<PAGE 1>
                 SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, DC 20549


                              FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                        EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1997

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
October 31, 1997 was 16,194,480.

<PAGE 2>

                        WINSTON HOTELS, INC.
                                INDEX

<TABLE>
<CAPTION>


                                                                 Page
<S>                                                                 <C>
PART I.   FINANCIAL INFORMATION

Item 1.   WINSTON HOTELS, INC.

            Consolidated Balance Sheets - September 30, 1997
            (unaudited) and December 31, 1996                      3
               
            Unaudited Consolidated Statements of Income - For the
            three and nine months ended September 30, 1997 and 
 	      1996                                                   4
               
            Unaudited Consolidated Statements of Cash Flows - For
            the nine months ended September 30, 1997 and 1996      5
               
            Notes to consolidated financial statements (unaudited) 6
               
          WINSTON HOSPITALITY, INC.
          
            Balance Sheets - September 30, 1997 (unaudited) and
            December 31, 1996                                      9
               
            Unaudited Statements of Income - For the three and
            nine months ended September 30, 1997 and 1996         10
               
            Unaudited Statements of Cash Flows - For the nine
            months ended September 30, 1997 and 1996              11
               
            Notes to financial statements (unaudited)             12
               
Item 2.   Management's Discussion and Analysis of Financial
	    Condition and Results of Operations                     13
          
PART II.  OTHER INFORMATION

Item 2.   Changes in Securities                                   21

Item 5.   Other Information                                       21

Item 6.   Exhibits and Reports on Form 8-K                        21

          Signature Page                                          23
</TABLE>

<PAGE 3>

                        WINSTON HOTELS, INC.
                     CONSOLIDATED BALANCE SHEETS
             ($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                 ASSETS

                                        September 30,  December 31,
                                            1997           1996
                                        -------------  ------------
                                         (unaudited)
<S>                                     <C>            <C>
Investment in hotel properties:
   Land                                 $      26,089  $     20,639
   Buildings and improvements                 212,978       166,664
   Furniture and equipment                     20,276        15,749
                                        -------------  ------------
   Operating properties                       259,343       203,052
   Less accumulated depreciation               18,690        11,508
                                        -------------  ------------
                                              240,653       191,544
   Properties under development                17,232         5,138
                                        -------------  ------------
Net investment in hotel properties	          257,885       196,682
Cash and cash equivalents                         792           234
Lease revenue receivable                        7,596         4,611
Deferred expenses, net                          1,401         1,362
Prepaid expenses and other assets               1,204           613
                                        -------------  ------------
        Total assets                    $     268,878  $    203,502
                                        =============  ============

          LIABILITIES AND SHAREHOLDERS' EQUITY

Due to banks                            $      24,481  $     42,800
Accounts payable and accrued expenses           2,847         1,799
Distributions payable                           5,216         4,352
Amounts due to Lessee                             836         1,391
Minority interest in Partnership               16,112        11,347
                                        -------------  ------------
        Total liabilities                      49,492        61,689

Shareholders' equity:
   Preferred stock, $.01 par value,
   10,000,000 shares authorized,
   3,000,000 and 0 shares issued and
   outstanding (liquidation preference
   of $75,366)                                     30		      -
   Common stock, $.01 par value,
   50,000,000 shares authorized,
   16,194,480 and 15,799,580 shares
   issued and outstanding                         162           158
   Additional paid-in capital                 223,358       145,216
   Unearned directors' compensation              (125)         (181)
   Deficit                                     (4,039)       (3,380)
                                        -------------  ------------
        Total shareholders' equity            219,386       141,813
                                        -------------  ------------
        Total liabilities and
          shareholders' equity          $     268,878  $    203,502
                                        =============  ============
</TABLE>


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

<PAGE 4>

                        WINSTON HOTELS, INC.
             UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
             ($ in thousands, except per share amounts)

<TABLE>
<CAPTION>                                  
                              Three       Three       Nine       Nine
                              Months      Months     Months     Months
                              Ended       Ended       Ended      Ended
                            Sept. 30,   Sept. 30,   Sept. 30,  Sept. 30,
                               1997        1996       1997       1996
                            ---------   ---------   ---------  ---------
<S>                         <C>         <C>         <C>        <C>
Revenue:
  Percentage lease revenue  $  10,328   $   8,389   $  27,098  $  19,721
  Interest and other income        78          46         132         84
                            ---------   ---------   ---------  ---------	
    Total revenue              10,406       8,435      27,230     19,805
                            ---------   ---------   ---------  ---------
                                                               
Expenses:                                                      
  Real estate taxes and
   property and casualty
   insurance                      670         408       1,826      1,102
  General & administrative        723         385       1,585      1,283
  Interest expense                977         452       2,788      2,026
  Depreciation                  2,612       2,063       7,182      4,672
  Amortization                     45          40         127        108
                            ---------   ---------   ---------  ---------
    Total expenses              5,027       3,348      13,508      9,191
                            ---------   ---------   ---------  ---------
 
    Income before allocation
     to minority interest       5,379       5,087      13,722     10,614
                                                               
Income allocation to
  minority interest               490         337       1,100        567
                            ---------   ---------   ---------  ---------

    Net income                  4,889       4,750      12,622     10,047
                                                                
Preferred share distribution      366           -         366          -
                            ---------   ---------   ---------  ---------
                                                                
    Net income applicable to                                        
     common shareholders    $   4,523   $   4,750   $  12,256  $  10,047
                            =========   =========   =========  =========
                                                               
Net income per common share $    0.28   $    0.30   $    0.77  $    0.84
                            =========   =========   =========  =========
                                                                
Weighted average number of                                      
 common shares and common
 share equivalents         17,800,169  16,947,610  17,324,704 12,695,440
                           ==========  ==========  ========== ==========
                                                               
Distributions per share:                                       
  Common                    $    0.27  $    0.255  $     0.81 $     0.75
                           ==========  ==========  ========== ==========
  Preferred                 $    0.12  $        -  $     0.12 $        -
                           ==========  ==========  ========== ==========
</TABLE>                                 

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

<PAGE 5>

                        WINSTON HOTELS, INC.
           UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                          ($ in thousands)

<TABLE>
<CAPTION>                                  
                                           Nine Months     Nine Months
                                              Ended           Ended
                                         Sept. 30, 1997  Sept. 30, 1996
                                         --------------  --------------
<S>                                      <C>             <C>
Cash flows from operating activities:
  Net income                             $       12,622  $       10,047
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
      Minority Interest                           1,100             567
      Depreciation                                7,182           4,672
      Amortization recorded as interest
       expense                                      316             164
      Amortization of franchise fees                 71              52
      Unearned compensation amortization             56              56
Changes in assets and liabilities:
      Lease revenue receivable                   (2,985)         (3,729)
      Prepaid expenses and other assets            (591)           (187)
      Accounts payable and accrued 
       expenses                                     683            (166)
                                         --------------  --------------
          Net cash provided by operating
           activities                            18,454          11,476
                                         --------------  --------------


Cash flows used in investing activities:
  Franchise fees paid                              (337)           (502)
  Deferred acquisition costs                          2            (421)
  Investment in hotel properties                (57,653)        (62,805)
                                         --------------  --------------
          Net cash used in investing
           activities	                        (57,988)        (63,728)
                                         --------------  --------------

Cash flows provided by financing activities:
  Purchase of interest rate cap agreements          (69)              -
  Fees paid to increase and extend the
   line of credit                                   (21)            (23)
  Net proceeds from issuance of common stock        200          60,623
  Net proceeds from issuance of preferred
   stock                                         71,866               -
  Payment of distributions to common
   shareholders                                 (12,417)         (9,033)
  Payment of distributions to minority
   interest                                      (1,148)           (332)
  Net decrease in line of credit borrowings     (18,319)         (1,400)
                                         --------------  --------------
          Net cash provided by financing
           activities                            40,092          49,835
                                         --------------  --------------
                                                         
Net increase/(decrease) in cash and cash
 equivalents                                        558          (2,417)
                                                         
Cash and cash equivalents at beginning
 of period                                          234           2,496
                                         --------------  --------------

Cash and cash equivalents at end of      
 period                                  $          792  $           79
                                         ==============  ==============

Supplemental disclosure:                                 
      Cash paid for interest             $        2,809  $        1,823
                                         ==============  ==============
                                                         
Summary of  non-cash investing and                        
financing activities:
     Investment in hotel properties
      payable   	                       $          703  $        1,736
     Distributions declared but not
      yet paid                                    5,216           4,340
     Issuance of partnership units in                          
      connection with the acquisition of
      hotel properties                           11,287           8,900
     Amounts included in accounts payable
      and accrued expenses related to the
      September 1997 stock offering                 363               -
     Adjustment to minority interest due to                    
      follow-on offerings and issuance of                      
      partnership units in connection with
      the acquisition of hotel properties         1,675           1,495

</TABLE>

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

<PAGE 6>
                        WINSTON HOTELS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (UNAUDITED)
             ($ in thousands, except per share amounts)
                                  
1.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, the
  information for the three and nine month periods ended  September
  30, 1997 and 1996 are not necessarily indicative of the results
  for a full year.
  
2.ACQUISITIONS
  ------------

  On  July 14, 1997, the Company acquired two hotel properties  for
  purchase  prices  totaling approximately $16,700 which  included  a
  cash  payment of approximately $6,300 and the issuance  of  815,000
  limited  partnership  units  by  WINN  Limited  Partnership.  The
  properties  purchased  were  the 202-room  Courtyard  by  Marriott-
  Brookhollow  in Houston, TX and the 126-room Hampton  Inn  in  West
  Springfield, MA.  On July 17, 1997, the seller redeemed 374,900  of
  these limited partnership units, valued at $4,799, in exchange  for
  374,900  newly issued shares of the Company's Common Stock,  valued
  at  $4,799.

  On August 6, 1997, the Company purchased  a  127-room Holiday Inn
  Express in Clearwater, FL for approximately $6,400 in cash.
  
  On  September  30, 1997, the Company acquired two hotel  properties
  in  Ann  Arbor,  MI  for  purchase  prices  totaling  approximately
  $15,100  in cash.  These properties include the 160-room  Courtyard
  by Marriott and the 110-room Fairfield Inn hotels.
  
3.PRO FORMA FINANCIAL INFORMATION
  -------------------------------

  These  unaudited pro forma condensed statements of  income  of  the
  Company  are  presented  as  if the  June  1996  Common  Stock  and
  September  1997  Preferred Stock follow-on offerings  had  occurred
  January  1, 1996 and the Company had acquired all 37 of the current
  hotels on the later of  January 1, 1996 or the hotel opening  date.
  These  unaudited pro forma condensed statements of income  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 does it purport  to
  represent the results of operations for future periods:


<PAGE 7>

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

<TABLE>
<CAPTION>

                                  Pro Forma             Pro Forma
                               Nine Months Ended     Nine Months Ended
                                 Sept. 30, 1997        Sept. 30, 1996
                               -----------------     -----------------
<S>                            <C>	                 <C>
Percentage lease and other
 revenue                       $          32,033     $          29,270
                               -----------------     -----------------
     
Expenses:
 Real estate taxes and property
  and casualty insurance                   2,181                 1,755
 General and administrative                1,620                 1,362
 Interest expense                            550                   260
 Depreciation                              8,006                 7,172
 Amortization                                145                   145
                               -----------------     -----------------
 Total expense                            12,502                10,694
                               -----------------     -----------------
   
 Income before allocation to
  minority interest                       19,531                18,576
Income allocation to minority
  interest                                 1,924                 1,722
                               -----------------     -----------------
 Net income                               17,607                16,854
 Preferred share distribution              5,203                 5,203
                               -----------------     -----------------
    
 Net income applicable to common
  shareholders                 $          12,404     $          11,651
                               =================     =================

  
 Net income per common share   $            0.82     $            0.78
                               =================     =================

 Weighted average number of
  common shares and common share
  equivalents          	              17,458,621            17,207,820

                               =================     =================
</TABLE>


4.PREFERRED STOCK
  ---------------

  On September 11, 1997, the Company issued 3,000,000 shares of
  9.25% Series A Cumulative Preferred Stock ($25 liquidation
  preference per share plus unpaid cumulative distributions).
  Except in the event of certain occurrences, the preferred shares
  are not redeemable prior to September 28, 2001.  The Company used
  the net proceeds from the offering of approximately $72,000 to pay
  down most of the then outstanding debt under its line of credit,
  and thereby created additional borrowing capacity to finance the
  acquisition and development of additional hotel properties.  As of
  September 30, 1997, distributions have been accrued for the
  portion of the quarter the Preferred Stock was outstanding.  These
  distributions will be paid, together with the fourth quarter
  distributions, in January 1998.

5.SUBSEQUENT EVENTS
  -----------------

  On October 29, 1997, the Company purchased a 156-room Hampton Inn
  in White Plains, New York (the "White Plains hotel") for
  approximately $12,500 in cash.

<PAGE 8>

                        WINSTON HOTELS, INC.
       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                             (UNAUDITED)
             ($ in thousands, except per share amounts)
  
  On  October 29, 1997, Winston Hospitality, Inc. (the  "Lessee")
  entered into an agreement with CapStar Hotel Company ("CapStar")
  under which a subsidiary of CapStar would acquire the rights to
  leases for the Current Hotels, the White Plains hotel, and five
  hotels currently under development by the Company.  Conditional
  upon the closing of this agreement, which is anticipated to occur
  during 1997, and in exchange for certain other undertakings by
  CapStar, the Company intends to extend the term of the Percentage
  Leases to 15 years from the date of closing.
  
6.EARNINGS PER SHARE
  ------------------

  The  Company will adopt 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  disclosing earnings per share  information.   Upon
  adoption,  all  prior  period data presented will  be  restated  to
  conform to the provisions of SFAS No. 128.

  If  the  Company  had  adopted SFAS No. 128 for  the  period  ended
  September 30, 1997, the following computation would have been  used
  to  arrive at basic income per common share and diluted income  per
  common  share  that would have been presented on  the  consolidated
  statements of income:


<TABLE>
<CAPTION>
                                   Three      Three      Nine       Nine
                                   Months     Months     Months     Months
                                   Ended      Ended      Ended      Ended
                                   Sept.      Sept.      Sept.      Sept.
                                   30, 1997   30, 1996   30, 1997   30, 1996
                                   --------   --------   --------   --------
<S>                                <C>        <C>        <C>        <C>
  Basic income per common share:
    Net income                     $  4,889   $  4,750   $ 12,622   $ 10,047
     Less preferred stock
       dividends                       (366)        -        (366)         -
                                   --------   --------   --------   --------

     Income available to common
       shareholders                $  4,523   $  4,750   $ 12,256   $ 10,047
                                   ========   ========   ========   ========
                                                                         
     Weighted average common
       shares outstanding        16,129,280 15,688,415 15,922,592 11,951,787
                                 ========== ========== ========== ==========
                                                                       
     Basic income per common
         share                     $   0.28   $   0.30   $   0.77   $   0.84
                                   ========   ========   ========   ========
                                                                         
  Diluted income per common share:
     Net income                    $  4,889   $  4,750   $ 12,622   $ 10,047
     Plus income allocation to
      minority interest                 490        337      1,100        567
     Less preferred stock
       dividends                       (366)         -       (366)         -
                                   --------   --------   --------   --------
     Income available to common                                       
       shareholders and minority
       interest                    $  5,013   $  5,087   $ 13,356   $ 10,614
                                   ========   ========   ========   ========
                                                                        
     Weighted average shares:                                         
       Common shares outstanding 16,129,280 15,688,415 15,922,592 11,951,787
       Units with redemption
        rights                    1,670,889  1,124,217  1,402,112    665,722
       Stock options                 78,294    134,978     70,397     77,931
                                 ---------- ---------- ---------- ----------
       Total shares              17,878,463 16,947,610 17,395,101 12,695,440
                                 ========== ========== ========== ==========
                                                                         
     Diluted income per common
       share                       $   0.28   $   0.30   $   0.77   $   0.84
                                   ========   ========   ========   ========
</TABLE>

<PAGE 9>

                      WINSTON HOSPITALITY, INC.
                           BALANCE SHEETS
             ($ in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                 ASSETS
                                         September 30,    December 31,
                                            1997            1996
                                         -------------    ------------
                                         (unaudited)    
<S>                                      <C>              <C>
Current assets:                                           
  Cash and cash equivalents              $       9,720    $      5,463
  Accounts receivable:
    Trade                                        2,147           1,166
    Lessor                                         836           1,391
    Affiliates                                     100              95
    Shareholders                                     -              71
  Prepaid expenses and other assets                274             220
                                         -------------    ------------
          Total current assets                  13,077           8,406
                                         -------------    ------------
                                                          
Furniture, fixtures and equipment:                        
  Furniture and equipment                          395             323
  Leasehold improvements                           113             113
                                         -------------    ------------
                                                   508             436
  Less accumulated depreciation and
   amortization                                    239             178
                                         -------------    ------------
          Net furniture, fixtures
           and equipment                           269             258
                                         -------------    ------------
          Total assets                   $      13,346    $      8,664
                                         =============    ============
                                  
                  LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:                                      
  Accounts payable:                                         
    Trade                                $       1,417     $    1,259
    Affiliates                                       -            146
    Shareholders                                   208              -
  Percentage lease payable to Lessor             7,596          4,611
  Accrued salaries and wages                       954            874
  Accrued sales and occupancy taxes                736            462
  Other current liabilities                        841            618
                                         -------------    ------------
          Total current liabilities             11,752          7,970
                                                          
Shareholders' equity:                                     
  Common stock, $.01 par value, 100 shares                   
   authorized, issued and outstanding                1               1
  Additional paid-in capital                        49              49
  Retained earnings                              1,544             644
                                         -------------    ------------
          Total shareholders' equity             1,594             694
                                         -------------    ------------
          Total liabilities and 
           shareholders' equity          $      13,346    $      8,664
                                         =============    ============

</TABLE>

The accompanying notes are an integral part of the financial statements.
                                  
<PAGE 10>

                      WINSTON HOSPITALITY, INC.
                   UNAUDITED STATEMENTS OF INCOME
                          ($ in thousands)

<TABLE>
<CAPTION>
                              Three       Three       Nine       Nine
                              Months     Months      Months     Months
                              Ended       Ended      Ended      Ended
                            Sept. 30,   Sept. 30,  Sept. 30,  Sept. 30,
                               1997       1996        1997       1996
                            ---------   ---------  ---------  ---------
<S>                         <C>         <C>        <C>        <C>
Revenue:                                                      
  Room                      $  22,098   $  17,702  $  58,911  $  43,129
  Food and beverage               713         584      2,123      1,024
  Other, net                      492         323      1,179        889
  Interest income                  64          26        129         75
                            ---------   ---------  ---------  ---------
     Total revenue             23,367      18,635     62,342     45,117
                            ---------   ---------  ---------  ---------
                                                              
Expenses:                                                     
  Property operating            7,999       6,223     21,264     15,184
  Repairs and maintenance         988         934      2,823      2,259
  Food and beverage               533         437      1,512        796
  General and administrative      700         475      1,860      1,471
  Franchise costs               2,041       1,537      5,376      3,765
  Management fees                 260         283        909        976
  Percentage lease payments    10,328       8,389     27,098     19,721
                            ---------   ---------  ---------  ---------
     Total expenses            22,849      18,278     60,842     44,172
                            ---------   ---------  ---------  ---------
                                                             
     Net income             $     518   $     357  $   1,500  $     945
                            =========   =========  =========  =========
                                                              
                                  
</TABLE>                          











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

<PAGE 11>                                  
                      WINSTON HOSPITALITY, INC.
                 UNAUDITED STATEMENTS OF CASH FLOWS
                          ($ in thousands)

<TABLE>
<CAPTION>
                                  
                                           Nine Months     Nine Months
                                              Ended           Ended
                                         Sept. 30, 1997  Sept. 30, 1996
                                         --------------  --------------
<S>                                      <C>             <C>
Cash flows from operating activities:                    
  Net income                             $        1,500  $          945
  Adjustments to reconcile net income to                    
   net cash provided by operating
   activities:
     Depreciation                                    61              60
     Changes in assets and liabilities:                       
       Accounts receivable - trade                 (981)         (1,378)
       Prepaid expenses and other assets            (54)           (112)
       Accounts payable - trade                     158             591
       Percentage lease payable to Lessor         2,985           3,729
       Accrued expenses and other
        liabilities                                 577             891
                                         --------------  --------------
          Net cash provided by operating
           activities                             4,246           4,726
                                         --------------  --------------
                                                        
Cash flows provided by (used in) investing
 activities:
  Purchases of furniture, fixture and
   equipment                                        (72)            (94)
  Advances from/(to) lessor, affiliates
   and shareholders                                 683          (2,037)
                                         --------------  --------------
          Net cash provided by (used in)
           investing activities                     611          (2,131)
                                         --------------  --------------

Cash flows used in financing activities:
  Distributions to shareholders                    (600)           (485)
                                         --------------  --------------
          Net cash used in financing
           activities                              (600)           (485)
                                         --------------  --------------
                                                         
Net increase in cash and cash equivalents         4,257           2,110
Cash and cash equivalents at beginning
 of period                                        5,463           2,249
                                         --------------  --------------
                                                        
Cash and cash equivalents at end of      
 period                                  $        9,720  $        4,359
                                         ==============  ==============
                                  
</TABLE>                          
                                  
                                  
                                  
                                  







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

<PAGE 12>                        
                      WINSTON HOSPITALITY, INC.
                    NOTES TO FINANCIAL STATEMENTS
                             (UNAUDITED)
                          ($ in thousands)
                                  
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.

RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 financial
statements to conform with the 1997 presentation.  These
reclassifications have no effect on net income or shareholders'
equity as previously reported.

SUBSEQUENT EVENTS
On October 29, 1997, Winston Hospitality, Inc. (the "Lessee") signed
agreements  with CapStar Hotel Company ("CapStar"), a Washington, D.C.
-based public company which owns and operates full-service hotels, under
which a subsidiary  of CapStar would acquire the rights to leases with
the Company and certain furniture, fixtures and  equipment  and  other
assets, for approximately $10,000 in cash and $24,000 in one of CapStar's
operating partnership  units.  Pursuant to the terms of the agreements, 
substantially all of the Lessee's employees would be offered positions
with CapStar.  Management contracts  for the 10 hotels currently managed
by third parties would be assumed by CapStar, as would operations for
the remaining Current Hotels, one hotel which was acquired by the Company
in October 1997, and five hotels currently under development by the 
Company.  In connection with the transactions, the Lessee anticipates 
incurring approximately $1,550 in  costs, primarily related to the 
transfer of franchise rights, termination of certain employees and legal,
advisory and other fees.  In addition, the Lessee would be at risk for
the eventual collection of accounts receivable and the liquidation of
other current assets as of the date of closing.


<PAGE 13>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
         CONDITION AND RESULTS OF OPERATIONS
        ($ in thousands, except per share amounts)
        
OVERVIEW

Winston Hotels, Inc. (the "Company"), which consummated an
underwritten initial public offering in June, 1994, follow-on
offerings  of  Common  Stock in May 1995 and in  June  1996,  and  of
Preferred  Stock in September 1997, operates as a REIT to  invest  in
hotel  properties and owned 37 hotels (the "Current  Hotels")  as  of
September  30,  1997.   The  Company owned twenty-one  hotels  as  of
December  31, 1995 (the "1995 Hotels"), acquired five hotels  in  May
1996,  three  hotels in July 1996, one hotel in September  1996,  one
hotel  in December 1996 (collectively, all ten are the "1996 Acquired
Hotels") and acquired one hotel in May 1997, two hotels in July 1997,
one   hotel  in  August  1997  and  two  hotels  in  September   1997
(collectively, all six are the "1997 Acquired Hotels"). Three of  the
1996  Acquired  Hotels opened in 1996, on February 29,  June  27  and
November 8 respectively (the "Newly Developed Hotels").  The  Company
currently  leases  the Current Hotels to Winston  Hospitality,  Inc.,
(the  "Lessee")  under percentage lease agreements  (the  "Percentage
Leases")  through which it receives its principal source of  revenue.
On October 29, 1997 the Lessee entered into an agreement with CapStar
Hotel  Company ("CapStar") under which a subsidiary of CapStar  would
acquire  the  rights  to  leases for the Current  Hotels,  one  hotel
acquired   in   October,  1997,  and  five  hotels  currently   under
development  by  the Company.  Conditional upon the closing  of  this
agreement, which is anticipated to occur during 1997, and in exchange
for  certain  other undertakings by CapStar, the Company  intends  to
extend the term of the Percentage Leases to 15 years from the date of
closing.

RESULTS OF OPERATIONS

For  the three and nine months ended September 30, 1997 and 1996, the
differences  in operating results are primarily attributable  to  the
fact  that the Company owned more hotels in 1997 than it did in 1996.
The  table  below  outlines the Company's number of hotel  properties
owned as of September 30, 1997 and 1996:

<TABLE>
<CAPTION>
                                    Properties Owned
                         ------------------------------------------
   Type of Hotel         September 30, 1997      September 30, 1996
  ---------------        ------------------      -------------------
  <S>                    <C>                     <C>
  Limited Service Hotels         34                       27
  Extended Stay Hotels            2                        2
  Full Service Hotels             1                        1
                                 ---                      ---
  Total                          37                       30

</TABLE>

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 and nine months ended September 30, 1997 versus
actual  results  for  the three and nine months ended  September  30,
1996,  below is an analysis of the pro forma results for the  Company
for  the  three and nine months ended September 30, 1997  versus  pro
forma results for the three and nine months ended September 30,  1996
as if the follow-on offerings and, the 1996 and the 1997 acquisitions
had  occurred  on the later of January 1, 1996 or the  hotel  opening
dates  for  the  two  Newly Developed Hotels which  opened  prior  to
September 30, 1996.




<PAGE 14>

THE COMPANY

ACTUAL - THREE MONTHS ENDED SEPTEMBER 30, 1997 VS ACTUAL - THREE 
----------------------------------------------------------------
MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------

The Company had revenues of $10,406 in 1997, consisting of $10,328 of
Percentage  Lease  revenues  and $78 of interest  and  other  income.
Percentage Lease revenues increased by $1,939, or 23%, in  1997  from
$8,389 in 1996.  This increase was comprised of: (i) $142 due to  the
rent  formulas of the Percentage Leases increasing rent  payments  by
the  Lessee  by  an  average of 35% of the  $194  in  increased  room
revenues attributable to inflation and by an average 65% of the  $114
in  increased  room revenues attributable primarily to higher  rates;
plus (ii) $719 for the 1996 Acquired Hotels; and (iii) $1,292 for the
1997  Acquired Hotels; offset in-part by (iv) a net decrease of  $214
in  lease revenues, primarily attributable to changes in occupancy at
several hotels which were undergoing renovations.

Real  estate taxes and property and casualty insurance costs incurred
in  1997  were  $670, an increase of $262 from $408  in  1996.   This
increase  was primarily attributable to the greater number of  hotels
owned  during the 1997 period than in the 1996 period.   General  and
administrative expenses increased $338 to $723 in 1997 from  $385  in
1996.  This increase was primarily attributable to approximately $225
in  one-time costs incurred with both listing our Common Stock on the
New  York  Stock  Exchange  and changes in the  financial  management
staff,  as  well  as additional overhead costs related  to  increased
activities  of  the Company in 1997.  Interest expense  increased  by
$525  to  $977  in  1997  from  $452  in  1996.   This  increase  was
attributable to: (i) $74 related to the increase in weighted  average
interest rates from the third quarter of 1996 to the third quarter of
1997; (ii) $675 related to the increase in the weighted average level
of  borrowings from the third quarter of 1996 to the third quarter of
1997; and (iii) $68 of increased amortization of line of credit  fees
and  unused line of credit fees in connection with the $125,000  line
of  credit  which was obtained in the fourth quarter of 1996.   These
increases were offset by an increase of $292 of capitalized  interest
costs  during  the  third  quarter of 1997  in  connection  with  the
Company's  development  projects.   Depreciation  increased  $549  to
$2,612  in  1997  from $2,063 in 1996, primarily due to  depreciation
related  to  the 1996 Acquired Hotels, the 1997 Acquired  Hotels  and
renovations completed during 1996 and 1997.

PRO FORMA - THREE MONTHS ENDED SEPTEMBER 30, 1997 VS PRO FORMA -
----------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------

The  Company  had pro forma revenues of $11,414 for the three  months
ended  September  30,  1997,  consisting  of  $11,330  of  pro  forma
Percentage  Lease  revenues and $84 of pro forma interest  and  other
income.   Pro forma Percentage Lease revenues increased by  $664,  or
6%,  to  $11,330  in  1997 from $10,666 in 1996.  This  increase  was
primarily comprised of: (i) $476 due to the rent formulas  of  the
Percentage Leases increasing pro forma rent payments by the Lessee by
an  average  of  37%  of  the $256 in increased  pro  forma  revenues
attributable to inflation and 68% of the $560 in increased pro  forma
room  revenues attributable primarily to higher rates, plus (ii) $436
in  increased pro forma lease revenues attributable to the opening of
the Newly Developed Hotels; offset in part by (iii) a net decrease of
$248  in  pro forma lease revenues, primarily attributable to changes
in occupancy at several hotels which were undergoing renovations.


Pro forma real estate taxes and property and casualty insurance costs
incurred  in 1997 were $736, an increase of $142 from $594 in 1996.
This  increase  was  attributable primarily to  the  Newly  Developed
Hotels.  General and administrative expenses increased $327 to $730
in 1997 from $403 in 1996.  This

<PAGE 15>

increase was primarily attributable to approximately $225 in one-time
costs incurred in connection with both listing our Common Stock on the
New York Stock Exchange and changes in the financial management staff,
as well as additional overhead costs related to increased activities 
of the Company in 1997.  Interest expense increased $87 to $170 in 1997
from $83 in 1996.  The increase was attributable to the increase in the
Company's line of credit from $50,000 to $125,000 in October, 1996.
Depreciation  increased $172 to $2,779 in 1997 from $2,607  in  1996.
This was attributable primarily to the Newly Developed Hotels.

ACTUAL - NINE MONTHS ENDED SEPTEMBER 30, 1997 VS ACTUAL - NINE
--------------------------------------------------------------
MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------

The  Company had revenues of $27,230, in 1997, consisting of  $27,098
of  Percentage Lease revenues and $132 of interest and other  income.
Percentage Lease revenues increased by $7,377, or 37%, in  1997  from
$19,721  in  1996.  This increase was comprised of: (i) $598  due  to
rent  formulas of the Percentage Leases increasing rent  payments  by
the  Lessee  by  an  average of 35% of the  $590  in  increased  room
revenues attributable to inflation and by an average 66% of the  $595
in  increased  room revenues attributable primarily to higher  rates;
plus  (ii) $5,515 for the 1996 Acquired Hotels; and (iii) $1,637  for
the  1997  Acquired Hotels; offset in-part by (iv) a net decrease  of
$373  in  lease  revenues,  primarily  attributable  to  changes   in
occupancy at several hotels which were undergoing renovations.

Real  estate taxes and property and casualty insurance costs incurred
in  1997 were $1,826, an increase of $724 from $1,102 in 1996.   This
increase  was primarily attributable to the greater number of  hotels
owned  during  the 1997 period than in the 1996 period.  General  and
administrative expenses increased $302 to $1,585 in 1997 from  $1,283
in  1996.   This increase was primarily attributable to approximately
$225 in one-time costs incurred with both listing our Common Stock on
the  New  York Stock Exchange and changes in the financial management
staff,  as  well  as additional overhead costs related  to  increased
activities  of  the Company in 1997.  Interest expense  increased  by
$762  to  $2,788  in  1997 from $2,026 in 1996.   This  increase  was
attributable to: (i) $84 related to the increase in weighted  average
interest rates from the third quarter of 1996 to the third quarter of
1997;  (ii)  $1,105 related to the increase in the  weighted  average
level  of  borrowings from the third quarter of  1996  to  the  third
quarter of 1997; and (iii) $269 of increased amortization of line  of
credit  fees  and unused line of credit fees in connection  with  the
$125,000  line of credit which was obtained in the fourth quarter  of
1996.   These  increases were offset by $696 of capitalized  interest
costs  during  the  third  quarter of 1997  in  connection  with  the
Company's  development projects.  Depreciation  increased  $2,510  to
$7,182  in  1997  from $4,672 in 1996, primarily due to  depreciation
related  to  the 1996 Acquired Hotels, the 1997 Acquired  Hotels  and
renovations completed during 1996 and 1997.

PRO FORMA - NINE MONTHS ENDED SEPTEMBER 30, 1997 VS PRO FORMA - NINE
--------------------------------------------------------------------
MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------

The  Company  had pro forma revenues of $32,033 for the  nine  months
ended  September  30,  1997,  consisting  of  $31,808  of  pro  forma
Percentage  Lease revenues and $225 of pro forma interest  and  other
income.  Pro forma Percentage Lease revenues increased by $2,752,  or
9%,  to  $31,808  in  1997 from $29,056 in 1996.  This  increase  was
primarily  composed  of:  (i) $1,432 due  to  rent  formulas  of  the
Percentage Leases increasing pro forma rent payments by the Lessee by
an  average  of 36% of the $741 in increased pro forma room  revenues
attributable  to  inflation and 68% of the $1,712  in  increased  pro
forma room revenues attributable primarily to higher rates; plus (ii)
$1,847  in  increased  pro forma lease revenues attributable  to  the
opening of the Newly Developed Hotels; offset in part by (iii) a  net


<PAGE 16>

decrease of $527 in pro forma lease revenues attributable to  changes
in occupancy at several hotels which were undergoing renovations.

Pro forma real estate taxes and property and casualty insurance costs
incurred  in  1997 were $2,181, an increase of $426  from  $1,755  in
1996. This increase was attributable primarily to the Newly Developed
Hotels.  Pro forma general and administrative expenses increased $258
to  $1,620  in 1997 from $1,362 in 1996.  This increase is  primarily
attributable  to  approximately $225 in one-time  costs  incurred  in
connection  with  listing our Common Stock  on  the  New  York  Stock
Exchange  and  changes in the financial management  staff.   Interest
expense  increased  $290  to $550 in 1997 from  $260  in  1996.   The
increase  was attributable to the increase in the Company's  line  of
credit  from  $50,000  to  $125,000 in  October,  1996.   Deprecation
increased $834 to $8,006 in 1997 from $7,172 in 1996.  This  increase
was primarily attributable to the Newly Developed Hotels.

THE LESSEE

ACTUAL  -  THREE MONTHS ENDED SEPTEMBER 30, 1997 VS ACTUAL - THREE
------------------------------------------------------------------
MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------

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

<TABLE>
<CAPTION>

                           Three Months      Three Months
                              Ended             Ended            Change
                          September 30,     September 30,
                               1997              1996           $       %
                          --------------    --------------    -------------
<S>                       <C>      <C>      <C>      <C>      <C>     <C>
Revenue:
  Room                    $22,098  94.5%    $17,702  95.0%    $4,396  24.8%
  Food and beverage           713   3.1%        584   3.1%       129  22.1%
  Other, net                  492   2.1%        323   1.7%       169  52.3%
  Interest income              64   0.3%         26   0.2%        38 146.2%
                          --------------    --------------    -------------
    Total revenue          23,367 100.0%     18,635 100.0%     4,732  25.4%
                          --------------    --------------    -------------
                                                                      
Expenses:                                                             
  Property operating
   expenses                 7,999  34.2%      6,223  33.4%     1,776  28.5%
  Repairs and maintenance     988   4.2%        934   5.0%        54   5.8%
  Food and beverage           533   2.3%        437   2.3%        96  22.0%
  General and administrative  700   3.0%        475   2.6%       225  47.4%
  Franchise costs           2,041   8.8%      1,537   8.3%       504  32.8%
  Management fees             260   1.1%        283   1.5%       (23) (8.1%)
  Percentage lease
   payments                10,328  44.2%      8,389  45.0%     1,939   23.1%
                          --------------    --------------    --------------
    Total expenses         22,849  97.8%     18,278  98.1%     4,571   25.0%
                          --------------    --------------    --------------
    Net income            $   518   2.2%    $   357   1.9%    $  161   45.1%
                          ==============    ==============    ==============
</TABLE>

The  increase of $4,732 in total revenue and $4,571 in total expenses
is  primarily due to the operation of a greater number of hotels  for
the  three months ended September 30, 1997 as compared with the  same
period of 1996.

The increase of $4,396 in room revenues was due to: (i) a decrease in
room  revenues  of $2 for the 1995 Hotels; (ii) an increase  in  room
revenues of $1,626 for the 1996 Acquired Hotels (including $1,055 for
the  Newly  Developed Hotels); and (iii) room revenues of $2,772  for
the 1997 Acquired Hotels.

<PAGE 17>


Repairs  and  maintenance expense declined as a percentage  of  total
revenue,  in  part because of the timing of certain costs  which  are
expected  to  occur during the fourth quarter of 1997,  and  in  part
because of the nature of certain fixed costs which generally  do  not
vary  as a percentage of revenues.  Management fees decreased to 1.1%
of  total revenues in 1997 from 1.5% of total revenues in 1996, as  a
result of a lower proportion of hotels and total revenues under third
party  management  in 1997 than 1996 and also as a  result  of  lower
profits from hotels under management in 1997 than 1996.

The  increase  in  net  income was generally a  result  of:  (i)  the
increase  in profits from a higher volume of revenues; (ii) temporary
savings  from repairs and maintenance expenses which are expected  to
be  incurred  during the fourth quarter of 1997; and (iii)  a  lesser
portion of profitable operations under third party management in 1997
than in 1996.

ACTUAL - NINE MONTHS ENDED SEPTEMBER 30, 1997 VS ACTUAL - NINE MONTHS
ENDED SEPTEMBER 30, 1996

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

<TABLE>
<CAPTION>

                           Nine Months        Nine Months
                              Ended             Ended            Change
                          September 30,     September 30,
                               1997              1996           $       %
                          --------------    --------------    --------------
<S>                       <C>               <C>               <C>     <C>
Revenue:                                                              
  Room                    $58,911  94.5%    $43,129  95.6%    $15,782  36.6%
  Food and beverage         2,123   3.4%      1,024   2.3%      1,099 107.3%
  Other, net                1,179   1.9%        889   2.0%        290  32.6%
  Interest income             129   0.2%         75   0.1%         54  72.0%
                          --------------    --------------    --------------
    Total revenue          62,342 100.0%     45,117 100.0%     17,225  38.2%
                          --------------    --------------    --------------

                                                                      
Expenses:                                                             
  Property operating
   expenses                21,264  34.1%     15,184  33.7%      6,080  40.0%
  Repairs and maintenance   2,823   4.5%      2,259   5.0%        564  25.0%
  Food and beverage         1,512   2.4%        796   1.8%        716  89.9%
  General and 
   administrative           1,860   3.0%      1,471   3.2%        389  26.4%
  Franchise costs           5,376   8.6%      3,765   8.3%      1,611  42.8%
  Management fees             909   1.5%        976   2.2%        (67) (6.9%)
  Percentage lease
   payments                27,098  43.5%     19,721  43.7%      7,377  37.4%
                          --------------    --------------    --------------
    Total expenses         60,842  97.6%     44,172  97.9%     16,670  37.7%
                          --------------    --------------    --------------
    Net income            $ 1,500   2.4%    $   945   2.1%    $   555  58.7%
                          ==============    ==============    ==============

</TABLE>

The  increase  of  $17,225  in total revenue  and  $16,670  in  total
expenses  is  primarily due to the operation of a greater  number  of
hotels for the nine months ended September 30, 1997 as compared  with
the same period of 1996.

The  increase of $15,782 in room revenues was due to: (i) an increase
in  room  revenues of $678, for the 1995 Hotels; (ii) an increase  in
room  revenues  of  $11,606 for the 1996 Acquired  Hotels  (including
$4,901  from the Newly Developed Hotels); and (iii) room revenues  of
$3,498  for  the  1997  Acquired Hotels.  Food and  beverage  revenue
increased  $1,099 primarily due to the acquisition of a full  service
hotel in May 1996.


<PAGE 18>


Repairs  and  maintenance expense declined as a percentage  of  total
revenue,  in  part because of the timing of certain costs  which  are
expected  to  occur during the fourth quarter of 1997,  and  in  part
because of the nature of certain fixed costs which generally  do  not
vary  as  a  percentage  of  revenues.   Food  and  beverage  expense
increased  $716  primarily due to the acquisition of  a  full-service
hotel in May 1996.  General and administrative expense declined as  a
percentage of total revenue, primarily because certain fixed costs do
not  vary as a percentage of revenues.  Management fees decreased  to
1.5%  of total revenues in 1997 from 2.2% of total revenues in  1996,
primarily  as  a  result of a lower proportion of  hotels  and  total
revenues under third party management in 1997 than 1996.

The  increase  in  net  income was generally a  result  of:  (i)  the
increase  in profits from a higher volume of revenues; (ii) temporary
savings  from repairs and maintenance expenses which are expected  to
be  incurred during the fourth quarter of 1997; (iii) economies noted
above  relating to general and administrative expenses;  and  (iv)  a
lesser  portion of profitable operations under third party management
in  1997  than in 1996; offset in part by (v) increases in  food  and
beverage  costs from the full-service hotel operation  of  one  hotel
that was acquired in May 1996.

LIQUIDITY AND CAPITAL RESOURCES

The  Company finances its operations from operating cash flow,  which
is  principally derived from Percentage Leases.  For the nine  months
ended  September 30, 1997, cash flow provided by operating activities
was  $18,454 and funds from operations, which is equal to net  income
before   minority   interest,  plus  depreciation,   less   preferred
dividends,  was  $20,538.  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.
During   the  first  nine  months  of  1997,  the  Company   declared
distributions of $14,076 to its common shareholders and $366  to  its
preferred  shareholders.   Because  the  Company's  cash  flow   from
operating activities is expected to exceed its 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  nine
months  ended  September 30, 1997 totaled $57,988, including  $39,750
related  to  the acquisition of the 1997 Acquired Hotels, $6,676  for
hotel  renovations primarily of the 1996 Acquired Hotels, and $11,227
for the development of four new extended-stay hotels and one limited-
service hotel, which are expected to cost approximately $50,000.  The
development  of these hotels is expected to be completed  during  the
first  and  second  quarters of 1998.  The total  cost  of  the  1997
Acquired Hotels was $50,182 including $39,750 in cash and $10,432  in
WINN Limited Partnership units.

The  Company plans to spend approximately $8,500 to renovate  certain
of  its  recently  acquired 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
nine  months ended September 30, 1997, the Company set aside $3,130
for such reserves. These reserves are in  addition  to amounts spent
on normal  repairs  and  maintenance which have approximated 4.8% and
5.2% of room revenues for the nine months ended September  30,  1997
and 1996, respectively, and are paid by the Lessee.

The  Company's net cash provided by financing activities for the nine
months   ended   September  30,  1997  totaled   $40,092,   primarily
attributable to net proceeds from the issuance of Preferred Stock  of

<PAGE 19>

$71,866,  offset by a net decrease of $18,319 in the line  of  credit
borrowings, the payment of distributions to shareholders of  $12,417,
and to minority interest of $1,148.

The  Company  has  collateralized a portion of its $125,000  line  of
credit with 28 of its Current Hotels.  As of September 30, 1997 there
was  $94,447 available for borrowing ("Line Availability"), of  which
$24,481   was  outstanding.  The  Line  Availability  is   calculated
quarterly,  and increases if cash flow attributable to the collateral
hotels  increases  and/or  the  Company  adds  additional  hotels  as
collateral.  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
September  30,  1997, the Company had additional  borrowing  capacity
under  the  debt  limitation of approximately  $190,000  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  first  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  herein,  that   meet   its
investment   criteria  and  is  continually  evaluating   acquisition
opportunities.   It  is expected that future hotel  acquisitions  and
development  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.

SEASONALITY

The  hotels'  operations historically have been seasonal  in  nature,
reflecting higher REVPAR during the second and third quarters.   This
seasonality  and   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, can be expected
to  cause fluctuations in the Company's quarterly lease revenue under
the Percentage Leases.

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.   Important factors that could cause  actual  results  to
differ  include,  but  are  not limited to the  following  (i)  risks
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  risks,
including  risk  of  construction delay, cost  overruns,




<PAGE 20>

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 21>

PART II - OTHER INFORMATION

Item 2.        Changes in Securities

          On  September 11, 1997, the Company issued 3,000,000 shares
          of   9.25%   Series  A  Cumulative  Preferred  Stock   ($25
          liquidation  preference  per share plus  cumulative  unpaid
          distributions).   The Series A Preferred Stock  will,  with
          respect  to  dividend rights and rights  upon  liquidation,
          dissolution or winding up of the Company, rank  (i)  senior
          to  all  classes or series of Common Stock of the  Company,
          and to all equity securities ranking junior to the Series A
          Preferred  Stock with respect to dividend rights or  rights
          upon liquidation, dissolution or winding up of the Company;
          (ii)  on a parity with all equity securities issued by  the
          Company  the terms of which specifically provide that  such
          equity  securities  rank  on a parity  with  the  Series  A
          Preferred  Stock with respect to dividend rights or  rights
          upon liquidation, dissolution or winding up of the Company;
          and (iii) junior to all existing and future indebtedness of
          the Company.  The term "equity securities" does not include
          convertible debt securities, which will rank senior to  the
          Series A Preferred Stock prior to conversion.

Item 5.   Other Information

          On  August  19, 1997, the Company announced that Philip  R.
          Alfano  would  resign  as Chief Financial  Officer  of  the
          Company   to  pursue  personal  interests.   Mr.   Alfano's
          resignation became effective October 3, 1997.  The  Company
          is  currently in the process of searching for a  new  Chief
          Financial Officer.
          
          On  October  9, 1997, the Company announced the appointment
          of   Brent  V.  West  to  the  newly  created  position  of
          Controller.  Mr. West assumes the day-to-day responsibility
          of overseeing all of the financial operations of the REIT.
          
          On  October 14, 1997, the Company announced that  David  C.
          Sullivan,  Executive  Vice President  and  Chief  Operating
          Officer of Promus Hotel Corporation, has been appointed  to
          the Company's Board of Directors.  Mr. Sullivan will serve,
          effective January 1, 1998, after his retirement from Promus
          Hotel Corporation.



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

               
               27.1 Financial Data Schedule (For SEC use only)

             (b)       Reports on Form 8-K.
             
               (1) The  Company filed a report on Form 8-K dated July
                   11,   1997   reporting  the  Second  Amended   and
                   Restated Agreement of Limited Partnership of  WINN
                   Limited   Partnership,  of   which   the   Company
                   currently  is  the  Sole General  Partner,  became
                   effective.    A   copy  of  the   Second   Amended
                   Agreement was attached as Exhibit 4.1.
               
<PAGE 22>
               
               (2)  The  Company  filed a report on  Form  8-K  dated
                    September  8, 1997 reporting the public  offering
                    of 3,000,000 shares of the Company's 9.25% Series
                    A  Cumulative Preferred Stock, par value $.01 per
                    share.  Certain  items  of  the  Form  8-K   were
                    incorporated  by  reference  into  the  Company's
                    Registration Statement on Form S-3.


<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   November 14, 1996            /s/Robert W. Winston, III
    ----------------------          --------------------------------
                                    Robert W. Winston, III
                                    Chief Executive Officer
                                    and President




Date   November 14, 1997            /s/ Brent V. West
    ----------------------          --------------------------------
                                    Brent V. West
                                    Controller (Principal Financial
                                     Officer)



                                  
<PAGE 24>

                        WINSTON HOTELS, INC.
         FORM 10-Q for the quarter ended September 30, 1997
                                  
                            EXHIBIT INDEX
                                  
Exhibit
Number    Description of Exhibit

27.1      Financial Data Schedule (For SEC use only)