<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                        
                              FORM 10-Q (Mark One)
 
    [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
                             Exchange Act of 1934
 
                 For the quarterly period ended September 30, 1997 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 1-12017
 
                              CAPSTAR HOTEL COMPANY 
              (Exact name of Registrant as specified in its Charter)
                                        

<TABLE>
             <S>                                               <C>

           DELAWARE                                         52-1979383
    (State of Incorporation)                   (IRS Employer Identification No.)

</TABLE>
 
                            1010 WISCONSIN AVENUE, N.W. 
                                  SUITE 650 
                             WASHINGTON, D.C. 20007 
                (Address of Principal Executive Offices)(Zip Code) 

                                  202-965-4455 
               (Registrant's Telephone Number, Including Area Code)
 
                                     NONE 
               (Former Name, Former Address and Former Fiscal Year, 
                         if Changed Since Last Report)
 
    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 for which the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
 
YES [X]  NO [ ]
 
    The number of shares of Common Stock, par value $0.01 per share, outstanding
at November 7, 1997 was 24,865,002.
 


<PAGE>

                             CAPSTAR HOTEL COMPANY
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                               PAGE
                                                                               ----
<S>                                                                            <C>
PART I. FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)

        Condensed Consolidated Balance Sheets -
        September 30, 1997 and December 31, 1996..........................       3

        Condensed Consolidated Statements of Operations -
        Three Months and Nine Months Ended 
        September 30, 1997 and 1996.......................................       4

        Condensed Consolidated Statements of Cash Flows -
        Nine Months Ended September 30, 1997 and 1996......................      5

        Notes to Condensed Consolidated Financial Statements...............      7

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
        FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................     10

PART II. OTHER INFORMATION

ITEM 5: OTHER INFORMATION..................................................     13

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K...................................     13
</TABLE>
 
                                       2
<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
 

CAPSTAR HOTEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                        
                                                                      SEPTEMBER 30, 1997    DECEMBER 31, 1996
                                                                      ------------------    -----------------
<S>                                                                      (UNAUDITED)
                                                                              <C>                 <C>         
ASSETS

Current Assets:
  Cash and cash equivalents.......................................     $     14,781        $    21,784
  Accounts receivable, net........................................           21,600              8,109
  Deposits, prepaid expenses, and other...........................           11,972              5,942
                                                                       -------------       ------------
Total current assets..............................................           48,353             35,835

Property and equipment:
  Land............................................................          114,097             58,127
  Building and improvements.......................................          600,815            248,376
  Furniture, fixtures, and equipment..............................           68,167             32,698
  Construction in progress........................................            7,705              3,891
                                                                       -------------       ------------
                                                                            790,784            343,092
Accumulated depreciation..........................................          (21,152)            (8,641)
                                                                       -------------       ------------
Total property and equipment, net.................................          769,632            334,451

Deferred costs, net...............................................           14,190              8,225
Investments in partnerships.......................................            5,887                650
Escrows and restricted funds......................................            2,755                 --
                                                                       -------------       ------------
                                                                       $    840,817        $   379,161
                                                                       -------------       ------------
                                                                       -------------       ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable................................................     $      9,767        $     4,125
  Accrued expenses and other liabilities..........................           29,754             10,737
  Income taxes payable............................................            2,982              1,436
  Long-term debt, current portion.................................            1,040                498
                                                                       -------------       ------------
Total current liabilities.........................................           43,543             16,796

Deferred income taxes.............................................            1,181              1,181
Long-term debt....................................................          454,087            199,863
                                                                       -------------       ------------
Total liabilities.................................................          498,811            217,840

Minority interests................................................           22,451                606


Stockholders' Equity:
    Common stock, par value $.01 per share:
     Authorized -- 49,000 shares
     Issued and outstanding -- 18,909 and 12,754 shares...........              189                128
    Paid-in capital...............................................          303,679            158,533
    Retained earnings.............................................           16,127              2,054
    Cumulative foreign currency translation adjustment............             (440)                --
                                                                      -------------       ------------
                                                                      $     840,817        $   379,161
                                                                      -------------       ------------
                                                                      -------------       ------------
</TABLE>
 
    See accompanying notes to condensed consolidated financial statements.
 
                                       3
<PAGE>

CAPSTAR HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED   NINE MONTHS ENDED
                                                                           SEPTEMBER 30,      SEPTEMBER 30,
                                                                       -------------------- ---------------------
<S>                                                                      <C>        <C>        <C>         <C>
                                                                         1997       1996        1997       1996
                                                                       ---------  ---------  ----------  ---------
Revenue:
  Hotel operations:
    Rooms..........................................................    $61,765    $20,839    $141,018  $  48,960
    Food and beverage..............................................     21,711      7,537      56,387     20,525
    Other operating departments....................................      5,268      1,574      10,933      4,544
  Hotel management and other fees..................................      1,296        922       3,521      3,099
                                                                       ---------  ---------  ----------  ---------
Total revenue......................................................     90,040     30,872     211,859     77,128
                                                                       ---------  ---------  ----------  ---------
Hotel operating expenses by department:
  Rooms............................................................     14,593      4,868      33,547     12,232
  Food and beverage................................................     17,927      6,318      45,265     16,620
  Other operating expenses.........................................      2,796        709       5,803      1,798

Undistributed operating expenses:
  Administrative and general.......................................     13,249      5,440      33,088     14,897
  Property operating costs.........................................     11,271      3,539      25,227      8,920
  Property taxes, insurance and other..............................      4,218      1,108       9,283      3,225
  Depreciation and amortization....................................      5,768      2,036      13,988      5,955
                                                                       ---------  ---------  ----------  ---------
Total operating expenses...........................................     69,822     24,018     166,201     63,647
Interest expense, net..............................................      6,819      3,138      15,262     10,428
                                                                       ---------  ---------  ----------  ---------
Income before minority interests, income taxes and 
  extraordinary loss...............................................     13,399      3,716      30,396      3,053
Minority interests.................................................       (373)       (49)       (994)        20
                                                                       ---------  ---------  ----------  ---------
Income before income taxes and extraordinary loss..................     13,026      3,667      29,402      3,073
Income taxes.......................................................      4,949      1,092      11,237      1,092
                                                                       ---------  ---------  ----------  ---------
Income before extraordinary loss...................................      8,077      2,575      18,165      1,981
Extraordinary loss from early extinguishment of debt, net of tax
  benefit..........................................................     (4,092)    (1,956)     (4,092)    (1,956)
                                                                      ---------  ---------  ----------  ---------
Net income.........................................................   $  3,985    $   619    $ 14,073    $    25
                                                                      ---------   ---------  ----------  ---------
                                                                      ---------   ---------  ----------  ---------
Weighted average number of common shares outstanding...............     18,909     12,754      17,062     12,754 
                                                                      ---------   ---------  ----------  ---------
                                                                      ---------   ---------  ----------  ---------
Earnings per share:                                                              
  Income before extraordinary loss.................................   $  0.43     $  0.13    $   1.06    $  0.13 
  Extraordinary loss...............................................     (0.22)      (0.15)      (0.24)     (0.15)
                                                                      ---------   ---------  ----------  ---------
  Net income.......................................................   $  0.21     $ (0.02)   $   0.82    $ (0.02)
                                                                      ---------   ---------  ----------  ---------
                                                                      ---------   ---------  ----------  ---------
</TABLE>
 
    See accompanying notes to condensed consolidated financial statements.
 
                                       4

<PAGE>
CAPSTAR HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                              NINE MONTHS ENDED
                                                                                                SEPTEMBER 30,
                                                                                            -------------------
<S>                                                                                            <C>         <C>
                                                                                               1997        1996
                                                                                            ----------  ----------
OPERATING ACTIVITIES
Net income................................................................................  $   14,073  $       25
Adjustments to reconcile net income to net cash provided by operating activities:
  Depreciation and amortization...........................................................      13,988       5,955
  Loss on early extinguishment of debt before taxes.......................................       6,600       3,260
  Minority interests......................................................................         994         (20)
Changes in operating assets and liabilities:
  Accounts receivable, net................................................................     (13,491)     (5,272)
  Deposits, prepaid expenses, and other...................................................      (6,030)     (2,966)
  Accounts payable........................................................................       5,642       2,187
  Accrued expenses and other liabilities..................................................      19,017       3,784
  Income taxes payable....................................................................       1,546          --
                                                                                            ----------  ----------
Net cash provided by operating activities.................................................      42,339       6,953
                                                                                            ----------  ----------
INVESTING ACTIVITIES
Purchases of property and equipment.......................................................    (399,517)   (111,328)
Investments in partnerships...............................................................      (5,237)         --
Purchases of minority interests...........................................................         (87)        (67)
Change in restricted cash.................................................................      (2,755)      6,351
                                                                                            ----------  ----------
Net cash used in investing activities.....................................................    (407,596)   (105,044)
                                                                                            ----------  ----------
FINANCING ACTIVITIES
Deferred costs............................................................................     (14,043)     (7,818)
Proceeds from long-term debt..............................................................     603,788     246,995
Principal payments on long-term debt......................................................    (365,368)   (248,593)
Proceeds from issuances of common stock, net..............................................     134,207     110,112
Distributions to limited partners.........................................................          --        (172)
Distributions to minority investors.......................................................        (325)       (104)
                                                                                            ----------  ----------
Net cash provided by financing activities.................................................     358,259     100,420
                                                                                            ----------  ----------
Effect of exchange rate changes on cash and cash equivalents..............................          (5)         --
                                                                                            ----------  ----------
Increase (decrease) in cash and cash equivalents..........................................      (7,003)      2,329
Cash and cash equivalents, beginning of period............................................      21,784       6,832
                                                                                            ----------  ----------
Cash and cash equivalents, end of period..................................................  $   14,781  $    9,161
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>

                                       5
<PAGE>
CAPSTAR HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
UNAUDITED (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                               NINE MONTHS ENDED
                                                                                                 SEPTEMBER 30,
                                                                                              --------------------
<S>                                                                                           <C>        <C>
                                                                                                1997       1996
                                                                                              ---------  ---------
Supplemental disclosure of cash flow information:

Cash paid for interest, net of capitalized interest of $288 and $325........................  $  14,202  $  10,784
Cash paid for income taxes..................................................................  $   7,183  $      --

Supplemental disclosure of non-cash investing and financing activities:

Additions to equipment through capital leases...............................................  $      22  $     305
Long-term debt assumed in purchase of property and equipment................................  $  16,324  $      --
Operating partnership units issued in purchase of property and equipment....................  $  32,264  $      --
Conversion of operating partnership units to common stock...................................  $  11,000  $      --
</TABLE>
 
    See accompanying notes to condensed consolidated financial statements.
 
                                      6

<PAGE>

CAPSTAR HOTEL COMPANY
SEPTEMBER 30, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
 
1. BASIS OF PRESENTATION
 
The principal activity of CapStar Hotel Company and its subsidiaries 
(collectively, the "Company") is to own, acquire, renovate, reposition and 
manage upscale, full-service hotels throughout North America. As of September 
30, 1997, the Company owned, leased or managed 69 hotels with 15,449 rooms. 
The Company owned 41 of these hotels with 10,521 rooms, leased 1 hotel with 
196 rooms, and managed an additional 27 hotels owned by third parties with 
4,732 rooms.
 
The accompanying condensed consolidated interim financial statements have 
been prepared by the Company, without audit, pursuant to the rules and 
regulations of the Securities and Exchange Commission (the "SEC"). Certain 
information and footnote disclosures normally included in financial 
statements prepared in accordance with generally accepted accounting 
principles ("GAAP") have been omitted pursuant to such rules and regulations. 
The condensed consolidated balance sheet data as of December 31, 1996 was 
derived from audited financial statements, but does not include all 
disclosures required by GAAP. The accompanying unaudited condensed 
consolidated interim financial statements reflect, in the opinion of 
management, all adjustments (consisting of normal recurring adjustments) 
considered necessary for a fair presentation of the financial position and 
results of operations and cash flows for the periods presented. The unaudited 
condensed consolidated interim financial statements should be read in 
conjunction with the financial statements, notes thereto and other 
information included in the Company's Annual Report on Form 10-K for the year 
ended December 31, 1996, filed with the SEC on February 20, 1997.
 
The preparation of financial statements in accordance with GAAP requires 
management to make estimates and assumptions. Such estimates and assumptions 
affect the reported amounts of assets and liabilities, as well as the 
disclosure of contingent assets and liabilities at the date of the financial 
statements, and the reported amounts of revenue and expenses during the 
reporting period. Actual results could differ from those estimates. 
Additionally, the results of operations for the interim periods are not 
necessarily indicative of the results for the entire year because of seasonal 
and short-term variations.
 
From time to time, the Company enters into swap and collar agreements that 
are designated as, and are effective as, hedges against the impact of 
interest rate fluctuations on certain of the Company's existing and probable 
future long-term debt instruments. Because these agreements qualify for hedge 
accounting treatment, any gains or losses are recognized as adjustments to 
interest expense over the lives of the underlying debt instruments. For hedge 
agreements that are terminated early or that are associated with anticipated 
future debt instruments, gains or losses are deferred until those debt 
instruments are entered into. If the Company determines it is no longer probable
that the Company will enter into an anticipated debt instrument, any related 
deferred gains or losses are recognized in the current period.
 
During the nine months ended September 30, 1997, the Company purchased four 
hotels in Canada. Results of operations for those hotels are maintained in 
Canadian dollars and translated using the average exchange rates during the 
period. Assets and liabilities are translated to U.S. dollars using the 
exchange rate in effect at the balance sheet date. Resulting translation 
adjustments are reflected in stockholders' equity as a cumulative foreign 
currency translation adjustment.
 
Certain 1996 amounts have been reclassified to conform to 1997 presentation.
 
                                      7 

<PAGE>

2. LONG-TERM DEBT
 
Long-term debt consisted of the following:
 
<TABLE>
<CAPTION>
                                                                             SEPTEMBER 30, 1997  DECEMBER 31, 1996
                                                                             ------------------  -----------------
<S>                                                                          <C>                 <C>
Credit Facility............................................................     $    235,200        $        --
Subordinated Notes.........................................................          149,810                 --
Senior secured revolving credit facility...................................               --            149,000
Senior subordinated credit facility........................................               --             50,000
Non-Recourse Facility......................................................           52,750                 --
Mortgage debt..............................................................           15,222                 --
Capital leases and other...................................................            2,145              1,361
                                                                                ------------        -----------
                                                                                     455,127            200,361
Less current portion.......................................................           (1,040)              (498)
                                                                                ------------        -----------
                                                                                $    454,087        $   199,863
                                                                                ------------        -----------
                                                                                ------------        -----------
</TABLE>
 
On July 1, 1997, the Company entered into a $450,000 senior secured credit 
facility (the "Credit Facility") structured as a $350,000, 5-year revolving 
credit facility and a $100,000, 7-year term loan facility. Borrowings under 
the Credit Facility bear interest, at the Company's option, at a rate 
equal to the lender's prime rate plus a spread of between 50 and 112.5 basis 
points or one, two, three or nine month LIBOR plus a spread of between 150 
and 212.5 basis points. The interest rate spread is determined based upon the 
Company's compliance with certain financial ratios. The Credit Facility 
provides for acquisition loans, working and renovation capital and letters of 
credit. The initial proceeds from the Credit Facility were used to repay 
indebtedness under certain existing credit facilities. In conjunction with 
entering into the Credit Facility, the Company terminated its existing senior 
secured revolving credit facility and senior subordinated credit facility. In 
connection with the refinancing of these facilities, the Company incurred 
$4,092 of extraordinary expenses (net of a tax benefit of $2,508) from the 
write-off of unamortized deferred financing costs.
 
On August 12, 1997, the Company entered into a $100,000 non-recourse credit 
facility (the "Non-Recourse Facility") that is secured by certain hotels 
owned by the Company. The Non-Recourse Facility bears interest at a rate of 
between 175 and 270 basis points over 30-day LIBOR, based upon the Company's 
compliance with certain ratios. The facility has an 18-month initial term 
that can be extended an additional 12 months, at the Company's option, 
subject to payment of additional fees and compliance with certain financial 
ratios.
 
On August 19, 1997, the Company completed the offering of $150,000 aggregate 
principal amount (issue price of $149,799, net of discount) of 8 3/4% senior 
subordinated notes (the "Subordinated Notes") due in 2007, generating net 
proceeds to the Company of approximately $145,000. The proceeds were used to
repay outstanding indebtedness under the Credit Facility. The Subordinated Notes
provide for semi-annual payments of interest in August and February, 
commencing in February 1998.
 
Aggregate maturities of the Company's long-term debt obligations are as 
follows:
 
<TABLE>
<S>                             <C>
1997                             $     146
1998                                 1,120
1999                                54,239
2000                                 1,521
2001                                13,091
Thereafter                         385,010
                                 ----------
                                 $ 455,127
                                 ----------
                                 ----------

</TABLE>
 
                                      8
<PAGE>
3. EARNINGS PER SHARE

Primary earnings per share ("EPS") for the three months and nine months ended 
September 30, 1997, has been calculated using actual income before 
extraordinary loss, extraordinary loss, and net income amounts divided by the 
weighted average number of common shares outstanding during the periods of 
18,908,990 and 17,061,644, respectively. Fully diluted EPS after 
extraordinary loss was also $0.21 and $0.82 for the respective periods, and 
was calculated using the weighted average number of common shares and common 
share equivalents outstanding of 20,072,979 and 17,961,499, respectively. For 
fully diluted EPS, net income for the periods was adjusted for minority 
interests (representing convertible operating partnership units), net of tax, 
of $274 and $604, respectively.

Prior to the consummation of the Company's initial public offering on August 
20, 1996, the Company conducted its operations through predecessor entities 
that were organized as limited partnerships. These limited partnerships were 
not subject to the provisions of Accounting Principles Board Opinion No. 15, 
"Earnings Per Share" ("APB No. 15"). Accordingly, EPS for the three 
months and nine months ended September 30, 1996 has been calculated using 
actual income before extraordinary loss, extraordinary loss, and net income 
amounts for the period from the initial public offering through September 30, 
1996. The weighted average number of common shares used in the calculations 
was 12,754,321.

Statement of Financial Accounting Standards No. 128, "Earnings Per Share" 
("SFAS No. 128"), supersedes APB No. 15 and specifies computation, 
presentation, and disclosure requirements for EPS. SFAS No. 128, which is 
effective for financial statements for periods ending after December 15, 
1997, replaces Primary EPS and Fully Diluted EPS with Basic EPS and Diluted 
EPS, respectively. Basic EPS excludes all of the dilutive effects of common 
share equivalents while Diluted EPS reflects all potential dilution. Had the 
Company implemented the requirements of SFAS No. 128, both Basic and Diluted 
EPS would have been $0.21 and $0.82 for the three months and nine months 
ended September 30, 1997, respectively.


4. PENDING ACQUISITIONS

As of September 30, 1997, the Company had signed agreements to acquire nine 
upscale, full-service hotels in four separate transactions, with an aggregate 
purchase price, including planned initial renovations, of approximately 
$225.6 million. The nine hotels to be acquired consist of the following: a 
portfolio of six hotels containing 1,960 rooms owned by affiliates of 
Medallion Hotels, Inc. (the "Medallion Portfolio"), for a purchase price of 
$167.5 million; the 204-room Embassy Suites Tucson International Airport, for 
a purchase price of $14.7 million; the 151-room Detroit Metro Airport Hilton 
Suites, for a purchase price of $15.9 million; and the 201-room Governor 
Morris Hotel & Conference Center in Morristown, New Jersey, for a purchase 
price of $27.5 million. The acquisition of the Embassy Suites Tucson 
International Airport was completed in October 1997 (see below). The 
remaining transactions are expected to close between November 1997 and 
January 1998.

5. SUBSEQUENT EVENTS

In October 1997, the Company completed a follow-on equity offering of 
5,953,722 shares of common stock at a price of $34.625 per share and a debt 
offering of $172,500 of 4.75% convertible subordinated notes due 2004 
(collectively, the "October Offerings"). The notes are convertible into 
shares of the Company's common stock by the holders at a rate of $43 per 
share. After underwriting discounts, commissions and other offering expenses, 
net proceeds to the Company from the October Offerings were $363,798. The 
proceeds were used to repay a portion of the Company's outstanding 
indebtedness and to fund certain acquisitions.

On October 23, 1997, the Company completed the acquisition of the Embassy 
Suites Tucson International Airport in Tucson, Arizona. The acquisition was 
funded through existing cash and proceeds from the October Offerings.

In October 1997, the Company entered into an agreement to acquire 
substantially all of the assets of Winston Hospitality, Inc. ("Winston") for 
$34,000. Winston leases 38 and manages 28 of the operating hotels of Winston 
Hotels, Inc., a real estate investment trust. The acquisition is expected to 
be completed during November 1997 and the purchase price will consist of 
$10,000 in cash and $24,000 in operating partnership units, which are 
convertible into shares of the Company's common stock.
 
                                      9
<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS
 
GENERAL
-------
 
At December 31, 1995, the Company owned and operated five hotels and acquired 
or assumed operations of seven additional hotels during the first nine months 
of 1996. At December 31, 1996, the Company owned 19 hotels and acquired 22 
additional hotels during the first nine months of 1997. Therefore, the 
financial statements for the three months and nine months ended September 30, 
1997 and 1996, reflect differing numbers of owned hotels throughout the 
periods.
 
FINANCIAL CONDITION
-------------------
 
SEPTEMBER 30, 1997 COMPARED WITH DECEMBER 31, 1996
 
Total assets increased by $461.6 million to $840.8 million at September 30, 
1997 from $379.2 million at December 31, 1996. This growth was primarily due 
to the acquisition of additional hotels during the first nine months of 1997. 
Deferred costs increased due to the financing fees paid related to the Credit 
Facility and the Subordinated Notes, net of the write-offs of financing fees 
related to terminated credit facilities. Escrows and restricted funds 
increased due to the new loan requirements of the Non-Recourse Facility.
 
Total liabilities increased by $281.0 million to $498.8 million at September 
30, 1997 from $217.8 million at December 31, 1996. This overall increase was 
also due primarily to the Company's acquisition of additional hotels during 
the first nine months of 1997. Total long-term debt increased to $455.1 
million at September 30, 1997, reflecting borrowings to finance 1997 hotel 
acquisitions, net of repayments with proceeds from the Company's offering of 
common stock in March 1997 (the "March Offering").

The increase in minority interests to $22.5 million at September 30, 1997 
reflects the operating partnership units issued in conjunction with the 
acquisition of certain hotels. The increase in paid-in capital resulted from 
the net proceeds from the March Offering and the partial conversion of the 
operating partnership units in May 1997.
 
RESULTS OF OPERATIONS
---------------------
 
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED 
SEPTEMBER 30, 1996
 
Revenues for the third quarter of 1997 increased to $90.0 million compared to 
$30.9 million in the third quarter of 1996. The significant increase is 
primarily attributable to the acquisition of additional hotels since the end 
of the third quarter of 1996. Operating expenses also increased due to the 
increase in the number of hotels owned during the 1997 period.
 
Interest expense increased from $3.1 million in the third quarter of 1996 to 
$6.8 million in 1997. This increase reflects the increased debt associated 
with ownership of additional hotels in the third quarter of 1997 compared to 
the same period of 1996, offset by repayment of debt with proceeds from the 
March Offering and the lower interest rate charged on the Credit Facility.
 
Minority interests were significantly higher for the third quarter of 1997 
compared to the same period of 1996 due to the minority interest in income 
related to the outstanding operating partnership units issued in April 1997.
 
Earnings before interest, income taxes, depreciation and amortization 
(EBITDA) for the third quarter of 1997 improved to $25.6 million compared to 
$8.8 million for the same period of 1996. The growth in EBITDA reflects the 
increase in the number of hotels owned and operated in 1997.
 
During the three months ended September 30, 1997 and 1996, the Company 
recognized extraordinary expenses of $4.1 million and $2.0 million (net of 
tax benefits of $2.5 million and $1.3 million), respectively, related to the 
write-off of unamortized loan costs in connection with expanding the 
Company's credit facilities.

                                     10 
<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1996
 
Revenues increased to $211.9 million for the nine months ended September 30, 
1997 from $77.1 million for the nine months ended September 30, 1996. 
Operating expenses also increased significantly from $63.6 million in 1996 to 
$166.2 million in 1997. These increases are a result of the increase in the 
number of hotels owned during the respective periods.

Interest expense increased to $15.3 million for the nine months ended 
September 30, 1997 from $10.4 million for the same period in 1996, reflecting 
the increase in debt incurred relating to the acquisition of hotels in 1997. 
This increase in debt levels and the related interest expense was partially 
offset by proceeds from the March Offering and the lower interest rate 
charged on the Credit Facility.

Minority interests increased to $1.0 million in 1997 due to the outstanding 
operating partnership units issued in April 1997. The extraordinary loss 
resulted from the write-offs of unamortized loan costs, as discussed above.

EBITDA increased to $58.7 million for the nine months ended September 30, 
1997 from $19.5 million for the same period of 1996, reflecting the larger 
number of hotels owned in 1997.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity are cash on hand, cash generated 
from operations, and funds from external borrowings and debt and equity 
offerings. The Company's continuing operations are funded through cash 
generated from hotel operations. Hotel and management company acquisitions 
and joint venture investments are financed through a combination of 
internally generated cash, external borrowings and the issuance of operating 
partnership units, debt and common stock.

The Company's cash and cash equivalents were $14.8 million at September 30, 
1997 compared to $21.8 million at December 31, 1996. Net cash provided by 
operations was $42.3 million in the first nine months of 1997 compared to 
$7.0 million for the same period of 1996. The Company used cash of $407.6 
million in investing activities, primarily for the acquisition of hotels and 
capital expenditures at the Company's owned hotels. Net cash provided by 
financing activities of $358.3 million resulted from the net proceeds from 
long-term debt, net of principal repayments, the March Offering and the 
Subordinated Notes offering.

In July 1997, the Company entered into the Credit Facility, consisting of a 
$350 million, 5-year revolving credit facility and a $100 million, 7-year 
term loan facility. The proceeds of the Credit Facility have been and will be 
used to fund new acquisitions, repay outstanding indebtedness and for general 
corporate purposes. As of September 30, 1997, $185.2 million was outstanding 
on the revolving facility and $50 million was outstanding on the term loan 
facility. In August 1997, the Company obtained the Non-Recourse Facility in 
the maximum principal amount of $100 million that has been used to fund 
certain acquisitions. At September 30, 1997, $52.8 million was outstanding on 
the Non-Recourse Facility. Also in August 1997, the Company completed the 
offering of the $150 million 8 3/4% Subordinated Notes. The net proceeds to 
the Company of approximately $145 million were used to repay outstanding 
indebtedness under the Credit Facility.

At September 30, 1997, the Company had available under the Credit Facility 
funds of $164.8 million under the revolving facility and $50 million on the 
term loan facility. The Company uses interest rate hedge contracts to limit 
its interest rate exposure on a portion of its variable-rate, long-term debt. 
These hedge contracts effectively reduce the impact of changes in interest 
rates on the Company's operating results.

In October 1997, the Company completed the October Offerings. Net proceeds to 
the Company of $363.8 million were used to repay all of the outstanding 
indebtedness on the revolving facility of the Credit Facility and to fund the 
acquisition of the Embassy Suites Tucson International Airport. The remaining 
proceeds will be used to fund a portion of the acquisition costs of Winston, 
the Medallion Portfolio, the Governor Morris Hotel & Conference Center and 
the Detroit Metro Airport Hilton Suites. 

                                     11 

<PAGE>

Capital for renovation work has been and is expected to be provided by a 
combination of internally generated cash and external borrowings. Once 
initial renovation programs are completed, the Company expects to spend 
approximately 4% of hotel revenues on an annual basis for ongoing capital 
expenditure programs, including room and facilities refurbishments, 
renovations, and furniture and equipment replacements. The Company believes 
that these investments will enhance the competitive position of its hotels. 
During the year ended December 31, 1996, the Company spent $21.6 million on 
initial renovation and ongoing capital expenditure programs. During the three 
months and nine months ended September 30, 1997, the Company spent $8.1 
million and $20.9 million, respectively, on such programs. The Company 
expects to spend an additional $35.4 million to complete the initial 
renovation programs on hotels owned as of September 30, 1997. Substantially 
all renovation programs for these owned hotels are expected to be completed 
within the next 12 months.

The Company believes cash generated by operations, together with existing 
borrowing capacity, will be sufficient to fund its existing working capital, 
ongoing capital expenditures and debt service requirements. In addition, the 
Company expects to continue to make acquisitions of upscale, full-service 
hotels and hotel management companies, and to secure additional management 
contracts. The Company has invested in two joint ventures during 1997. The 
Company expects to form additional joint ventures and strategic alliances 
with institutional and private hotel owners to invest in future acquisitions, 
and to secure additional fee management arrangements. The Company believes 
that there will continue to be additional acquisition opportunities and such 
acquisitions may require the Company to increase its borrowing capacity or 
consider the issuance of additional debt or equity securities.

SEASONALITY

Demand in the lodging industry is affected by recurring seasonal patterns. 
Demand is lower in the winter months due to decreased travel and higher in 
the spring and summer months during peak travel season. Accordingly, the 
Company's operations are seasonal in nature, with lower revenue, operating 
profit and cash flow in the first and fourth quarters and higher revenue, 
operating profit and cash flow in the second and third quarters.

                                     12

<PAGE>
 
PART II. OTHER INFORMATION
 
ITEM 5: OTHER INFORMATION
 
    (a) In addition to the acquisitions previously reported on Forms 8-K, during
October 1997 the Company completed the acquisition of the 204-room Embassy
Suites Tucson International Airport for a purchase price, including planned 
initial renovations, of $14.7 million. The acquisition was funded through 
existing cash and proceeds from the October Offerings.
 
    In October 1997, the Company announced the acquisition of substantially 
all of the assets of Winston for $34 million. Winston leases 38 and manages 
28 of the operating hotels of Winston Hotels, Inc., a real estate investment 
trust. The acquisition is expected to be completed during November 1997 and 
the purchase price will consist of $10 million in cash and $24 million in 
operating partnership units, which are convertible into shares of the 
Company's common stock.
 
    (b) Forward-Looking Statements
 
    Certain statements in this Form 10-Q and in the future filings by the 
Company with the SEC, in the Company's press releases, and in oral statements 
made by or with the approval of an authorized executive officer constitute 
"forward-looking statements" within the meaning of the Private Securities 
Litigation Reform Act of 1995. Such forward-looking statements involve known 
and unknown risks, uncertainties and other factors, which may cause the 
actual results, performance or achievements expressed or implied by such 
forward-looking statements. Such factors include, among other things, the 
following: the ability of the Company to successfully implement its 
acquisition strategy and operating strategy; the Company's ability to manage 
rapid expansion; changes in economic cycles; competition from other 
hospitality companies; and changes in the laws and government regulations 
applicable to the Company.
 
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
 
    (a) Exhibits.

    Exhibit No.

    27--Financial Data Schedule

    (b) Reports on Form 8-K
 
    Current Report on Form 8-K dated and filed on July 30, 1997, as amended,
    regarding the consummation of the acquisition of the Chicago Radisson and
    the Georgetown Inn. (Item 2)
 
    Current Report on Form 8-K dated and filed on August 13, 1997, regarding 
    the consummation of the acquisition of the National Airport Hilton. (Items 
    2 and 7).
 
    Current Report on Form 8-K dated and filed on September 2, 1997, regarding
    the consummation of the acquisition of the Radisson Plaza in Lexington,
    Kentucky. (Items 2 and 7).
 
    Current Report on Form 8-K dated and filed on September 8, 1997, for
    purposes of incorporating by reference into the Company's Registration 
    Statement on Form S-3 (File No. 333-34253) certain financial statements
    of hotels owned or under purchase contract. (Items 5 and 7).
 
    Current Report on Form 8-K dated and filed on September 9, 1997, as amended
    for purposes of incorporating by reference into the Company's Registration
    Statement on Form S-3 (File No. 333-34253) the financial statements of the
    National Airport Hilton and the unaudited pro forma financial statements of 
    the Company. (Items 5 and 7).
 
    Current Report on Form 8-K dated and filed on September 18, 1997, regarding
    the probable acquisition of the Governor Morris Hotel & Conference Center.
    (Items 5 and 7).
 
                                       13

<PAGE>

    Current Report on Form 8-K dated and filed on September 22, 1997, regarding
    the probable acquisition of the Medallion Portfolio. (Items 5 and 7).
 
    Current Report on Form 8-K dated and filed on September 22, 1997, for
    purposes of incorporating by reference into the Company's Registration 
    Statement on Form S-3 (File No. 333-34253) certain Accountants' Consents
    in respect of financial statements incorporated by reference in the Form 
    S-3. (Items 5 and 7).
  

                                     14

<PAGE>
                                 SIGNATURES
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
                                                     CAPSTAR HOTEL COMPANY
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  <S>                                                   <C>

  Dated: November 10, 1997                           /s/ PAUL W. WHETSELL
                                                     --------------------
                                                     Paul W. Whetsell 
                                                     President and Chief Executive Officer
 



  Dated: November 10, 1997                           /s/ JOHN EMERY
                                                     --------------------
                                                     John Emery 
                                                     Chief Financial Officer
 
                                       15

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