<PAGE>
 
               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.   20549
                                   FORM 10-K


[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
    ACT OF 1934

For the fiscal year ended December 31, 1995       
                          -----------------

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

For the transition period from __________________ to __________________ 

Commission file number 1-9563     
                       ------ 

                          AIRCOA HOTEL PARTNERS, L.P.
            ------------------------------------------------------ 
            (Exact name of registrant as specified in its charter)
          
      State of Delaware                                 84-1042607
-------------------------------            ------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)


    5775 DTC Boulevard, Suite 300
        Englewood, Colorado                               80111   
----------------------------------------               ----------
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code: (303) 220-2000  
                                                    --------------

Securities registered pursuant to 
Section 12(b) of the Act:                     Name of each exchange on which 
                                              registered:  
     
     Class A Depository Units                 American Stock Exchange

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

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

        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (S229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

        The aggregate market value of the voting units held by non-affiliates of
the registrant, computed by reference to the price as of the close of trading on
February 20, 1996 was $2,704,744.

        There were 5,340,214 units outstanding of the registrant's Class A Units
as of February 13, 1996. 
<PAGE>
 
                         AIRCOA HOTEL PARTNERS, L.P. 

                         1995 FORM 10-K ANNUAL REPORT 

                              Table of Contents 


                                                                        Page 
                                                                      --------
                                   PART I  

Item 1.   Business.................................................     I - 1 

Item 2.   Properties...............................................     I - 3

Item 3.   Legal Proceedings........................................     I - 4

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


                                    PART II

Item 5.   Market for the Registrant's Partnership Units and
          Related Unitholder Matters...............................     II - 1

Item 6.   Selected Financial Data..................................     II - 2

Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations......................     II - 3

Item 8.   Financial Statements and Supplementary Data..............     II - 9

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


                                   PART III

Item 10.  Directors and Executive Officers of the General Partner..     III - 1

Item 11.  Payments and Compensation to
          General Partner and Affiliates...........................     III - 3

Item 12.  Security Ownership of Certain Beneficial
          Owners and Management....................................     III - 4

Item 13.  Certain Relationships and Related Transactions...........     III - 6


                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on
          Form 8-K.................................................     IV - 1
<PAGE>
 
                                    PART I

Item 1. Business
------- --------

        GENERAL DEVELOPMENT OF BUSINESS

        AIRCOA Hotel Partners, L.P., a Delaware limited partnership ("AHP" or
        the "Partnership") was organized in December 1986, by AIRCOA Hospitality
        Services, Inc. ("AHS" or the "General Partner") to acquire, own, operate
        and sell hotels and resort properties. The Partnership owns and operates
        six hotel and resort properties (the "Properties") through operating
        partnerships (the "Operating Partnerships") which were acquired in 1986.

        The Partnership owns a 99% limited partner interest in each of the six
        Operating Partnerships which hold title to the Properties and through
        which the Partnership conducts all of its operations. AHS, a wholly
        owned subsidiary of Richfield Hospitality Services, Inc. ("Richfield"),
        is also the 1% general partner of each of the Operating Partnerships.
        Richfield operates the Properties for the Partnership under certain
        management agreements.

        FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

        The Partnership's operations have been in one industry segment since
        formation. Revenue has been generated through the ownership and
        operation of the Properties. The following table reflects the sources of
        revenue and gross operating profit and total assets for each of the
        three years ended December 31, 1995, 1994 and 1993.

<TABLE> 
<CAPTION> 
                                                        (In thousands, except percentages)
                                                1995                    1994                    1993
                                       --------------------     -------------------     -------------------
                                        Revenue     Percent     Revenue     Percent     Revenue     Percent
                                       --------     -------    --------     -------    --------     -------
<S>                                    <C>         <C>          <C>         <C>         <C>         <C>  
Rooms                                  $ 26,810       59.1%    $ 26,863       58.2%    $ 26,693       59.0%
Food and Beverage                        11,733       25.8%      12,274       26.6%      11,664       25.8%
Other Property  
  Operations                              6,856       15.1%       7,020       15.2%       6,911       15.2%
                                       --------     -------    --------     -------    --------     -------
Total Revenue                          $ 45,399      100.0%    $ 46,157      100.0%    $ 45,268      100.0%
                                       ========     =======    ========     =======    ========     =======
Gross Operating Profit                 $ 12,799       28.1%    $ 13,566       29.4%    $ 13,739       30.4%
                                       ========     =======    ========     =======    ========     =======
Total Assets                           $ 69,406                $ 73,542                $ 77,369
</TABLE>
 
Gross operating profit represents operating income of the Partnership before
rent, taxes and insurance, management fees, depreciation, amortization and
impairment of property. Gross operating profit is indicative of the
profitability from operations of the Properties.

Room revenue is significantly impacted by the rates obtained for rooms and the
level of occupancy of the Properties. Although not in the same proportion, these
factors also impact revenue generated from food and beverage and other property
operations. Average daily room rates of the Properties were $59.55, $59.42 and
$60.08, in 1995, 1994 and 1993, respectively. Average occupancy levels for the
Properties were 77.6%, 77.9% and 76.6% in 1995, 1994 and 1993, respectively. For
a discussion of the changes in various operating statistics, see Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

                                      I-1
<PAGE>
 
    NARRATIVE DESCRIPTION OF BUSINESS

    BUSINESS

    The principal business of the Partnerships is the ownership and operation of
    six hotel and resort properties located in geographically diverse areas of
    the continental United States. The Properties are full service facilities
    serving the vacation, leisure, meetings, convention and business segments of
    the hotel market. In addition to lodging, various guest services are offered
    by the Properties including restaurants, lounges, banquet, room, valet,
    concierge, parking and shuttle services. Other services available at some of
    the Properties include a marina, health and fitness facilities, swimming
    pools, tennis courts, spas and retail facilities.

    IMPORTANCE OF FRANCHISES AND TRADEMARKS

    Four of the Properties are affiliated with national franchises and operate
    under franchise agreements. The benefits of these franchise agreements
    include national brand name recognition and world wide central reservation
    systems, as well as operating quality standards and extensive marketing
    programs. One of the Properties is licensed to use the Regal trademark,
    which is sub-licensed to the hotel by an affiliate of AHS. The Partnership
    considers such affiliations and licenses to be important to the operations
    and success of the Properties in regard to customer recognition and
    satisfaction. Other properties may be licensed in the future to use the
    Regal trademark.

    SEASONALITY OF BUSINESS

    Because of the Properties' locations, occupancy levels are generally lower
    in the first and fourth quarters and higher in the second and third quarters
    of the year. These fluctuations are consistent with the normal recurring
    seasonal patterns of the industry.

    INDUSTRY PRACTICES

    The Properties periodically offer discounts to contract and group customers
    and room rates generally fluctuate during peak and non-peak times of the
    year. Deposits are often obtained in advance for facility rentals and rooms.
    In addition, a certain level of capital expenditures, repair and replacement
    of hotel property is required under the Partnership's loan agreement.

    The Properties are managed by Richfield in accordance with certain
    management contracts. Management services provided under the contracts
    include operations supervision, strategic business planning, yield
    management, sales and marketing oversight, personnel management and
    accounting and technical services.

    MARKET INFORMATION AND COMPETITIVE CONDITIONS

    According to Smith Travel Research, all of the U.S. lodging industry
    performance measures were higher in 1995 than in 1994, but the rate of
    increase has slowed significantly. Average daily room rate for the industry
    increased by 4.8% to $67.34 and room occupancy increased 1.2% to 65.5%. The
    hospitality industry in the U.S. experienced a rise in the rate of increase
    in supply and a drop in the rate of increase in change in demand, and it was
    only the continued rise in the average room rate that kept the increase in
    room revenue near the level of 1994. Room revenue per available room
    (Revpar) was up 6.1%, considerably below the 8.5% increase for a year ago.
    Smith Travel Research estimates that performance ratios in the lodging
    industry in 1996 will not improve significantly over 1995.

                                      I-2
<PAGE>
 
    The Partnership's occupancy levels have consistently exceeded the industry
    averages noted above; however, average daily rates are slightly below the
    industry levels. The Partnership's operations in certain markets are price
    sensitive. The Partnership considers its primary points of competition to
    include, but are not limited to, room rates, location, guest services and
    responsiveness, adequacy and appearance of facilities and overall customer
    satisfaction. The demand at a particular hotel of the Partnership may be
    adversely affected by many factors, including changes in travel patterns,
    local and regional economic conditions and the degree of competition with
    other hotels in the area.

    REGULATION

    The Operating Partnerships are subject to regulation in connection with
    their business, including liquor licensing, occupational health and safety
    regulations, environmental regulations, food service regulation and labor
    laws. The Operating Partnerships have not experienced significant
    difficulties with regulation in these areas; however, failure to comply with
    those regulations could result in loss of licenses, permits or other
    authorizations which could adversely impact the Partnership's operating
    revenue.

    EMPLOYEES

    All hotel personnel are employed by the respective Operating Partnerships.
    Richfield processes the payroll on behalf of the Operating Partnerships. The
    number of persons employed by the Operating Partnerships, as of December 31,
    1995, was approximately 934. Management considers employee relations to be
    satisfactory.

Item 2. Properties
------- ----------
    The six hotel and resort properties including the hotel buildings and
    leasehold improvements are owned by the Operating Partnerships. Three of the
    hotel properties are located on land owned by the Operating Partnerships,
    while the other three hotel properties are located on land leased by the
    Operating Partnerships on a long-term basis. The following table presents
    certain information for each of the Properties:
<TABLE> 
<CAPTION> 
                                                                                                   Number
                                                                                                     of
          Property                Primary Markets Served                Area Served                Rooms
          --------                ----------------------                -----------                ------
<S>                               <C>                                   <C>                        <C> 
Aurora Inn and Pine Lake          Vacation, Business                    Greater Cleveland/Akron,       69
  Trout Club ("Aurora")                                                 Ohio

Fourwinds/A Clarion Resort        Destination Resort                    Bloomington/Indianapolis,     126
   ("Fourwinds")                  and Marina                            Indiana

Regal at McCormick Ranch          Vacation, Meetings                    Phoenix/Scottsdale,           125
   ("McCormick")                                                        Arizona 

Sheraton Inn-Buffalo              Business, Meetings                    Buffalo/Niagara Falls,        293
   Airport ("Buffalo")            and Leisure                           New York 

Sheraton Lakeside Inn             Vacation                              Orlando/Walt Disney           651
   ("Lakeside")                                                         World, Florida  

Sheraton University Center        Business, Meetings,                   Raleigh/Durham/Chapel         322
   ("University")                 Medical and Conventions               Hill, North Carolina   

                                                                                         TOTAL      1,586
</TABLE> 

                                      I-3
<PAGE>
 
        The appraised value of the Properties is summarized below:
<TABLE> 
<CAPTION> 
                                              Appraised Values
                             -------------------------------------------------
                             December 1995     December 1994     December 1993
                             -------------     -------------     -------------
<S>                          <C>               <C>               <C> 
Aurora Inn & Pine Lake Trout    
  Club                       $  7,200,000         7,520,000         7,240,000
Fourwinds/A Clarion Resort      8,800,000        10,200,000        10,200,000
Regal at McCormick Ranch        9,875,000         9,015,000         7,900,000
Sheraton Inn-Buffalo Airport   15,000,000        17,730,000        18,140,000
Sheraton Lakeside Inn          30,000,000        34,000,000        39,000,000
Sheraton University Center     12,000,000         8,025,000         7,050,000
                             -------------     -------------     -------------
Total appraised value        $ 82,875,000        86,490,000        89,530,000
                             =============     =============     =============
</TABLE> 
        The decline in the aggregate appraised value of the portfolio is
        primarily the result of decreases in the value of the Sheraton Lakeside
        Inn and the Sheraton Inn - Buffalo Airport in 1995, 1994 and 1993, and
        the decline in the Fourwinds Resort in 1995. These declines are
        primarily attributable to these hotels being located in markets with
        increases in the supply of available rooms and static demand for hotel
        rooms. See Item 7, Management's Discussion and Analysis of Financial
        Condition and Results of Operations.

Item 3. Legal Proceedings
------- -----------------
        There are no material pending legal proceedings to which the Partnership
        or any of the Operating Partnerships is a party, except for ordinary and
        routine litigation incidental to the business of the Partnership.

Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
        There were no matters submitted to a vote of Unitholders during the
        quarter ended December 31, 1995.

                                      I-4
<PAGE>
 
                                    PART II


Item 5. Market for the Registrant's Partnership Units and Related Unitholder
------- --------------------------------------------------------------------
Matters
-------

  Class A Units of AIRCOA Hotel Partners, L.P. are traded on the American
Stock Exchange under the symbol AHT.  There is no established public trading
market for the Partnership's Class B Units, the majority of which are held by
affiliates of the General Partner.  Under certain circumstances (which have not
been satisfied at any time since the inception of the Partnership) described in
the Partnership's limited Partnership Agreement, the Class B Units may be
converted into Class A Units.  Beginning in 1997, and each year thereafter
through 2001, a minimum of 250,000 Class B Units are required to be converted
at a redemption value of $20.00 per Class B Unit, by issuing Class A Units
valued at the then current market price of a Class A Unit.  See Item 7,
Management's Discussion and Analysis of Financial Conditions and Results of
Operations.  The following table sets forth the range of high and low closing
prices of Class A Units for each full quarterly period for the two most recent
years, as reported by the American Stock Exchange.

        For the Quarter Ended                   High               Low
--------------------------------------------------------------------------------
March 31, 1994                                 3 11/16              3
--------------------------------------------------------------------------------
June 30, 1994                                   3 5/8             2 1/2
--------------------------------------------------------------------------------
September 30, 1994                              2 7/8             2 3/8
--------------------------------------------------------------------------------
December 31, 1994                               3 1/4             2 5/8
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
March 31, 1995                                    4               2 7/8
--------------------------------------------------------------------------------
June 30, 1995                                   3 5/8             2 3/16
--------------------------------------------------------------------------------
September 30, 1995                             2 13/16            1 13/16
--------------------------------------------------------------------------------
December 31, 1995                               2 1/8              1 1/2
--------------------------------------------------------------------------------

      As of December 31, 1995 the Partnership had approximately 1,400 Class A
Unitholders.

       The Class A Unitholders have not received any distributions since 1990. 
The Class B Units do not receive distributions until the Class A Unitholders
receive Minimum Annual Distributions, as defined in the Partnership Agreement. 
In addition, the Partnership loan agreements stipulate certain limitations on
these distributions based on excess cash flow as defined in the mortgage loan
agreement.  See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.

                                      II-1
<PAGE>
 
Item 6. Selected Financial Data
------- -----------------------

<TABLE> 
<CAPTION> 



                                                                              Years ended December 31,         
                                                               ------------------------------------------------------
                                                                1995        1994        1993       1992       1991
                                                               --------    --------    --------   --------   --------
<S>                                                            <C>        <C>         <C>        <C>        <C> 
                                                                      (In thousands, except per unit amounts)
                                                                      ---------------------------------------

Consolidated Operations Data
----------------------------

Revenue                                                        $ 45,399     46,157      45,268     42,998     42,990
Operating income (loss) (1)                                        (630)     5,122       5,556      4,331      3,848
Net income (loss) (1)                                            (5,421)       627       1,120        113     (1,923)
Income (loss) per unit:
        Class A: Net loss                                         (1.50)      (.10)       (.02)      (.22)      (.66)
        Class B: Net income                                        2.86       1.25        1.27       1.17       1.00

Weighted average number of units outstanding:
                Class A                                       5,340,214  5,340,214   5,340,214  4,490,214  4,297,954
                Class B                                         950,000    950,000     950,000    950,000    950,000

Consolidated Balance Sheet Data
-------------------------------

Working capital deficit (2)                                      (2,452)    (7,178)    (48,180)   (48,771)    (5,963)
Total assets                                                     69,406     73,542      77,369     78,589     79,029
Long-term debt and affiliate notes payable (2)                   51,390     46,180       6,000      8,715     53,650
Partners' capital                                                 9,752     15,173      14,546     13,426     12,378
Appraised values of properties                                   82,875     86,490      89,530     90,240    106,000

Consolidated Cash Flow Data
---------------------------

Capital expenditures                                              3,286      2,049       2,353      2,530      1,799
Net cash provided by operating  activities                        3,143      5,568       5,841      4,080      2,665
Net cash used in investing activities                            (3,306)    (1,944)     (2,394)    (2,433)    (1,513)
Net cash provided (used) by financing activities                  1,018     (5,279)     (3,612)    (1,391)       449
</TABLE> 

   (1)     Includes a loss for the impairment of the Partnership's Lakeside
           property in the amount of $4,789 for the year ended December
           31, 1995.
   (2)     Certain of the Partnership's indebtedness to unaffiliated financial
           institutions was classified as current at December 31, 1993 and 1992.

                                      II-2
<PAGE>
 
Item 7. Management's Discussion and Analysis of Financial Condition and
------- ---------------------------------------------------------------
Results of Operations
---------------------

      RESULTS OF OPERATIONS

      The following table reflects certain historical financial information and
      operating statistics for the years ended December 31, 1995, 1994 and 1993.

                       Historical Financial Information
                       --------------------------------

                  (in thousands, except operating statistics)

<TABLE> 
<CAPTION> 

                                              1995           1994         1993
                                           ---------       --------     --------
<S>                                        <C>             <C>          <C> 
Revenue:
  Rooms                                    $ 26,810         26,863       26,693
  Food and beverage                          11,733         12,274       11,664
  Other property operations                   6,856          7,020        6,911
                                           ---------       --------     --------
   Total revenue                             45,399         46,157       45,268

Expenses:
  Hotel operations                           32,600         32,591       31,529
                                           ---------       --------     --------
   Gross operating profit                    12,799         13,566       13,739

  Other operating expenses (1)(2)            13,429          8,444        8,183
                                           ---------       --------     --------
   Operating income                            (630)         5,122        5,556

  Other expense, net (3)                     (4,791)        (4,495)      (4,436)
                                           ---------       --------     --------

   Net income (loss)                       $ (5,421)           627        1,120
                                           =========       ========     ========

                                Operating Statistics
                                --------------------
  Average daily rate                       $  59.55          59.42        60.08

  Average occupancy percent                    77.6%          77.9%        76.6%

  Number of available rooms                   1,586          1,586        1,586

</TABLE> 

 (1)     Includes rent, taxes and insurance, management fees, depreciation and
         amortization, and impairment of property.
 (2)     1995 includes impairment loss on the Lakeside property in the amount of
         $4,789.  No impairment loss was recorded in 1994 or 1993.
 (3)     Principally comprised of interest expense.

                                      II-3
<PAGE>
 
REVENUE

Total revenue decreased $758,000 or 1.6% in 1995, compared to an increase
of $889,000 or 2.0% in 1994.  Of the total revenue in 1995, 1994 and 1993,
rooms comprised 59.1%, 58.2% and 59.0%, respectively; food and beverage
comprised 25.8%, 26.6% and 25.8%, respectively, and other property operations
comprised 15.1%, 15.2% and 15.2%, respectively.

Rooms revenue is primarily a function of the Properties' occupancy levels
and room rates. Rooms revenue decreased $53,000 in 1995 due to a decrease in
occupancy from 77.9% to 77.6% offset by an increase in average room rates of
$.13.  Rooms revenue increased $170,000 in 1994 due to an increase in occupancy
from 76.6% to 77.9% offset in part by a decrease in average room rates of $.66.
Rooms revenue decreases in 1995 were primarily attributable to decreases at the
Sheraton Lakeside and Sheraton Inn Buffalo Airport.  The leisure market at
Sheraton Lakeside continued to be impacted by significant competitive
pressures, resulting from an increase in room supply in the Orlando area.  The
reduction in rooms revenue at Sheraton Buffalo was due to a decrease in
Canadian leisure activity resulting from declines in the value of the Canadian
dollar and loss of a substantial airline room contract.  The decreases in
Lakeside and Buffalo were mitigated by the impact of increases in rooms
revenue, due to increases in average rate, at Regal McCormick Ranch, Sheraton
University Center and Aurora Inn.  Rooms revenue increases in 1994 were
primarily attributable to increased sales to group and contract customers at
the Regal McCormick Ranch, Sheraton University Center and Sheraton Inn Buffalo
Airport.  The rooms revenue increases were offset in part by a decrease in
rooms revenue at the Sheraton Lakeside, which was impacted by the significant
competitive pressures in the leisure market.  These competitive pressures
combined with discounts offered to attract more group and contract business
resulted in the decreases in average room rates.

Food and beverage revenue decreased $541,000 or 4.4% in 1995 and increased
$610,000 or 5.2% in 1994. Food and beverage revenue is impacted by room
occupancy and the mix of room sales between leisure, group, contract and
business customers.  The primary reason for the decrease in 1995 was related to
increased competition from stand-alone restaurants in the area surrounding the
Regal McCormick, the smaller percentage contribution from the Canadian leisure
market maintained at the Sheraton Buffalo and a decrease in banquet activity at
both locations.  The primary increases in occupancy in 1994 were from group and
contract customers, which have a favorable impact on food and beverage revenue.

Other property operations consist of marina sales and rentals (at
Fourwinds), gift shops, food marts, lease income, phone charges and other
miscellaneous guest services.  Other property operations decreased $164,000 or
2.3% in 1995 and increased $109,000 or 1.6% in 1994.  The 1995 decrease in
other property operations was primarily due to storm damage at the Clarion
Fourwinds Resort, which impacted the "Marina-related" revenues.  The 1994
increase in other property operations was primarily due to the overall increase
in occupancy. 

While the hotel industry continues to be very competitive, the Properties,
as a group, have outperformed the industry when measuring revenue per available
room (occupancy percent times average room rate).  The Properties' revenue per
available room, as a group, was $46.23, $46.29 and $46.02 in 1995, 1994 and
1993, respectively.  Revenue per available room for the United States hotel
industry, accumulated by Smith Travel Research, was $44.11, $41.49 and $38.85
in 1995, 1994 and 1993, respectively.

                                      II-4
<PAGE>
 
COSTS AND OPERATING EXPENSES

Total operating expenses increased $4,994,000 or 12.2% in 1995.  This
increase is primarily attributable to the impairment of the Lakeside property
of $4,789,000, and an increase in other operating expenses of $196,000. 
Excluding the impairment of the Lakeside property, total operating costs
increased primarily as a result of increased food and beverage costs.  Food and
beverage costs as a percent of food and beverage revenue increased to 73.1% in
1995 from 71.4% in 1994.  The primary reason for the increase in this
percentage is a result of costs incurred for promotional campaigns and
marketing plans to reposition the restaurant at the Clarion Fourwinds Resort,
Aurora Inn and Regal McCormick Ranch.

Included in costs and operating expenses in 1995 is a loss for the
impairment of the Lakeside property in the amount of $4,789,000, recorded in
the fourth quarter of 1995.  The circumstances leading up to this impairment
loss were primarily a result of the existing and expected local market
conditions, a decreasing trend in the property's appraised value and historical
operating results in recent years.  This loss was recognized in accordance with
the provisions of Statement of Financial Accounting Standards No. 121,
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of (SFAS
No. 121), which was issued by the Financial Accounting Standards Board in March
1995 and adopted by the Partnership in the fourth quarter of 1995. The
Partnership believes that expected future cash flows from the operations of its
other hotel properties will be sufficient to recover their carrying values. The
Partnership has no current plans to sell any of its properties for less than
their carrying values.

Total operating expenses increased $1,323,000 or 3.3% in 1994.  This
increase is attributable to an increase in hotel operating expenses of
$1,062,000 and an increase in other operating expenses of $261,000.  Hotel
operating expenses increased in 1994 primarily as a result of overall increases
in occupancy and revenue.  The increase in other operating expenses in 1994 is
due to an increase of 6.9% in marketing expenses primarily as a result of
increases in franchise fee rates at two of the three Sheraton properties.  The
increase in other operating expenses in 1994 is due to a 6.0% increase in
depreciation and amortization from renovations completed in June 1993 on the
Sheraton Inn - Buffalo Airport and other capital additions.

Other expense increased $296,000 or 6.6% in 1995.  This change is
primarily attributable to an increase in interest expense of $191,000 due to
higher levels of debt, net of a $123,000 decrease in amortization of debt issue
costs.

Other income and expense remained relatively consistent in 1994 as
compared to 1993. Interest expense increased 3.7% in 1994 primarily as a result
of increases in the interest rate offset by decreases in the total indebtedness
level.  The increase in interest expense in 1994 was offset in part by a gain
of $105,000 recognized in 1994 on an insurance settlement.

                                      II-5
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

Net cash provided by operating activities was $3,143,000 in 1995, a
decrease of $2,425,000 from 1994.  This decrease is the result of a decrease in
cash received from customers, due to lower hotel revenues, of $1,132,000, an
increase of $1,013,000 in interest paid, and an increase in cash paid to
employees of $493,000, offset in part by decreases in cash paid to suppliers
and vendors of $172,000 and increases in other cash receipts of $41,000.

Net cash provided by operating activities was $5,568,000 in 1994, a
decrease of $273,000 from 1993.  This decrease is the result of an increase in
cash paid to suppliers and vendors for increased costs and expenses of
$2,096,000, offset in part by increases in cash received from customers for
increased hotel revenue of $1,403,000 and other cash receipts of $145,000 and
decreases in cash paid to employees of $186,000 and interest paid of $89,000.

Net cash used in investing activities increased $1,362,000 in 1995 due to
increases in capital expenditures and cash paid for other assets.  Net cash
used in investing activities decreased $450,000 in 1994 due to decreases in
capital expenditures and cash paid for other assets.

Net cash generated by financing activities increased $6,297,000 in 1995
primarily due to the closing of the new first mortgage loan.  Net cash used in
financing activities increased $1,667,000 in 1994, primarily due to increases
in principal payments on the Partnership's indebtedness.

The Partnership anticipates funding its 1996 debt service obligations, and
capital expenditures through a combination of operating cash flows and draws on
its line of credit, to handle seasonal demands, as necessary.  The Partnership
has capital improvements of approximately $3,700,000 planned in 1996.

INDEBTEDNESS

At December 31, 1995 the Partnership had a working capital deficit of
$2,452,000.  The Partnership's working capital requirements are expected to be
satisfied through the management of payables, collection of receivables, and
use of the Partnership's revolving credit line.

On June 8, 1995, the Partnership signed a credit agreement with a new
lender to provide a new $45,000,000 first mortgage loan and a $1,000,000
revolving credit line.  The proceeds of the $45,000,000 first mortgage loan
were used to pay off the existing mortgage loan and the note payable to bank
with the balance available for certain property renovations and the payment of
a facility fee and closing costs.  Regal Hotels International Holdings Limited
("RHL"), an affiliate of the general partner, has provided a limited guarantee
for the new first mortgage loan.  The Partnership paid a loan guarantee fee of
$230,000 to RHL.  This is an annual fee and is calculated as 0.5% of the
outstanding loan balance at June 8 of each year.

                                      II-6
<PAGE>
 
The new credit agreement includes a variety of interest rate options, the
most favorable of which at present is the Eurodollar Rate plus 2%, which was
7.75% at December 31, 1995.  Repayment of the new first mortgage loan is based
on a twenty-year amortization with a maturity date at June 2000, while the
revolving credit line is renewable annually at the option of the lender.

A condition of the credit agreement signed by the Partnership for the
first mortgage loan and revolving credit line required the subordination of the
$6,000,000 notes payable to AHS (the "Notes").  AHS has agreed to this
subordination, and as a result, on September 26, 1995, the Board of Directors
of AHS, in its capacity as General Partner, and the Advisory Committee of the
AHP authorized the extension of the term and deferral of certain past-due
interest on the Notes.

Pursuant to this extension, the Notes, which originally matured in January
1995 now become due on June 8, 2000, which is coterminous with the new mortgage
loan.  Interest accrued on the Notes after December 31, 1994, was paid at
closing.  Interest incurred subsequent to closing continues to be accrued at
12% per annum and is paid monthly.

The unpaid interest on the Notes accrued prior to January 1, 1995, in the
amount of $2,100,000, was converted into debt pursuant to a new promissory note
("New Note") which will also mature on June 8, 2000.  The New Note accrues
interest at the rate of 12% per annum, payable at maturity.

The Notes and New Notes are convertible into Class A Units of the
Partnership at $16.60 per unit.  In addition, these notes stipulate that 25% of
any excess cashflow, as defined, will be applied against the principal portion
of the notes outstanding.

The new first mortgage loan contains numerous covenants requiring, among
other matters, the maintenance of a minimum debt service coverage ratio
including the deferral of management fees payable to an affiliate if this
minimum debt service ratio is not achieved, restrictions on additional
indebtedness, limitations on annual cash distributions to Class A Unitholders,
limitations on the payment of principal on the affiliate notes payable,
prepayment premiums during the first two years, and maintenance of minimum
aggregate capital expenditures (4% of revenues in 1995 and 5% of revenues
thereafter.)

PARTNERSHIP DISTRIBUTIONS AND UNIT CONVERSIONS

The Partnership Agreement provides for periodic distribution of
distributable cash flow, as defined, to the partners subject to any applicable
restrictions and the discretion of the General Partner.  Distributable cash
flow is generally defined as cash flow from operations of the hotel properties.
Such cash is allocated and distributed (net of AHS's 1% general partnership
interest in the Operating Partnerships) 99% to the Class A Unitholders and 1%
to the General Partner until the Class A Unitholders have received defined
Minimum Annual Distributions. The Minimum Annual Distribution is $2.16 per
Class A Unit.  Any portion of the Minimum Annual Distribution that is not paid
by the Partnership in any year is added to the cumulative unpaid Minimum Annual
Distribution.  The Partnership has not made any distributions since 1990. 
Prior to making future distributions, the Partnership will comply with its
capital expenditure requirements as specified in its mortgage loan agreement
and maintain sufficient working capital balances.  At December 31, 1995, the
cumulative unpaid Minimum Annual Distribution per Class A Unit significantly
exceeds the Partnership's net asset value per unit based on the appraised
values of the hotel properties.  At this time it is uncertain whether there
will be any excess cash flow to be available for distribution to the Class A
unitholders in 1996.

                                     II-7
<PAGE>
 
The Class B Units entitle each Unitholder to a limited partnership
interest which is subordinated to the Class A Units.  The Class B Units are
redeemable or convertible in certain circumstances.  The Class B Units do not
receive distributions until the Class A Unitholders receive Minimum Annual
Distributions which have not been made by the Partnership since 1990.  Through
1996, the Class B Units are convertible into Class A Units only to the extent
that distributable cash flow of the Partnership in the previous year would have
been sufficient to pay Minimum Annual Distributions for the Class A Units,
including the Class B Units to be converted.  The Partnership does not expect
any Class B Units to be converted in 1996. Beginning in 1997, during the 30-day
period following the release of the Partnership's annual audited financial
statements, and each year thereafter through 2001, a minimum of 250,000 Class B
Units are required to be converted at a redemption value of $20.00 per Class B
Unit, by issuing Class A Units valued at the then current market price of a
Class A Unit. Therefore, the number of Class A Units to be issued upon the
conversion of a Class B Unit will be determined at the time of conversion by
dividing $20.00 by the then current market price of a Class A Unit. Current
market price for this calculation is the average market price for a Class A Unit
during the last five days prior to conversion.

Based on current market prices of the Class A Units, such required
conversion is expected to result in substantial dilution to the preconversion
Class A Unitholders.  For example, based on the average closing month end
market price of Class A Units during 1995 of approximately  $2.58, the 
conversion  of  250,000  Class  B Units  in the first  year of the required
conversion period would result in an approximate 27% dilution to the Class A
Unitholders upon conversion.  The conversion of all 950,000 Class B Units would
result in an approximate 58% dilution to the preconversion Class A Unitholders
at the $2.58 per unit market price.  In addition, using the same per unit
market price for a Class A Unit of $2.58, affiliate ownership of Class A Units
would increase to approximately 79% and 88% upon conversion of the first
250,000 Class B Units and conversion of all 950,000 Class B Units,
respectively.  Changes in the market price of Class A Units do not result in
proportional changes in dilution.  The market price of the Partnership's Class
A Units is subject to fluctuations and there is no assurance that such prices
upon conversion will approximate the average per unit market price in 1995.

Pursuant to the Partnership Agreement, the Class A Units to be issued upon
conversion of the Class B Units must be identical to the Class A Units existing
prior to the conversion date. If the General Partner determines, based on advice
of counsel, that no reasonable allowable convention or other method is available
to preserve the uniformity of the intrinsic tax characteristics of any
specifically identifiable group of units, such units will be separately
identified, to the extent practicable, as distinct classes to reflect intrinsic
tax differences, regardless of any such non-uniformity.

PROPERTY VALUES

The appraised value of the Properties is $82,875,000 at December 31, 1995,
which exceeds their carrying values of $62,755,000.  In accordance with
Statement on Financial Accounting Standards on Accounting for the Impairment of
Long-Lived Assets, which was issued in 1995, the Partnership has recognized an
impairment on the Lakeside property.  The Partnership has no current plans to
sell any of its properties for less than their carrying values.

                                      II-8
<PAGE>
 
        INCOME TAXES

        In accordance with the Revenue Act of 1987, the Partnership will become
        a taxable entity in 1998. As a result, the income of the Partnership
        will be taxable as a corporation and distributions from the Partnership
        will continue to be taxable to the individual partners. The Partnership
        anticipates that it will have an excess of tax basis over book basis of
        the hotel properties at January 1, 1998 of approximately $2,600,000,
        which will result in tax deductions in 1998 and later years. Therefore,
        the Partnership does not expect that the impact on net income in 1998
        from becoming a taxable entity will be significant. The Partnership is
        continuing to evaluate various alternatives to minimize the impact on
        the Partnership as a result of these changes in tax laws.

        INFLATION

        The rate of inflation as measured by changes in the average consumer
        price index has not had a material impact on the revenue or net income
        of the Partnership in the three most recent years.

        OTHER MATTERS

        Management of the Partnership, the Board of Directors of the General
        Partner and the Advisory Committee are seeking to increase the value of
        the Partnership for all of its Unitholders. Management has been
        evaluating and will continue to evaluate different strategies for
        maximizing Unitholder value including; (i) continued ownership and
        operation of the properties, (ii) liquidation, sale or other similar
        transactions, (iii) sales of one or more of the Partnership's properties
        in response to exceptional offers, and (iv) combining the Partnership or
        its assets with other hotel-owning entities.

        During 1995, the General Partner has received suggestions from certain
        Class A Unitholders regarding; (i) the reconfiguration of the
        Partnership as a real estate investment trust ("REIT"), (ii) a
        reorganization of the Partnership involving the redemption of the
        interests of the General Partner and its affiliates (the "Majority
        Unitholders") and (iii) sales of one or more of the Partnership's
        properties. The suggestions made concerning the reconfiguration of the
        Partnership as a REIT and the reorganization transaction were each
        rejected by the Partnership because they each called for the Majority
        Unitholders to surrender substantial economic entitlements in the
        Partnership without adequate compensation. The Partnership also rejected
        an offer to sell the Durham property for approximately three-quarters of
        its present appraised value.

        Unless and until such time as management identifies one or more
        preferable strategic alternatives the Partnership intends to pursue its
        current strategy of owning and operating its existing portfolio of
        properties.

Item 8. Financial Statements and Supplementary Data
------- -------------------------------------------

        The financial statements of AHP are filed under this Item, beginning on
        Page II-10. The financial statement schedules required under Regulation
        S-X are filed pursuant to Item 14 of this report.

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

        None.

                                      II-9
<PAGE>
 
                         INDEPENDENT AUDITORS' REPORT
                         ----------------------------

THE PARTNERS
AIRCOA HOTEL PARTNERS, L.P.:


We have audited the accompanying consolidated balance sheets of AIRCOA Hotel
Partners, L.P. and subsidiary operating partnerships as of December 31, 1995
and 1994, and the related consolidated statements of operations, partners'
capital and cash flows for each of the years in the three year period ended
December 31, 1995.  These consolidated financial statements are the
responsibility of the Partnership's management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AIRCOA
Hotel Partners, L.P. and subsidiary operating partnerships as of December 31,
1995 and 1994, and the results of their operations and their cash flows for
each of the years in the three year period ended December 31, 1995, in
conformity with generally accepted accounting principles.


                                KPMG PEAT MARWICK LLP


Denver, Colorado
February 23, 1996

                                     II-10
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1995 AND 1994

(IN THOUSANDS)
        

<TABLE> 
<CAPTION> 

--------------------------------------------------------------------------------
ASSETS                                                   1995            1994
------                                                 --------         -------
<S>                                                    <C>              <C> 

Current assets:
  Cash and cash equivalents                            $  2,116           1,261
  Accounts receivable:
    Trade                                                 2,479           2,555
    Affiliates                                              143              43
  Inventory                                                 339             401
  Prepaid expenses                                          482             498
                                                       --------         -------

      Total current assets                                5,559           4,758
                                                       --------         -------

Property and equipment, at cost:
  Land and leasehold improvements                         8,914           8,767
  Buildings and leasehold improvements                   66,838          70,109
  Furniture, fixtures and equipment                      18,332          16,304
  Construction in progress                                  -               407
                                                       --------         -------
                                                         94,084          95,587
Less accumulated depreciation and amortization          (31,329)        (27,234)
                                                       --------         -------

      Net property and equipment                         62,755          68,353

Other assets, including debt issue costs, net 
 of accumulated amortization of $237 in 1995 
 and $212 in 1994                                         1,092             431
                                                       --------         -------

                                                       $ 69,406          73,542
                                                       ========         =======

                                                                     (Continued)
</TABLE> 

                                     II-11
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

CONSOLIDATED BALANCE SHEETS, CONTINUED
        
<TABLE> 
<CAPTION> 

--------------------------------------------------------------------------------

LIABILITIES AND PARTNERS' CAPITAL                           1995         1994
---------------------------------                         --------     --------
<S>                                                       <C>          <C> 
Current liabilities:
  Current installments of long-term debt                  $  1,080       2,185
  Trade accounts payable                                     1,683       1,634
  Payables to affiliates:
    Trade accounts                                             715         444
    Interest                                                   -         2,100
  Accrued liabilities:
    Payroll                                                    217         327
    Taxes, other than income taxes                             473         982
    Other                                                    1,848       2,450
  Deferred revenue and advance deposits                      1,995       1,814
                                                          --------     --------

        Total current liabilities                            8,011      11,936

Long-term debt, excluding current installments              43,290      40,180

Notes payable to affiliates                                  8,100       6,000

Accrued administration and management fees
 payable to affiliate                                          253         253
                                                          --------     --------

        Total liabilities                                   59,654      58,369

Partners' capital:
  General partner                                              236         376
  Limited partners:
    Class A Unitholders                                     13,603      21,605
    Class B Unitholders (deficit)                           (4,087)     (6,808)
                                                          --------     --------

        Total partners' capital                              9,752      15,173
                                                          --------     --------

Commitments and contingencies

                                                          $ 69,406      73,542
                                                          ========     ========
</TABLE> 

See accompanying notes to consolidated financial statements.

                                     II-12
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

(IN THOUSANDS, EXCEPT UNIT DATA)
        
--------------------------------------------------------------------------------
<TABLE> 
<CAPTION> 

                                              1995         1994         1993
                                          -----------  -----------  -----------
<S>                                        <C>          <C>          <C> 
Revenue:
  Rooms                                   $    26,810       26,863       26,693
  Food and beverage                            11,733       12,274       11,664
  Other property operations                     6,856        7,020        6,911
                                          -----------  -----------  -----------
                                               45,399       46,157       45,268
                                          -----------  -----------  -----------
Costs and operating expenses:
  Rooms                                         7,366        7,242        7,189
  Food and beverage                             8,577        8,769        8,186
  Other property operations                     3,046        3,325        3,206
  Administrative and general                    4,954        4,793        4,823
  Marketing                                     3,944        4,025        3,764
  Energy                                        2,365        2,307        2,234
  Property maintenance                          2,348        2,255        2,127
  Rent, taxes and insurance                     2,743        2,540        2,674
  Management fees                               1,802        1,835        1,788
  Depreciation and amortization                 4,095        3,944        3,721
  Impairment of property                        4,789           -            -
                                          -----------  -----------  -----------
                                               46,029       41,035       39,712
                                          -----------  -----------  -----------

        Operating income (loss)                  (630)       5,122        5,556
                                          -----------  -----------  -----------

Other income (expenses):
  Interest expense, including amortization
   of debt issue costs of $348 in 1995,
   $471 in 1994, and $458 in 1993              (4,791)      (4,600)      (4,436)
  Gain on insurance settlements                   -            105          -
                                          -----------  -----------  -----------
                                               (4,791)      (4,495)      (4,436)
                                          -----------  -----------  -----------

Net income (loss)                         $    (5,421)         627        1,120
                                          ===========  ===========  ===========


Income (loss) per limited partnership 
 unit:
  Class A Unitholders                     $     (1.50)        (.10)        (.02)
                                          ===========  ===========  ===========

  Weighted average number of units 
   outstanding                              5,340,214    5,340,214    5,340,214
                                          ===========  ===========  ===========

  Class B Unitholders                     $      2.86         1.25         1.27
                                          ===========  ===========  ===========

  Weighted average number of units 
   outstanding                                950,000      950,000      950,000
                                          ===========  ===========  ===========
</TABLE> 

See accompanying notes to consolidated financial statements.

                                     II-13
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL

YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

(IN THOUSANDS, EXCEPT UNIT DATA)
        
--------------------------------------------------------------------------------
<TABLE> 
<CAPTION> 

                                                                    Limited Partners' Capital (Deficit)   
                                                                ----------------------------------------- 
                                                                Class A Unitholders   Class B Unitholders      Total  
                                                    General     -------------------   -------------------    partners' 
                                                    partner      Units      Capital   Units       Capital     capital
                                                 -----------    --------- ---------   --------- ---------   -----------
<S>                                              <C>            <C>       <C>         <C>       <C>         <C> 
BALANCES AT DECEMBER 31, 1992                      $  365       5,340,214    22,249    950,000     (9,188)    13,426

Net income (loss)                                      10           -           (92)      -         1,202      1,120
                                                 -----------    --------- ---------   --------- ---------   -----------
BALANCES AT DECEMBER 31, 1993                         375       5,340,214    22,157    950,000     (7,986)    14,546

Net income (loss)                                       1           -          (552)      -         1,178        627
                                                 -----------    --------- ---------   --------- ---------   -----------
BALANCES AT DECEMBER 31, 1994                         376       5,340,214    21,605    950,000     (6,808)    15,173

Net income (loss)                                    (140)          -        (8,002)      -         2,721     (5,421)
                                                 -----------    --------- ---------   --------- ---------   -----------
BALANCES AT DECEMBER 31, 1995                      $ 236        5,340,214    13,603    950,000     (4,087)     9,752
                                                 ===========    ========= =========   ========= =========   ===========
</TABLE> 

See accompanying notes to consolidated finanical statements.

                                     II-14
<PAGE>

 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

(IN THOUSANDS)
        
--------------------------------------------------------------------------------
<TABLE> 
<CAPTION> 

                                               1995           1994       1993
                                             --------       --------   --------
<S>                                          <C>            <C>        <C> 
Cash flows from operating activities:
  Cash received from customers               $ 43,460         44,592     43,189
  Cash paid to suppliers and vendors          (25,054)       (25,226)   (23,130)
  Cash paid to employees                      (12,916)       (12,423)   (12,609)
  Interest paid                                (4,443)        (3,430)    (3,519)
  Other cash receipts                           2,096          2,055      1,910
                                             --------       --------   --------

     Net cash provided by operating                        
      activities                                3,143          5,568      5,841
                                             --------       --------   --------

Cash flows from investing activities:
  Capital expenditures                         (3,286)        (2,049)    (2,353)
  Proceeds from insurance for damaged 
   property and equipment                         -              105        236
  Payments for other assets                       (20)           -         (277)
                                             --------       --------   --------

     Net cash used in investing activities     (3,306)        (1,944)    (2,394)
                                             --------       --------   --------

Cash flows from financing activities:
  Proceeds from refinancing                    45,000            -          -  
  Principal payments on long-term debt        (42,995)        (4,950)    (3,325)
  Refinancing costs and other                    (987)          (329)      (342)
  Proceeds from sale of Class A Units             -              -           55
                                             --------       --------   --------

      Net cash provided by (used in)
       financing activities                     1,018         (5,279)    (3,612)
                                             --------       --------   --------

      Increase (decrease) in cash
       and cash equivalents                       855         (1,655)      (165)

Cash and cash equivalents, beginning of year    1,261          2,916      3,081
                                             --------       --------   --------

Cash and cash equivalents, end of year       $  2,116          1,261      2,916
                                             ========       ========   ========
</TABLE> 
                                                                     (Continued)

                                     II-15
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
        
--------------------------------------------------------------------------------
<TABLE> 
<CAPTION> 

                                                1995          1994       1993
                                              --------      --------   --------
<S>                                           <C>           <C>        <C> 
Reconciliation of net income (loss) to 
 net cash provided by operating
 activities:
  Net income (loss)                           $ (5,421)         627       1,120
  Adjustments to reconcile net income 
   to net cash provided by operating 
   activities:
    Depreciation and amortization                4,095        3,944       3,721
    Impairment of property                       4,789          -           -  
    Amortization of debt issue costs               348          471         458
    Gain on insurance settlements                  -           (105)        -
    Decrease (increase) in accounts          
     receivable relating to operations             (24)         284        (328)
    Decrease (increase) in inventory                62          (25)        (74)
    Decrease (increase) in prepaid expenses         16         (124)        (41)
    Increase (decrease) in trade accounts             
     payable, payables to affiliates, accrued
     liabilities, accrued administration and
     management fees payable to affiliate        
     relating to operations                       (903)         290         826
    Increase in deferred revenue and
     advance deposits                              181          206         159
                                              --------      --------   --------

       Net cash provided by operating 
        activities                            $  3,143        5,568       5,841
                                              ========      ========   ========
</TABLE> 

See accompanying notes to consolidated financial statements.

                                     II-16
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995 AND 1994
------------------------------------------------------------------------------  
(1)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        BASIS OF PRESENTATION

        AIRCOA Hotel Partners, L.P. (the "Partnership") is a publicly traded
        limited partnership formed to acquire, own and operate hotel properties.
        The Partnership holds a 99% limited partner interest in six limited
        partnerships (the "Operating Partnerships"). Each of the Operating
        Partnerships owns and operates a hotel and resort property (the
        "Properties"). AIRCOA Hospitality Services, Inc. ("AHS"), a wholly-owned
        subsidiary of Richfield Hospitality Services, Inc. ("Richfield") holds a
        1% General Partner interest in the Partnership and in each of the
        Operating Partnerships.

        PRINCIPLES OF CONSOLIDATION

        The accompanying consolidated financial statements include the accounts
        of the Partnership and the accounts of each of the Operating
        Partnerships. All significant interpartnership accounts and transactions
        have been eliminated.

        CASH AND CASH EQUIVALENTS

        Cash equivalents, representing money market accounts, overnight
        Eurodollar deposits and repurchase agreements, were $1,965,000 and
        $739,000 at December 31, 1995 and 1994, respectively. For purposes of
        the consolidated statements of cash flows, the Partnership considers all
        highly liquid investments with original maturities of three months or
        less to be cash equivalents.

        Included in cash and cash equivalents at December 31, 1995 is
        approximately $1,100,000 designated for use on hotel renovations and
        other costs directly related to the hotel properties. These funds are
        expected to be used for such expenditures prior to December 31, 1996.

        FINANCIAL INSTRUMENTS

        In 1995, the Partnership adopted the provisions of Statement of
        Financial Accounting Standards No. 107, Disclosures About Fair Value of
        Financial Instruments (SFAS No. 107). The carrying amounts of the
        Partnership's financial instruments, including cash and cash
        equivalents, accounts receivable, trade accounts payable, payables to
        affiliates and accrued liabilities, approximate fair value primarily
        because of the short maturities of those instruments. The fair value of
        the Partnership's long-term debt and notes payable to affiliates
        approximate their carrying values based on borrowing rates currently
        available to the Partnership for loans with similar terms.

                                     II-17
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
--------------------------------------------------------------------------------
(1)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        OPERATING ASSETS

        The Partnership uses an inventory method of accounting for china,
        glassware, silver, linen, and uniforms. Under the inventory method,
        operating assets are stated at amounts based upon the physical quantity
        of such assets on hand using average costs, less a valuation allowance
        to reflect deterioration from use.

        PROPERTY AND EQUIPMENT

        Property and equipment are stated at cost. Hotel property renovations
        and improvements are capitalized. Repairs, maintenance, and minor
        refurbishments are charged to expense as incurred. Interest incurred
        during construction of facilities or major renovations is capitalized
        and amortized over the life of the related assets. Interest of $43,000
        was capitalized in 1993. No interest was capitalized in 1995 or 1994.
        Upon the retirement or sale of property and equipment, the cost and
        related accumulated depreciation are removed from the respective
        accounts, and the resulting gain or loss, if any, is included in
        operations.

        Property and equipment held under leaseholds is amortized over the
        shorter of the lease term or the estimated useful life of the asset.

        Depreciation and amortization are calculated using the straight-line
        method over the estimated useful lives of the assets, generally as
        follows:

             Land improvements and leasehold improvements    15 years

             Buildings and leasehold improvements            30 years

             Furniture, fixtures and equipment               10 years


        The Partnership assesses the carrying value of its hotel properties for
        impairment when circumstances indicate such amounts may not be
        recoverable from future operations. In the fourth quarter of 1995, the
        Partnership adopted the provisions of Statement of Financial Accounting
        Standards No. 121, Accounting for the Impairment of Long-Lived Assets
        and Long-Lived Assets to be Disposed Of (SFAS No. 121). SFAS No. 121,
        which was issued by the Financial Accounting Standards Board in March
        1995, establishes recognition and measurement standards for the
        impairment of long-lived assets expected to be held and used and long-
        lived assets to be disposed. Generally, assets to be held and used in
        operations are considered impaired if the sum of expected future cash
        flows is less than the assets' carrying amount. If an impairment is
        indicated, the loss is measured based on the amount by which the assets'
        carrying value exceeds its fair value. Assets to be disposed of are
        reported at the lower of their carrying value or fair value less
        estimated selling costs. Prior to the adoption of SFAS No. 121, the
        Partnership assessed impairment based on the expected future cash flows
        from operations of its hotel properties.

                                     II-18
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
--------------------------------------------------------------------------------
(1)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        OTHER ASSETS

        Other assets consist principally of debt issue costs, franchise license
        costs, and liquor license costs. Debt issue and franchise license costs
        are amortized using the straight-line method over the term of the
        respective debt or license agreements.

        DEFERRED REVENUE AND ADVANCE DEPOSITS

        Deferred revenue for facility rentals and advance room deposits is
        recognized as revenue when services are provided.

        INCOME TAXES

        No current provision or benefit for income taxes is included in the
        accompanying consolidated financial statements since the taxable income
        or loss of the Partnership is included in the tax returns of the
        individual partners of the Partnership.
        
        Current federal income tax regulations will subject the Partnership to
        corporate taxation beginning in 1998. Accordingly, the Partnership
        utilizes an asset and liability method of accounting for deferred income
        taxes. Under the asset and liability method, deferred income taxes are
        recognized for the future tax consequences attributable to differences
        between the financial statement carrying amounts of existing assets and
        liabilities and their respective tax basis expected to be recovered or
        settled subsequent to 1997. Deferred tax assets and liabilities are
        measured using enacted tax rates expected to apply to taxable income in
        the years such temporary differences are expected to be recovered or
        settled. The effect on deferred taxes of a change in tax rates will be
        recognized in operations in the period of the enactment date.

        NET INCOME (LOSS) PER UNIT

        Net income (loss) per limited partnership unit is computed by dividing
        the net income (loss) attributable to each class of units by the
        weighted average number of units outstanding in each class during the
        period. Because of the loss attributable to A Unitholders in 1995, 1994
        and 1993, Class A Units issuable upon conversion of notes payable (see
        Note 5) and upon conversion of the Class B Units (see Note 2) were not
        considered in the computation, as such conversions would be anti-
        dilutive.

        RISKS AND UNCERTAINTIES

        The preparation of the Partnership's consolidated financial statements
        in conformity with generally accepted accounting principles necessarily
        requires management to make estimates and assumptions that affect the
        reported amounts of assets and liabilities and disclosure of contingent
        assets and liabilities at the balance sheet dates and the reported
        amounts of revenues and expenses during the reported periods. Actual
        results could differ from those estimates.

                                     II-19
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
--------------------------------------------------------------------------------
(1)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        Certain of the Properties have agreements with various customers,
        including airline carriers and tour groups that require the Properties
        to provide rooms at specified rates. The loss of such agreements and
        customers could adversely impact revenue.

        RECLASSIFICATIONS

        Certain amounts in the 1994 and 1993 consolidated financial statements
        have been reclassified to conform to the 1995 presentation.

(2)     PARTNERSHIP UNITS AND ALLOCATIONS

        LIMITED PARTNERSHIP UNITS

        The Class A Units entitle each Unitholder to a limited partnership
        interest in a percentage of the profits and losses, tax allocations, and
        distributions of the Partnership, as described below.

        The Class B Units entitle each Unitholder to a limited partnership
        interest which is subordinate to the Class A Units. The Class B Units
        are redeemable by the Partnership or convertible into Class A Units, in
        certain circumstances. The Class B Units do not receive distributions
        until the Class A Unitholders receive defined Minimum Annual
        Distributions. Through 1996 the Class B Units are convertible into Class
        A Units to the extent that distributable cash flow of the Partnership in
        the previous year would have been sufficient to pay Minimum Annual
        Distributions for the Class A Units, including the Class B Units to be
        converted. Beginning in 1997, during the 30-day period following the
        release of the Partnership's annual audited financial statements, and
        each year thereafter through 2001, a minimum of 250,000 Class B Units
        are required to be converted into Class A Units annually through 2001 at
        a redemption value of $20.00 per Class B Unit, by issuing Class A Units
        valued at the then current market price of the Class A Units. Therefore,
        the number of Class A Units to be issued upon conversion of a Class B
        Unit will be determined at the time of conversion by dividing $20.00 by
        the then current market price of a Class A Unit.

        CASH DISTRIBUTIONS

        The Partnership agreement provides for periodic distribution of
        distributable cash flow, as defined, to the partners at the discretion
        of the General Partner. Distributable cash flow is generally defined as
        cash flow from operations of the hotel properties. Such cash is
        allocated and distributed (net of AHS' 1% general partnership interest
        in the Operating Partnerships) 99% to the Class A Unitholders and 1% to
        the General Partner until the Class A Unitholders have received defined
        Minimum Annual Distributions. The Minimum Annual Distribution is
        presently $2.16 per Class A Unit. After payment of the Minimum Annual
        Distribution, additional cash distributions, if any, will be allocated
        49.5% to the Class A Unitholders, 49.5% to the Class B Unitholders and
        1% to the General Partner.

                                     II-20
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
--------------------------------------------------------------------------------
(2)     PARTNERSHIP UNITS AND ALLOCATIONS (CONTINUED)

        CASH DISTRIBUTIONS (CONTINUED)

        Capital transaction proceeds generally consist of net proceeds from
        sales and refinancing of the Partnership's hotel properties. Cash from
        capital transaction proceeds is allocated and distributed 99% to the
        Class A Unitholders and 1% to the General Partner until the Class A
        Unitholders have received any previously unpaid Minimum Annual
        Distributions, and the unrecovered capital preference amount, as
        defined. Capital transaction proceeds are then allocated and distributed
        99% to the Class B Unitholders and 1% to the General Partner until all
        the Class B Units have been redeemed. Subsequent to the redemption of
        the Class B Units, capital transaction proceeds are allocated and
        distributed 75% to the Class A Unitholders and 25% to the General
        Partner. The unrecovered capital preference amount of a Class A and a
        Class B Unit at December 31, 1995 is $16.60 and $20.00, respectively.

        The Minimum Annual Distribution amount attributable to Class A
        Unitholders and the Class B Unitholders sharing percentage in
        distributable cash flow are reduced proportionately based upon
        distributions of capital transaction proceeds.

        The Partnership has not made any distributions since 1990. At December
        31, 1995, the cumulative unpaid Minimum Annual Distribution per Class A
        Unit significantly exceeds the Partnership's net asset value per unit
        based on the appraised values of the hotel properties.

        ALLOCATION OF INCOME AND LOSSES

        Partnership income and losses are allocated among the partners in
        accordance with federal income tax provisions based upon the partners
        ownership interests, adjusted to reflect original contribution values
        agreed upon by the partners and other basis differences at the inception
        of the Partnership. Income and losses are allocated among individual
        units on a pro rata basis within each class of units. For financial
        reporting purposes, the net income or loss of the Partnership is
        generally allocated in accordance with the income tax allocation
        provisions described above. In accordance with the Partnership
        agreement, deductions of approximately $3,056,000, $1,148,000 and
        $1,148,000 in 1995, 1994 and 1993, respectively, were transferred in the
        allocation of income (loss) from the Class B Units to the Class A Units
        and General Partner. In 1995, such allocation includes the impact from
        the impairment of the Lakeside property (see Note 3).

(3)     HOTEL PROPERTY VALUATIONS

        The Partnership periodically evaluates the carrying value of its hotel
        properties for impairment. These evaluations are based upon management's
        estimate of future operating results considering recent performance and
        existing and expected local market conditions. Based on these
        evaluations, the Partnership recognized an impairment of approximately
        $4,789,000 relating to the Lakeside property in 1995. The loss was
        determined based on the excess of the hotel property's carrying value
        over its fair value at December 31, 1995. The fair value of the hotel
        property was determined through a third-party appraisal obtained in
        January 1996. The impairment loss is included in costs and operating
        expenses in the accompanying consolidated statements of operations.

                                     II-21
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
--------------------------------------------------------------------------------
        The Partnership believes that the expected future cash flows from the
        operations of its other hotel properties will be sufficient to recover
        their carrying values. The Partnership has no current plans to sell any
        of its properties for less than their carrying values.

(4)     LONG-TERM dEBT

        On June 8, 1995, the Partnership signed a credit agreement with a new
        lender which provided a $45,000,000 first mortgage loan and a $1,000,000
        revolving credit line. The proceeds of the $45,000,000 first mortgage
        loan were used to refinance, on a long-term basis, the Partnership's
        existing mortgage loan in the amount of $38,950,000 and the note payable
        to bank of $1,790,000 which were due July 31, 1995 and October 31, 1995,
        respectively, and to provide approximately $3,000,000 to fund hotel
        property renovations. The balance of the funds were used for the payment
        of a facility fee and closing costs.

        The first mortgage loan interest rate at December 31, 1995 of 7.75% was
        based on the current Eurodollar rate plus 2%. Repayment of the first
        mortgage loan is based on a twenty-year amortization with a final
        maturity date in June 2000. Payments under this loan consist of monthly
        installments of $90,000 plus interest on the unpaid balance. The
        revolving credit line is renewable annually at the option of the lender.
        No amounts have been drawn on the line at December 31, 1995.

        Long-term debt is summarized as follows (in thousands):


                                                  December 31,        
                                              -------------------
                                                1995       1994
                                              --------    -------

            Mortgage loan                     $ 44,370    40,450
            Note payable to bank                   -       1,915
                                              --------    -------
                                                44,370    42,365
            Less current installments            1,080     2,185
                                              --------    -------
            Long-term debt, excluding current
             installments                     $ 43,290    40,180
                                              ========    =======


        The first mortgage loan and revolving credit line contain various
        convenants including: minimum debt service ratios, restrictions on
        additional indebtedness, limitations on annual cash distributions to
        Class A Unitholders, limitations on the payment of principal on the
        affiliate notes payable, prepayment premiums during the first two years,
        deferral of management fees payable to Richfield if minimum debt service
        ratios are not achieved, maintenance of a capital expenditure reserve
        account equal to 4% of gross revenue in 1995 and 5% thereafter, and a
        maximum loan-to-value ratio of 65% based on the aggregate appraised
        values of the Properties. The Partnership is in compliance with these
        covenants for the year ended December 31, 1995. The first mortgage loan
        and revolving credit line are subject to certain limited guarantees of
        an affiliate of the General Partner. The first mortgage loan also
        requires Bank approval of any dilution in the present ownership
        interests of affiliates of the General Partner in the Partnership.

                                     II-22
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
--------------------------------------------------------------------------------
(4)     LONG-TERM DEBT (CONTINUED)

        In accordance with the Partnership Agreement, the General Partner
        received a 1% financing fee, reduced by the amount of the financing fee
        paid to the lender, for arranging the refinancing of the Partnership's
        indebtedness. In addition, the Partnership has paid/will pay an annual
        guarantee fee calculated as .5% of the outstanding loan balance at June
        8 of each year to an affiliate of the General Partner for the limited
        guarantee of the first mortgage loan and the revolving credit line.

        Maturities of long-term debt are summarized as follows (in thousands):

             Year ending December 31,

                     1996                  $  1,080
                     1997                     1,080
                     1998                     1,080
                     1999                     1,080
                     2000                    40,050
                                           --------
                                           $ 44,370
                                           ========

(5)     NOTES PAYABLE TO AFFILIATES

        A condition of the credit agreement signed by the Partnership for the
        first mortgage loan and revolving credit line required the subordination
        of the $6,000,000 notes payable to AHS (the "Notes"), AHS has agreed to
        this subordination, and as a result, on September 26, 1995 the Board of
        Directors of AHS, in its capacity as General Partner, and the Advisory
        Committee of AHP authorized the extension of the term and deferral of
        certain past-due interest on the Notes.

        Pursuant to this extension, the Notes, which originally matured in
        January 1995, are due on June 8, 2000, which is coterminous with the new
        mortgage loan. The unpaid interest on the Notes accrued prior to January
        1, 1995, in the amount of $2,100,000 were converted into a new
        promissory note ("New Note") which also matures on June 8, 2000. The New
        Note accrues interest at the rate of 12% per annum and is payable at
        maturity. Interest accrued on the Notes after December 31, 1994, was
        paid at closing. Interest incurred on the Notes subsequent to closing
        continues to be accrued at 12% per annum and is paid monthly. These
        notes are convertible into Class A Units of the Partnership at $16.60
        per unit. In addition, these notes stipulate that 25% of any excess
        cashflow, as defined in the new mortgage loan, will be applied against
        the principal of the notes outstanding.

(6)     INCOME TAXES

        The Partnership's only significant temporary difference (which will
        result in tax deductions in 1998 and later years) is an excess of the
        tax basis over the book basis of the Properties of approximately
        $6,500,000 and $2,350,000 at December 31, 1995 and 1994, respectively.
        The Partnership's net deferred tax asset was approximately $2,600,000
        and $940,000 at December 31, 1995 and 1994, respectively. The
        Partnership has established a 100% valuation allowance on these net
        deferred tax assets. The change in the valuation allowance in 1995 was
        an increase of approximately $1,660,000.

                                     II-23
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
--------------------------------------------------------------------------------
(7)     RELATED PARTY TRANSACTIONS AND COMMITMENTS

        PARTNERSHIP ADMINISTRATION

        AHS, as General Partner, is responsible for managing the business and
        affairs of the Partnership and the Operating Partnerships. The General
        Partner is reimbursed monthly for all direct operating expenses incurred
        on behalf of the Partnership and Operating Partnerships. In addition,
        the General Partner receives an annual partnership administration fee
        equal to .25% of the independently appraised value of the hotel
        properties of the Partnership.

        MANAGEMENT AGREEMENTS

        Richfield operates the hotel properties for the Partnership in exchange
        for a management fee equal to 4% of annual gross revenue from the hotel
        properties. In addition, the hotel properties are obligated to reimburse
        Richfield for payroll, professional fees, and certain out-of-pocket
        expenses incurred by Richfield on their behalf. The management
        agreements expire in 2012 and can be terminated by the Partnership prior
        to expiration, in certain circumstances, by the payment of a fee equal
        to three times the management fee paid for the preceding 12 months.

        Richfield also provides data processing services and obtains various
        types of insurance coverage, on an aggregate basis, for the hotel
        properties which it owns or manages. Such data processing and insurance
        costs are charged to the hotel properties.

        LICENSE AGREEMENTS

        One of the hotel properties has a license agreement with an affiliate to
        operate as a Regal Hotel. The license agreement provides for a fee of 2%
        of total sales revenue, as defined, in 1995, increasing to 2.5% in 1996,
        and 3% thereafter and expires in 2012. The agreement can be terminated
        by the Partnership prior to expiration in certain circumstances, through
        payment of a termination fee.

        HOTEL PROPERTY ACQUISITIONS AND DISPOSITIONS AND PARTNERSHIP FINANCING

        The General Partner receives an acquisition fee equal to 1% of the
        purchase price of any hotel property acquired by the Partnership. Upon
        the sale of a hotel property, the General Partner receives either a
        disposition fee equal to 1% of the sales price of the hotel property, or
        a reasonable brokerage fee, based upon fees for comparable properties in
        the area, less the amount of any such brokerage fees paid to third
        parties. The General Partner receives a financing fee equal to 1% of the
        principal amount of any new Partnership loan, or refinancing of
        Partnership debt if the refinancing is completed with a lender other
        than the lender whose loan is being refinanced. Such fee is required to
        be reduced by the amount of the financing fee paid to the lender.

                                     II-24
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
--------------------------------------------------------------------------------
(7)     RELATED PARTY TRANSACTIONS AND COMMITMENTS (CONTINUED)

        OTHER ARRANGEMENTS

        The General Partner and its affiliates are paid development, purchasing,
        and design fees for services performed in connection with the renovation
        or expansion of the Partnership's hotel properties. In addition, an
        affiliate of AHS receives fees in connection with the bulk purchase of
        hotel furnishings, equipment, and supplies.

        The Partnership leases a private club and recreational facility from an
        affiliate of AHS, under an operating lease. The Partnership receives 90%
        to 100% of available cash flow from operation of the private club and
        recreational facility as lease income and management fees. The lease
        expires in 2052 and may be terminated by the Partnership earlier. The
        Partnership received lease income and management fees of $256,000,
        $330,000, and $328,000 pursuant to these arrangements in 1995, 1994, and
        1993, respectively.

        Subject to the terms of the lease agreement, an affiliate of the
        Partnership has an option to purchase 50 undeveloped acres from the
        private club for $10. The option is only exercisable if all the permits
        and consents from state and local authorities permit continued operation
        of the club after conveyance of the 50 acres to the affiliate. The
        affiliate pays a pro-rata share of the property taxes on the private
        club. The private club is located on a tract of land consisting of
        approximately 80 acres.

        The following amounts resulting from transactions with affiliates are
        included in the accompanying consolidated balance sheets (in thousands):


                                                      December 31    
                                               -----------------------
                                                  1995         1994
                                               ---------   -----------
        Fees and costs, included in property
          and equipment, net                    $ 1,123        1,028
                                               ==========   ==========
        General partner financing fee           $   144         - 
                                               ==========   ==========
        Guarantee fee                           $   115         -
                                               ==========   ==========
   

        The general partner financing fee and the guarantee fee have been
        capitalized and are included in other assets. The financing fee is being
        amortized over the life of the first mortgage loan, and the annual
        guarantee fee is being amortized over twelve months. Amortization of
        these in the amount of $131,000 is included in interest expense.

                                     II-25
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
--------------------------------------------------------------------------------
(7)     RELATED PARTY TRANSACTIONS AND COMMITMENTS (CONTINUED)

        The following amounts resulting from transactions with affiliates are
        included in the accompanying consolidated statements of operations (in
        thousands):


                                                  1995      1994      1993
                                                 ------- --------- ---------

           Partnership administration fees       $   209     222       186
                                                 ======= ========= =========
           Management fees                       $ 1,802   1,835     1,788
                                                 ======= ========= =========
           Allocated insurance expense           $ 1,411   1,505     1,502
                                                 ======= ========= =========
           Allocated data processing costs       $    80      45        45
                                                 ======= ========= =========
           Interest expense                      $   851     720       720 
                                                 ======= ========= =========
           Lease income                          $   256     330       328 
                                                 ======= ========= =========
           License fees                          $   174     132       114
                                                 ======= ========= =========


        In December 1992, the Partnership issued 850,000 Class A Units to
        affiliates of AHS for cash proceeds of $935,000, of which $55,000 was
        collected in January 1993.

(8)     COMMITMENTS AND CONTINGENCIES

        Under terms of the Clarion and ITT Sheraton franchises, the Partnership
        is committed to make annual payments for franchise and licensing fees
        and reservation services. The Clarion license agreement requires
        franchise fees equal to 3% of gross room revenue and expires in 2012.
        The ITT Sheraton license agreements require franchise fees equal to 6%
        of gross room revenue and expire in 2012. Total franchise fees on the
        Clarion and ITT Sheraton license agreements were $1,650,000, $1,677,000
        and $1,383,000 for 1995, 1994 and 1993, respectively.

        Three of the hotel properties are subject to noncancelable operating
        land leases which expire between 2000 and 2033. The leases generally
        require annual rental payments of a fixed amount, ranging from $10,000
        to $90,000, plus a contingent amount based upon a percentage of
        specified room revenue, food and beverage revenue, or gross revenue, as
        defined, ranging from 1% to 8%. The accompanying consolidated statements
        of operations include land rent expense of $799,000, $803,000, and
        $762,000, for 1995, 1994, and 1993, respectively.

        The Partnership has capital improvements of approximately $3,700,000
        planned for 1996.

        The Class A Units issuable upon conversion of notes payable and upon
        conversion of the Class B Units, and the Class A Units issued pursuant
        to the general partner's obligations regarding cash distributions have
        certain demand registration rights.

        During July of 1995, the Bloomington Clarion Fourwinds property
        experienced substantial damage to the dock areas due to severe weather.
        As of December 31, 1995, the Partnership has estimated the total cost of
        the damage to be approximately $742,000. The Partnership anticipates
        that these costs will be reimbursed under its insurance policies.

                                     II-26
<PAGE>
 
AIRCOA HOTEL PARTNERS, L.P.
AND SUBSIDIARY OPERATING PARTNERSHIPS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
--------------------------------------------------------------------------------
(8)     COMMITMENTS AND CONTINGENCIES (CONTINUED)

        The Partnership is involved in various claims and legal actions arising
        in the ordinary course of business. In the opinion of management, the
        ultimate disposition of these matters will not have a material effect on
        the consolidated financial statements of the Partnership.

                                     II-27
<PAGE>
 
                                   PART III

Item 10.        Directors and Executive Officers of the General Partner
--------        -------------------------------------------------------
                THE GENERAL PARTNER

                AHS is the General Partner of the Partnership and of each of the
                Operating Partnerships. From its formation in 1968 until
                November 1993, AHS was engaged in the management of hotel and
                resort properties. Richfield assumed the management contracts
                for the properties effective November 1993 as a part of the
                integration by Richfield of its hotel management subsidiaries,
                including AHS.

                DIRECTORS AND EXECUTIVE OFFICERS OF AHS

                The directors and executive officers of AHS are listed below.
                The Advisory Committee of AHP consists of one member of the AHS
                Board of Directors, Anthony Williams. The other members of the
                Advisory Committee include William Arthur and Frank Hughes who
                do not serve in any other capacity with Richfield or its
                affiliates. The functions of the AHP Advisory Committee include,
                among other things, review of the policies and practices of the
                Partnership and AHS regarding various matters as to which
                potential conflicts of interest may arise and review of certain
                acquisitions and dispositions of hotel properties by AHP. The
                officers of AHS devote such time and effort as is necessary for
                AHS to perform its duties as General Partner of the Partnership.
                Each of the directors of AHS are elected to a one-year term at
                the annual meeting of the shareholder of AHS.

                IDENTIFICATION OF DIRECTORS
<TABLE> 
<CAPTION> 
                Name and Year First                    Principal Occupation 
                Became a Director              Age     During the Past Five Years
                -------------------            ---     --------------------------
                <S>                            <C>     <C> 
                Daniel Bong Shu Yin, 1995       56      Daniel Bong has served as a Director for Century City International Holdings
                                                        Limited ("CCIHL"), a Bermuda corporation listed in Hong Kong and engaged in
                                                        property development and hotel ownership and management since 1989. He is
                                                        also a Director of the subsidiary corporations of CCIHL, Paliburg
                                                        International Holdings Limited ("PIHL") and Deputy Chairman of Regal Hotels
                                                        International Holdings Limited ("RHIHL"). Mr. Bong is responsible for
                                                        overseeing the hotel operations and is a qualified architect. Mr. Bong has
                                                        served as President/Chief Executive Officer of Holdings since October 1995
                                                        and as a Director since May 1995.
</TABLE> 

                                     III-1
<PAGE>

<TABLE> 
                <S>                             <C>     <C> 
                Lawrence Lau Siu Keung, 1995    45      Lawrence Lau joined CCIHL in 1994 and has served as a Director since 1995.
                                                        He also serves as a Director of PIHL and RHIHL. Mr. Lau is in charge of the
                                                        overall financial and accounting functions of CCIHL and its subsidiaries.
                                                        Mr. Lau served as Group Controller (Finance) for Shaw Brothers (H.K.) Ltd.
                                                        from 1992 to 1994. From 1989 to 1992 he was Financial Controller for Regal
                                                        Pacific Holdings Limited. Mr. Lau has served as a Director of Holdings since
                                                        May 1995.

                Sandy Leung Sun So, 1996        41      Sandy Leung has served as Senior Vice President of AHS and Holdings since
                                                        February 1996. He joined CCIHL in November 1995 as General Manager-Corporate
                                                        Finance. Prior to joining CCIHL, Mr. Leung served as a Director of Shanghai
                                                        International Capital (H.K.) Limited from May 1994 to September 1995. Mr.
                                                        Leung also served as an Executive Director of Seapower Corporate Finance
                                                        Limited from May 1992 to April 1994. From July 1991 to April 1992, Mr. Leung
                                                        served as Senior Manager of Lippo Asia Limited.

                Douglas M. Pasquale, 1995       41      Douglas M. Pasquale has served as President/CEO of AHS since February 1996.
                                                        He previously served as Executive Vice President since February 1992 and was
                                                        appointed Chief Financial Officer in August 1994. Mr. Pasquale joined AHS in
                                                        1986 as Vice President of Investor Services. Mr. Pasquale did not serve as
                                                        an officer of AHS from August 1989 to February 1992, but continued to serve
                                                        as Vice President of Holdings during this time period. Mr. Pasquale became a
                                                        Director of Holdings in February 1993.

                Michael Sheh, 1995               38     Michael Sheh has served as Senior Vice President and Treasurer of AHS since
                                                        June 1995. Mr. Sheh served as Vice President/Treasurer of Holdings from 1989
                                                        to March 1995, when he was elected Senior Vice President. He became a
                                                        Director of Holdings in May 1995.
</TABLE> 
                                     III-2
<PAGE>

<TABLE> 
<C>             <S>                             <C>     <C> 
 
w               Paul J. Sistare, 1994           41      Paul J. Sistare served as President/CEO of AHS from April 1994 to February
-               (Resigned, February, 1996)              1996. He previously served as Executive Vice President from September 1992.
                                                        Mr. Sistare served as Executive Vice President of Holdings from September
                                                        1992 to February 1996. He was elected a Director of Holdings in February
                                                        1993. Mr. Sistare joined Forte Hotels International in 1983 and served as
                                                        Senior Vice President from 1989 to 1992.

                Carol K. Werner, 1989            41     Carol K. Werner served as General Counsel, Secretary and Executive Vice
                                                        President of AHS from 1989 to March 1995. She also served as Director,
                                                        Executive Vice President and Secretary of Holdings and certain affiliates
                                                        from 1989 to 1995. Since August 1995, Ms. Werner has been working with the
                                                        Denver, Colorado office of Coudert Brothers, an international law firm. Ms.
                                                        Werner was an associate of Coudert Brothers, prior to her employment with
                                                        AHS.

                Anthony Williams, 1989           50     Anthony Williams is the Chairman of the executive committee of Coudert
                                                        Brothers, an international law firm, and has been a partner since 1981.
                                                        He has served as a directory of Holdings since 1989.
</TABLE> 
                There are no family relationships between any of the directors
                or the executive officers of AHS. Coudert Brothers, an
                international law firm of which Anthony Williams and Carol
                Werner are attorneys, has provided legal services for the
                Partnership and affiliates since the beginning of 1989. CCIHL,
                PIHL, RHIHL are affiliates of AHP.

Item 11.        Payments and Compensation to General Partner and Affiliates
--------        -----------------------------------------------------------

                As set out in the Partnership's agreement of limited
                partnership, various fees are payable to AHS, as General
                Partner, for services rendered to the Partnership. These fees
                include Partnership administration fees equal to .25% of the
                appraised value of the Properties determined as of December 31st
                of each year; acquisition fees equal to 1% of the purchase price
                of any additional hotel property purchased by the Partnership;
                mortgage or refinancing fees equal to 1% of the loan amount;
                annual guarantee fees equal to .5% of the outstanding loan
                balance to an affiliate of AHS; and brokerage and disposition
                fees equal to 1% of the total contract price of the property
                with respect to the sale of a Partnership property to a third
                party. Affiliates of AHS receive property management service
                fees, data processing and risk management fees pursuant to the
                hotel management agreements with the Operating Partnerships. The
                Properties may also reimburse AHS and its affiliates for certain
                costs paid by AHS and its affiliates on behalf of the Operating
                Partnerships including payroll, professional fees and certain
                out-of-pocket expenses. For a detailed description of amounts
                paid or owed to AHS and its affiliates by the Partnership or the
                Operating Partnerships for various services performed by AHS and
                its affiliates during 1995, see Item 8, Financial Statements and
                Supplementary Data. The McCormick Ranch property has also
                entered into a license agreement with Holdings for use of the
                Regal name. For a detailed description of amounts paid or owed
                to Holdings, see Item 8, Financial Statements and Supplementary
                Data.

                                     III-3
<PAGE>
 
Item 12.        Security Ownership of Certain Beneficial Owners and Management
--------        --------------------------------------------------------------
     (a)        The following table sets forth information as of March 4, 1996
                with respect to persons who are known to the Partnership (based
                on statements filed with the Securities and Exchange Commission
                pursuant to section 13(d) or 13(g) of the Securities Act of
                1934) to be the beneficial owner of more than five percent of
                any class of the Partnership's voting securities.
<TABLE> 
<CAPTION> 
                Name and address of         Amount and nature of   Percent
Title of Class  beneficial owner            beneficial ownership   of Class
--------------  -------------------         --------------------   --------
<S>             <C>                         <C>                    <C> 
Class A Units   Century City International      3,794,646(1)         71.0%
                Paliburg Plaza
                68 Ye Woo Street                Indirect
                Hong Kong                       Ownership

Class A Units   Regal Hotel Management, Inc.    1,825,065(1)         34.2%
                5775 DTC Boulevard              Direct 
                Suite 300                       Ownership
                Englewood, Colorado  
                80111

Class A Units   Gateway Hotel Holdings, Inc.    769,041(1)           14.4%
                5775 DTC Boulevard              Direct 
                Suite 300                       Ownership
                Englewood, Colorado  
                80111

Class A Units   AIRCOA Equity Interests, Inc.   650,000(1)           12.2%
                5775 DTC Boulevard              Direct
                Suite 300                       Ownership
                Englewood, Colorado  
                80111

Class A Units   Richfield Holdings, Inc.        546,740(1)(2)        10.2%
                5775 DTC Boulevard              Direct 
                Suite 300                       Ownership
                Englewood, Colorado  
                80111

Class A Units   Investing Group:                409,000(3)           7.65%
                                                Direct 
                                                Ownership
                Hatfield Family Trust, UA
                RR1, Box 162
                Ridgeland, South Carolina  
                29936
                (108,700 units  2.03%)
</TABLE> 

                                     III-4
<PAGE>
 
<TABLE> 
<CAPTION> 
                Name and address of         Amount and nature of   Percent
Title of Class  beneficial owner            beneficial ownership   of Class
--------------  -------------------         --------------------   --------
<S>             <C>                         <C>                    <C> 
                J. Mark Grosvenor
                3145 Sports Arena 
                Boulevard
                San Diego, California  
                92110
                (110,000 units  2.02%)

                Gerald Loehr Trust
                c/o Gerald G. Loehr
                P.O. Box 675207
                Rancho Santa Fe, California  
                92067
                (43,500 units   .814%)

                Gardner-Smith Living 
                Trust, UA
                7825 Fay Avenue, Suite 250
                La Jolla, California  92037
                (43,200 units   .81%)

                Narans Investment 
                Management, Inc.
                3440 South Vance Avenue, 
                Suite 700
                Lakewood, Colorado  80227
                (32,200 units   .60%)

                Blacor, Inc.
                8235 Douglas Avenue, 
                Suite 1300
                Dallas, Texas  75225
                (25,400 units   .47%)

                Lance T. Shaner
                303 Science Park Road
                State College, Pennsylvania  
                16803
                (25,500 units   .51%)

                Don W. Cockroft
                P. O. Box 770577
                Memphis, Tennessee  38177
                (10,500 units   .20%)

                Michael McNulty
                8235 Douglas Avenue, Suite 
                1300
                Dallas, Texas  75225
                (10,000 units   .20%)
</TABLE> 

                                     III-5
<PAGE>
 
Class B Units    Century City International   950,000(4)(5)   100.0%
                 Holdings Limited             Indirect
                                              Ownership

      (1)     Each of Richfield Holdings, Inc. ("Holdings"), AIRCOA Equity
              Interests, Inc. ("AEI"), Regal Hotel Management, Inc. ("RHM") and
              Gateway Hotel Holdings, Inc. ("Gateway") share voting and
              investment power with Century City International Holdings Limited
              ("Century City").

      (2)     Holdings has direct ownership of 546,740 Class A Units, an
              indirect ownership of 650,000 Class A Units through AEI, and
              indirect ownership of 3,800 Class A Units through Richfield
              Hospitality Services, Inc., for a total direct and indirect
              ownership of 1,200,540, which represent 22.5% of the Class A
              Units. 

      (3)     Individuals or trusts listed have jointly filed a Schedule 13-D
              indicating that they are acting as a group. Ownership information
              is based on Amendment No. 2 to the Schedule 13-D filed February 3,
              1996.

      (4)     Class B Units are not tradeable securities however, they are
              convertible into Class A Units under certain conditions as set
              forth in the limited partnership agreement of the Partnership. No
              conversion rights have been exercisable since the Partnership's
              inception through the date hereof. 

      (5)     Holdings directly owns 200,000 Class B Units. RHM directly owns
              688,746 Class B Units of the Partnership. Buffalo Hotel Investors,
              Ltd., an affiliate, directly owns 61,254 Class B Units.

       In addition to its direct interest in the Partnership's voting
       securities, Holdings indirectly owns 100% of the outstanding common
       shares of AHS. In February, 1989 Novolane, B.V., a Netherlands company
       ("Novolane") and Kingsfield Investment B.V., a Netherlands company
       ("Kingsfield") together acquired 51% of the voting securities of
       Holdings. Kingsfield sold the 5% interest it held in Holdings to an
       unaffiliated party during 1990. Novolane currently owns 49.77% of
       Holdings outstanding voting securities and 100% of the voting securities
       of RHM. In December 1994, Regal International Limited purchased 45.58% of
       Holdings outstanding voting securities from an unaffiliated entity.
       Century City, a Bermuda company, indirectly controls Novolane, Gateway
       and Regal International Limited. More than 60% of the voting stock of
       Century City is beneficially owned by Mr. Lo Yuk Sui, a citizen of Hong
       Kong.

  (b)  Security Ownership of Management

       As of March 4, 1996, no officers or directors of AHS have beneficial
       ownership of any equity securities of the Partnership or AHS.

Item 13. Certain Relationships and Related Transactions
-------- ----------------------------------------------

     (a)     Transaction with Management and Others - See (b)

     (b)     Certain Business Relationships

             The Partnership is provided services by, and engages in certain
             other transactions with AHS, its general partner, and other
             affiliates. See Item 11, Payments and Compensation to the General
             Partner and Affiliates and Item 8, Financial Statements and
             Supplementary Data.

                                     III-6
<PAGE>
 
                                    PART IV

<TABLE> 
<CAPTION> 
                                                                                                                       
                                                                                                          Page                 
Item 14.        Exhibits, Financial Statement Schedules, and Reports on Form 8-K                         Number
--------        ----------------------------------------------------------------                         ------
<S>             <C>                                                                                      <C> 
(a) (1)         Financial Statements - Included in Part II of this Report:

                Independent Auditors' Report                                                               II-9

                Consolidated Balance Sheets, December 31, 1995 and 1994                                    II-10

                Consolidated Statements of Operations                                                      II-12
                  Years Ended December 31, 1995, 1994, and 1993 

                Consolidated Statements of Partners' Capital                                               II-13
                  Years Ended December 31, 1995, 1994, and 1993

                Consolidated Statements of Cash Flows                                                      II-14
                  Years Ended December 31, 1995, 1994, and 1993 

                Notes to Consolidated Financial Statements, December 31, 1995 and 1994                     II-16

(a) (2)         Financial Statement Schedules


                The financial statement schedules are omitted as they are either
                not required or are not applicable or the required information
                is included in the financial statements or notes thereto.

(a)     (3)     Exhibits

3.1             Agreement of Limited Partnership of the Partnership, as amended
                and restated, incorporated herein by reference to the
                Partnership's Registration Statement No. 33-13418, Exhibit 3.1,
                declared effective by the Securities and Exchange Commission on
                July 23, 1987.

3.3             Certificate of Limited Partnership for the Partnership, as
                amended, incorporated herein by reference to the Partnership's
                Registration Statement No. 33-13418, Exhibit 3.3, declared
                effective by the Securities and Exchange Commission on July 23,
                1987.

3.4             Agreement of Limited Partnership for the Operating Partnerships,
                incorporated herein by reference to the Partnership's
                Registration Statement No. 33-13418, Exhibit 3.4, declared
                effective by the Securities and Exchange Commission on July 23,
                1987.

3.5             Certificate of Limited Partnership for the Operating
                Partnerships, incorporated herein by reference to the
                Partnership's Registration Statement No. 33-13418, Exhibit 3.5,
                declared effective by the Securities and Exchange Commission on
                July 23, 1987.

4.1             Form of Deposit Agreement, incorporated herein by reference to
                the Partnership's Registration Statement No. 33-13418, Exhibit
                4.1, declared effective by the Securities and Exchange
                Commission on July 23, 1987.

</TABLE> 

                                      IV-1
<PAGE>
 
4.2     Form of Depositary Receipt, incorporated herein by reference to the
        Partnership's Registration Statement No. 33-13418, Exhibit 4.2, declared
        effective by the Securities and Exchange Commission on July 23, 1987.

4.3     The form of Transfer Application, incorporated herein by reference to
        the Partnership's Registration Statement No. 33-13418, Exhibit 4.3,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

10.1    Hotel Contribution Agreement for Sheraton Buffalo, dated December 30,
        1986, between the Partnership, Buffalo Inn Associates, a Colorado
        general partnership, Newpart, and ABI, Ltd., a Colorado limited
        partnership ("ABI"), as amended, incorporated herein by reference to the
        Partnership's Registration Statement No. 33-13418, Exhibit 10.1,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

10.2    Assignment, Assumption and Indemnification Agreement for Sheraton
        Buffalo, dated December 31, 1986, between Buffalo Inn Associates,
        Newpart, ABI and the Partnership, incorporated herein by reference to
        the Partnership's Registration Statement No. 33-13418, Exhibit 10.2,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

10.3    Assignment and Assumption Agreement between Sheraton Buffalo, dated
        February 20, 1987, between the Partnership and Buffalo Operating
        Partnership, L.P., a Delaware limited partnership, incorporated herein
        by reference to the Partnership's Registration Statement No. 33-13418,
        Exhibit 10.3, declared effective by the Securities and Exchange
        Commission on July 23, 1987.

10.4    Hotel Contribution Agreement for Sheraton University Center ("Sheraton
        University"), dated December 30, 1986, between the Partnership, Durham
        Joint Venture, a Florida joint venture ("Durham JV"), and Newpart, as
        amended, incorporated herein by reference to the Partnership's
        Registration Statement No. 33-13418, Exhibit 10.4, declared effective by
        the Securities and Exchange Commission on July 23, 1987.

10.5    Assignment, Assumption and Indemnification Agreement for Sheraton
        University, dated December 31, 1986, between Durham JV and the
        Partnership, incorporated herein by reference to the Partnership's
        Registration Statement No. 33-13418, Exhibit 10.5, declared effective by
        the Securities and Exchange Commission on July 23, 1987.

10.6    Assignment and Assumption Agreement for Sheraton University, dated
        February 20, 1987, between the Partnership and Durham Operating
        Partnership, L.P., a Delaware limited partnership, incorporated herein
        by reference to the Partnership's Registration Statement No. 33-13418,
        Exhibit 10.6, declared effective by the Securities and Exchange
        Commission on July 23, 1987.

10.7    Hotel Contribution Agreement for Fourwinds, Aurora Inn, Clarion
        McCormick, Sheraton Lakeside, dated December 30, 1986, between the
        Partnership and Newpart and Amendment thereto dated effective December
        30, 1986, between the same parties relating to The Pine Lake Trout Club
        ("Pine Lake"), as amended, incorporated herein by reference to the
        Partnership's Registration Statement No. 33-13418, Exhibit 10.7,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

                                      IV-2
<PAGE>
 
10.8    Assignment, Assumption and Indemnification Agreement for Fourwinds,
        dated December 31, 1986, between Newpart and the Partnership,
        incorporated herein by reference to the Partnership's Registration
        Statement No. 33-13418, Exhibit 10.8, declared effective by the
        Securities and Exchange Commission on July 23, 1987.

10.9    Assignment and Assumption Agreement for Fourwinds, dated February 20,
        1987, between the Partnership and Fourwinds Operating Partnership, L.P.,
        a Delaware limited partnership, incorporated herein by reference to the
        Partnership's Registration Statement No. 33-13418, Exhibit 10.9,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

10.10   Assignment, Assumption and Indemnification Agreement for Aurora Inn,
        dated December 31, 1986, between Newpart and the Partnership,
        incorporated herein by reference to the Partnership's Registration
        Statement No. 33-13418, Exhibit 10.10, declared effective by the
        Securities and Exchange Commission on July 23, 1987.

10.11   Assignment and Assumption Agreement for Aurora Inn, dated February 20,
        1987, between the Partnership and Aurora Inn Operating Partnership,
        L.P., a Delaware limited partnership, incorporated herein by reference
        to the Partnership's Registration Statement No. 33-13418, Exhibit 10.11,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

10.12   Assignment, Assumption and Indemnification Agreement for Clarion
        McCormick, dated December 31, 1986, between Newpart and the Partnership,
        incorporated herein by reference to the Partnership's Registration
        Statement No. 33-13418, Exhibit 10.12, declared effective by the
        Securities and Exchange Commission on July 23, 1987.

10.13   Assignment and Assumption Agreement for Clarion McCormick, dated
        February 20, 1987, between the Partnership and McCormick Ranch Operating
        Partnership, L.P., a Delaware limited partnership, incorporated herein
        by reference to the Partnership's Registration Statement No. 33-13418,
        Exhibit 10.13, declared effective by the Securities and Exchange
        Commission on July 23, 1987.

10.14   Assignment, Assumption and Indemnification Agreement for Sheraton
        Lakeside, dated December 31, 1986, between Newpart and the Partnership,
        incorporated herein by reference to the Partnership's Registration
        Statement No. 33-13418, Exhibit 10.14, declared effective by the
        Securities and Exchange commission on July 23, 1987.

10.15   Agreement for the Purchase and Sale of Partnership Interest for
        Sheraton Lakeside, dated as of January 1, 1987, between Lakeside Inns
        Limited, a British Virgin Islands corporation, and Newpart; as amended,
        incorporated herein by reference to the Partnership's Registration
        Statement No. 33-13418, Exhibit 10.15, declared effective by the
        Securities and Exchange Commission on July 23, 1987.

10.16   Partnership Interest Purchase Agreement and Consent and Waiver for
        Sheraton Lakeside, dated December 30, 1986, between Newpart and the
        Orlando S.L. Ltd., an Ohio limited partnership, incorporated herein by
        reference to the Partnership's Registration Statement No. 33-13418,
        Exhibit 10.16, declared effective by the Securities and Exchange
        Commission on July 23, 1987.
   
                                      IV-3
<PAGE>
 
10.17   Confirmatory Assignment of Agreement for the Purchase and Sale of
        Partnership Interest for Sheraton Lakeside, dated as of February 20,
        1987, between Newpart and the Partnership, incorporated herein by
        reference to the Partnership's Registration Statement No. 33-13418,
        Exhibit 10.17, declared effective by the Securities and Exchange
        Commission on July 23, 1987.

10.18   Assignment for Sheraton Lakeside, dated February 20, 1987, by Orlando
        Lakeside Associates Limited, a Florida limited partnership, to the
        Partnership, incorporated herein by reference to the Partnership's
        Registration Statement No. 33-13418, Exhibit 10.18, declared effective
        by the Securities and Exchange Commission on July 23, 1987.

10.19   Assignment and Assumption Agreement for Sheraton Lakeside, dated
        February 20, 1987, between the Partnership and Lakeside Operating
        Partnership, L.P., a Delaware limited partnership, incorporated herein
        by reference to the Partnership's Registration Statement No. 33-13418,
        Exhibit 10.19, declared effective by the Securities and Exchange
        Commission on July 23, 1987.

10.20   Assignment, Assumption and Indemnification Agreement for Pine Lake,
        executed on January 31, 1987, to be effective as of December 31, 1986,
        between Newpart and the Partnership, incorporated herein by reference to
        the Partnership's Registration Statement No. 33-13418, Exhibit 10.20,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

10.21   Assignment and Assumption Agreement for Pine Lake, dated February 20,
        1987, between the Partnership and Aurora Inn Operating Partnership,
        L.P., incorporated herein by reference to the Partnership's Registration
        Statement No. 33-13418, Exhibit 10.21, declared effective by the
        Securities and Exchange Commission on July 23, 1987.

10.22   Option to Purchase, dated as of February 20, 1987, between the
        Partnership and Newpart, incorporated herein by reference to the
        Partnership's Registration Statement No. 33-13418, Exhibit 10.22a,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

10.22a  Lease, dated as of February 20, 1987, between the Partnership and
        MHM, Inc., a Delaware corporation d/b/a Motor Hotel Management, Inc.,
        incorporated herein by reference to the Partnership's Registration
        Statement No. 33-13418, Exhibit 10.22b, declared effective by the
        Securities and Exchange Commission on July 23, 1987.

10.22b  Agency Agreement, dated as of February 20, 1987, between the
        Partnership and MHM, Inc., incorporated herein by reference to Exhibit
        10.22b filed with the Registrant's annual report on Form 10-K filed with
        the Commission on March 31, 1989.

10.23   Form of Management Agreement between the Partnership and the General
        Partner, as assigned to the Operating Partnerships, incorporated herein
        by reference to the Partnership's Registration Statement No. 33-13418,
        Exhibit 10.26, declared effective by the Securities and Exchange
        Commission on July 23, 1987.

10.23a  Assignment and Assumption of Management Agreement for Aurora Inn
        Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
        November 5, 1993, incorporated herein by reference to Exhibit 10.23a
        filed with the Registrant's Annual Report on Form 10-K filed with the
        commission on April 8, 1994.

                                      IV-4
<PAGE>
 
10.23b  Assignment and Assumption of Management Agreement for Buffalo
        Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
        November 5, 1993, incorporated herein by reference to Exhibit 10.23b
        filed with the Registrant's Annual Report on Form 10-K filed with the
        commission on April 8, 1994.

10.23c  Assignment and Assumption of Management Agreement for Durham
        Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
        November 5, 1993, incorporated herein by reference to Exhibit 10.23c
        filed with the Registrant's Annual Report on Form 10-K filed with the
        commission on April 8, 1994.

10.23d  Assignment and Assumption of Management Agreement for Fourwinds
        Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
        November 5, 1993, incorporated herein by reference to Exhibit 10.23d
        filed with the Registrant's Annual Report on Form 10-K filed with the
        commission on April 8, 1994.

10.23e  Assignment and Assumption of Management Agreement for Lakeside
        Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
        November 5, 1993, incorporated herein by reference to Exhibit 10.23e
        filed with the Registrant's Annual Report on Form 10-K filed with the
        commission on April 8, 1994.

10.23f  Assignment and Assumption of Management Agreement for McCormick Ranch
        Operating Partnership, L.P. to Richfield Hotel Management, Inc. dated
        November 5, 1993, incorporated herein by reference to Exhibit 10.23f
        filed with the Registrant's Annual Report on Form 10-K filed with the
        commission on April 8, 1994.

10.24   Clarion License Agreement between the Clarion Hotel Corporation, a
        Colorado corporation, and the Partnership, as assigned to the Clarion
        Operating Partnerships, incorporated herein by reference to the
        Partnership's Registration Statement No. 33-13418, Exhibit 10.27,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

10.24a  Assignment and Consent to Assignment dated as of February 28, 1987,
        between The Clarion Hotel Corporation, a Colorado corporation, the
        Partnership, and Clarion Hotels and Resorts, a Maryland joint venture,
        assigning the Clarion License Agreement previously filed as Exhibit
        10.27, incorporated herein by reference to the Partnership's
        Registration Statement No. 33-13418, Exhibit 10.27a, declared effective
        by the Securities and Exchange Commission on July 23, 1987.

10.24b  Amendment between Clarion Hotels and Resorts, a Maryland joint
        venture and Fourwinds Operating Partnership L.P., a Delaware limited
        partnership dated August 3, 1989 amending certain provisions of the
        License Agreement incorporated herein by reference to Exhibit 10.24b
        filed with the Registrant's Annual Report on Form 10-K filed with the
        Commission on March 31, 1990.

10.25   Sheraton Lakeside License Agreement dated May 14, 1992, incorporated
        herein by reference to Exhibit 10.25 filed with the Registrant's Annual
        Report on Form 10-K filed with the commission on April 8, 1994.

10.25a  Sheraton Lakeside Amendment of License Agreement and License Fee
        Deferral Agreement dated November 5, 1993, incorporated herein by
        reference to Exhibit 10.25a filed with the Registrant's Annual Report on
        Form 10-K filed with the commission on April 8, 1994.

                                      IV-5
<PAGE>
 
10.25b  Sheraton Buffalo License Agreement dated November 2, 1991,
        incorporated herein by reference to Exhibit 10.25b filed with the
        Registrant's Annual Report on Form 10-K filed with the commission on
        April 8, 1994.

10.25c  Sheraton Buffalo Amendment of License Agreement and License Fee
        Deferral Agreement dated November 5, 1993, incorporated herein by
        reference to Exhibit 10.25c filed with the Registrant's Annual Report on
        Form 10-K filed with the commission on April 8, 1994.

10.25d  Sheraton University License Agreement, incorporated herein by
        reference to the Partnership's Registration Statement No. 33-13418,
        Exhibit 10.28c, declared effective by the Securities and Exchange
        Commission on July 23, 1987.

10.25e  Regal McCormick Sublicense Agreement dated February 15, 1996. (1)

10.26   Credit Agreement dated June 8, 1995, between the Partnership and the
        Operating Partnerships as makers, to The HongKong and Shanghai Banking
        Corporation Limited as payee, incorporated herein by reference to
        Exhibit 10.40, filed with the Registrant's Quarterly Report on Form 10-Q
        filed with the Commission on August 14, 1995.

10.26a  Promissory Note dated June 8, 1995, by the Partnership and the
        Operating Partnerships as makers, to The HongKong Shanghai Banking
        Corporation Limited as payee in the principal amount of $18,085,000,
        incorporated herein by reference to Exhibit 10.40a, filed with the
        Registrant's Quarterly Report on Form 10-Q filed with the Commission on
        August 14, 1995.

10.26b  Promissory Note dated June 8, 1995, by the Partnership and the
        Operating Partnerships as makers, to The HongKong Shanghai Banking
        Corporation Limited as payee in the principal amount of $1,000,000,
        incorporated herein by reference to Exhibit 10.40b, filed with the
        Registrant's Quarterly Report on Form 10-Q filed with the Commission on
        August 14, 1995.

10.26c  Renewal Note dated June 8, 1995, by the Partnership and the Operating
        Partnerships as makers, to The HongKong Shanghai Banking Corporation
        Limited as payee in the principal amount of $17,690,000, incorporated
        herein by reference to Exhibit 10.40c, filed with the Registrant's
        Quarterly Report on Form 10-Q filed with the Commission on August 14,
        1995.

10.26d  Promissory Note dated June 8, 1995, by the Buffalo Operating
        Partnership, L.P. as maker, to The HongKong and Shanghai Banking
        Corporation Limited as payee in the principal amount of $9,225,000,
        incorporated herein by reference to Exhibit 10.40d, filed with the
        Registrant's Quarterly Report on Form 10-Q filed with the Commission on
        August 14, 1995.

10.27   Forwinds Ground Lease, incorporated herein by reference to the
        Partnership's Registration Statement No. 33-13418, Exhibit 10.36a,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

10.27a  Clarion McCormick Ground Lease, incorporated herein by reference to
        the Partnership's Registration Statement No. 33-13418, Exhibit 10.36b,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

                                      IV-6
<PAGE>
 
10.27b  Sheraton Buffalo Ground Lease, incorporated herein by reference to
        the Partnership's Registration Statement No. 33-13418, Exhibit 10.36d,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

10.27c  Amendment No. 4 to Sheraton Buffalo Ground Lease dated June 28, 1988
        incorporated herein by reference to Exhibit 10.34d filed with the
        Registrant's Annual Report on Form 10-K filed with the Commission on
        March 31, 1989.

10.27d  Fourwinds Amended and Restated Indenture of Ground Lease dated May
        20, 1991, incorporated herein by reference to Exhibit 10.25c filed with
        the Registrant's Annual Report on Form 10-K filed with the Commission on
        April 14, 1992.

10.29   Other material contracts, incorporated herein by reference to the
        Partnership's Registration Statement No. 33-13418, Exhibit 10.37,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

10.30   Management Contract for Clarion McCormick, dated as of October 23,
        1982, between ARI, Inc., an Ohio corporation and the Board of Directors
        of the Council of Co-owners of the Shores, as amended, incorporated
        herein by reference to the Partnership's Registration Statement No. 33-
        13418, Exhibit 10.37h, declared effective by the Securities and Exchange
        Commission on July 23, 1987.

10.31   Letter Agreement for Aurora Inn, dated December 23, 1986, between
        Aurora Inn Co., an Ohio limited partnership and Aurora Inn Operating
        Partnership, L.P., incorporated herein by reference to the Partnership's
        Registration Statement No. 33-13418, Exhibit 10.37l, declared effective
        by the Securities and Exchange Commission on July 23, 1987.

10.31a  Sublease and License Agreement for Sheraton Buffalo, dated as of
        December 31, 1986 between the Partnership, Buffalo Inn Associates, a
        Colorado general partnership ("BIA"), and AEI, incorporated herein by
        reference to the Partnership's Registration Statement No. 33-13418,
        Exhibit 10.37m, declared effective by the Securities and Exchange
        Commission on January 23, 1987.

10.31b  Sublease and License Agreement for Sheraton Buffalo, dated February
        20, 1987, between Buffalo Operating Partnership, L.P., BIA and AEI,
        incorporated herein by reference to the Partnership's Registration
        Statement No. 33-13418, Exhibit 10.37n, declared effective by the
        Securities and Exchange Commission on July 23, 1987.

10.32   Subscription Agreement dated November 19, 1990 incorporated herein by
        reference to Exhibit 10.41 filed with the Registrant's Annual Report on
        Form 10-K filed with the Commission on April 26, 1991.

10.33   Subscription Agreement dated December 11, 1992 incorporated herein by
        reference to Exhibit 10.38 filed with the Registrant's Annual Report on
        Form 10-K filed with the Commission on April 15, 1993.

10.34   Promissory Note dated as of June 8, 1995 by AHP as maker, to AHS as
        payee in the principal amount of $6,000,000. (1)


                                      IV-7
<PAGE>
 
10.35   Promissory Note dated as of June 8, 1995 by AHP as maker, to AHS as
        payee in the principal amount of $2,100,000. (1)

22.     The Partnership holds a 99% limited partner interest in each of the
        following Delaware limited partnerships: Aurora Inn Operating
        Partnership, L.P.; Buffalo Operating Limited Partnership, L.P.; Durham
        Operating Partnership, L.P.; Fourwinds Operating Partnership, L.P.;
        Lakeside Operating Partnership, L.P.; and McCormick Ranch Operating
        Partnership, L.P.

27.     Financial Data Schedule  (1)

28.1    Certificate of Incorporation of AIRCOA Hospitality Services, Inc.
        (formerly Associated Inns & Restaurants Company of America), as amended,
        incorporated herein by reference to the Partnership's Registration
        Statement No. 33-13418, Exhibit 28.1, declared effective by the
        Securities and Exchange Commission on July 23, 1987.

28.2    By-laws of AIRCOA Hospitality Services, Inc. (formerly Associated Inns
        & Restaurants Company of America), as amended, incorporated herein by
        reference to the Partnership's Registration Statement No. 33-13418,
        Exhibit 28.2, declared effective by the Securities and Exchange
        Commission on July 23, 1987.

28.3    Appraisal of Fourwinds, incorporated herein by reference to the
        Partnership's Registration Statement No. 33-13418, Exhibit 28.3,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

28.4    Appraisal of Sheraton University, incorporated herein by reference to
        the Partnership's Registration Statement No. 33-13418, Exhibit 28.4,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

28.6    Appraisal of Sheraton Lakeside, incorporated herein by reference to the
        Partnership's Registration Statement No. 33-13418, Exhibit 28.6,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

28.7    Appraisal for Sheraton Buffalo, incorporated herein by reference to the
        Partnership's Registration Statement No. 33-13418, Exhibit 28.7,
        declared effective by the Securities and Exchange Commission on July 23,
        1987.

(1)     Filed herewith

                                      IV-8
<PAGE>
 
                                  SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf of the undersigned, thereunto duly authorized.

        By:     AIRCOA HOTEL PARTNERS, L.P.
                a Delaware limited partnership


        By:     AIRCOA HOSPITALITY SERVICES, INC.
                its General Partner


        By:     /s/ Douglas M. Pasquale                                   
                ----------------------------------
                        Douglas M. Pasquale, Chief Executive Officer,
                          President and Director
Dated:  
      ---------

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

<TABLE> 
<CAPTION> 


         Signature                                    Title                            Date       
         ---------                                    -----                            ----
<S>                                                   <C>                              <C> 
/s/ Dougas M. Pasquale  
----------------------------
Douglas M. Pasquale             Chief Executive Officer,                                
                                 President and Director                
                                 (Principal Executive and Financial Officer)
                                   of AIRCOA Hospitality Services, Inc.

/s/ David C. Ridgley
----------------------------
David C. Ridgley                Chief Accounting Officer
                                 of AIRCOA Hospitality Services, Inc.
                                 (Principal Accounting Officer)

/s/ Daniel Bong Shu Yin 
----------------------------
Daniel Bong Shu Yin             Director                                
                                 of AIRCOA Hospitality Services, Inc.
                        

/s/ Lawrence Lau Siu Keung      
----------------------------
Lawrence Lau Siu Keung          Director                                
                                 of AIRCOA Hospitality Services, Inc.
                        

/s/ Sandy Leung Sun So
----------------------------  
Sandy Leung Sun So              Director                                
                                 of AIRCOA Hospitality Services, Inc.
                        

/s/ Michael Sheh        
----------------------------
Michael Sheh                    Director                                
                                 of AIRCOA Hospitality Services, Inc.
</TABLE> 

                                      IV-9
<PAGE>
 
<TABLE> 
<CAPTION> 

<S>                           <C> 
/s/ Carol K. Werner     
----------------------------
Carol K. Werner               Director                                
                               of AIRCOA Hospitality Services, Inc.
                        

/s/ Anthony Williams    
----------------------------
Anthony Williams              Director                                
                               of AIRCOA Hospitality Services, Inc.

</TABLE> 
                        

                                     IV-10