities and
Exchange Commission, including the factors listed in the Company's
Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on August 1, 1997.

<PAGE 22>

PART II - OTHER INFORMATION



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

          (a)  Exhibits.

             27.  Financial Data Schedule (For SEC use only)

          (b)  Reports on Form 8-K.

               No reports on Form 8-K were filed during the quarter
               ended March 31, 1998.


<PAGE 23>                                  
                             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.


                                    WINSTON HOTELS, INC.



Date        August 17, 1998        /s/ James D. Rosenberg
    --------------------------     ------------------------
                                   James D. Rosenberg
                                   Chief Financial Officer and
                                    Chief Operating Officer
                                   (Authorized officer and Principal
                                    Financial Officer)

<PAGE 24>                                  
                        WINSTON HOTELS, INC.
           FORM 10-Q for the quarter ended March 31, 1998
                                  
                            EXHIBIT INDEX
                                  
Exhibit
Number         Description of Exhibit
------         ----------------------

27.            Financial Data Schedule (For SEC use only).