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 June 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)



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

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

                           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 August 14, 1997 was 18,907,576.


 


<PAGE>





                              CAPSTAR HOTEL COMPANY


                                      INDEX

                                                                    Page
                                                                    ----

PART I.    FINANCIAL INFORMATION

ITEM 1:    FINANCIAL STATEMENTS (UNAUDITED)

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

           Condensed Consolidated Statements of Operations -
            Three Months and Six Months Ended
            June 30, 1997 and 1996                                      4

           Condensed Consolidated Statements of Cash Flows -
            Six Months Ended June 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                12



PART II.   OTHER INFORMATION

ITEM 4:    SUBMISSION OF MATTERS TO
           A VOTE OF SECURITY HOLDERS                                  14

ITEM 5:    OTHER INFORMATION                                           14

ITEM 6:    EXHIBITS AND REPORTS ON FORM 8-K                            14



                                        2
 

<PAGE>


PART I.   FINANCIAL INFORMATION
ITEM 1:   FINANCIAL STATEMENTS


CAPSTAR HOTEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>




                                                          June 30, 1997        December 31, 1996
                                                          -------------        -----------------
                                                            (unaudited)
 
Assets
<S>                                                        <C>                    <C>
     Cash and cash equivalents                             $  11,489              $  21,784
     Accounts receivable, net                                 17,704                  8,109
     Deposits, prepaid expenses, and other                    30,384                  5,942
                                                           ---------              ---------
     Total current assets                                     59,577                 35,835
 
Property and equipment
     Land                                                     81,683                 58,127
     Building and improvements                               414,140                248,376
     Furniture, fixtures, and equipment                       51,150                 32,698
     Construction in progress                                  5,314                  3,891
                                                           ---------              ---------
                                                             552,287                343,092
     Accumulated depreciation                                (15,936)                (8,641)
                                                           ---------              ---------
     Total property and equipment, net                       536,351                334,451
 
Deferred costs, net of accumulated amortization
     of $1,727 at June 30, 1997 and $802 at
     December 31, 1996                                         8,703                  8,225    
 
Investments in partnerships                                    2,987                    650
Restricted cash                                                  455                      0
                                                           ---------              ---------
 
                                                           $ 608,073              $ 379,161
                                                           =========              =========
 
Liabilities, Minority Interest, and Stockholders' Equity
   Accounts payable                                        $   8,149              $   4,125
   Accrued expenses and other liabilities                     21,264                 10,737
   Income taxes payable                                        4,739                  1,436
   Long term debt, current portion                             1,060                    498
                                                           ---------              ---------
   Total current liabilities                                  35,212                 16,796
 
   Deferred tax liability                                      1,181                  1,181
   Long term debt                                            233,935                199,863
                                                           ---------              ---------
   Total liabilities                                         270,328                217,840
 
   Minority interest                                          22,270                    606
 
Common stock (49,000,000 shares authorized, at $.01
   par value, 18,905,952 and 12,754,321 issued and
   outstanding at June 30, 1997 and December 31, 1996            189                    128
   Paid in capital                                           303,564                158,533
   Retained earnings                                          12,142                  2,054
   Cumulative foreign currency translation adjustment           (420)                     0
                                                           ---------              ---------
 
                                                           $ 608,073              $ 379,161
                                                           =========              =========

See accompanying notes to condensed consolidated financial statements.
</TABLE>
 

                                        3

<PAGE>



CAPSTAR HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                     Three Months Ended June 30,       Six Months Ended June 30,
                                                     ---------------------------       ------------------------

Revenue from hotel operations                             1997(1)         1996(1)         1997(1)          1996
<S>                                                    <C>             <C>             <C>             <C>
  Rooms                                                $  47,993       $  17,407       $  79,254       $  28,120
  Food and beverage                                       20,848           8,234          34,676          12,989
  Other operating departments                              3,515           1,532           5,664           3,059
Hotel management and other fees                            1,355           1,050           2,225           2,088
                                                       ---------       ---------       ---------       ---------

Total revenue                                             73,711          28,223         121,819          46,256
                                                       ---------       ---------       ---------       ---------

Hotel operating expenses by department
  Rooms                                                   11,190           4,458          18,954           7,365
  Food and beverage                                       16,107           6,520          27,338          10,302
  Other operating expenses                                 1,840             657           3,008           1,089
Undistributed operating expenses
  Administrative and general                              10,994           4,689          19,839           9,457
  Property operating costs                                 8,086           3,848          13,960           5,381
  Property taxes, insurance and other                      2,871           1,324           5,064           2,116
  Depreciation and amortization                            4,721           2,247           8,220           3,919
                                                       ---------       ---------       ---------       ---------

Total operating expenses                                  55,809          23,743          96,383          39,629

Interest expense, net                                      4,188           4,507           8,440           7,290
                                                       ---------       ---------       ---------       ---------

Income (loss) before minority interest and income         13,714             (27)         16,996            (663)
taxes

Minority interest                                           (572)             75            (620)             69
                                                       ---------       ---------       ---------       ---------

Income (loss) before income taxes                         13,142              48          16,376            (594)

Income taxes                                               4,994              --           6,288              --
                                                         -------         -------         -------         -------

Net income (loss)                                        $ 8,148         $    48         $10,088         $  (594)
                                                         -------         -------         -------         -------

Earnings per share                                       $  0.43           $  --         $  0.62           $  --
                                                         =======         =======         =======         =======

(1)   Unaudited


See accompanying notes to condensed consolidated financial statements.

</TABLE>


                                        4

<PAGE>


CAPSTAR HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>

                                                         Six Months Ended June 30,
                                                        --------------------------
                                                          1997             1996
                                                        ---------       ---------
                                                       (unaudited)
Cash flows from operating activities:
<S>                                                     <C>             <C>
Net income (loss)                                       $  10,088       $    (594)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization                               8,220           3,919
Minority interest                                             620             (69)
Changes in operating assets and liabilities:
Accounts receivable, net                                   (9,595)         (4,199)
Deposits, prepaid expenses, and other                     (24,442)         (3,388)
Accounts payable                                            4,024           2,108
Accrued expenses and other liabilities                     10,527           6,114
Income taxes payable                                        3,303               0
                                                         --------        --------
Net cash provided by operating activities                   2,745           3,891
                                                         --------        --------

Cash flows from investing activities:
Purchases of property and equipment                      (161,718)        (84,116)
Investments in partnerships                                (2,337)              0
Purchases of minority interest                                (57)            (67)
Additions to restricted cash for capital                     (455)        (11,442)
improvements                                             --------        --------
Net cash used in investing activities                    (164,567)        (95,625)
                                                         --------        --------
Cash flows from financing activities:
Deferred costs                                             (1,403)         (3,092)
Release of restricted deposits for hedge agreement              0           2,023
Proceeds from long term debt                              110,550          91,308
Payments of long term debt and capital leases             (91,544)           (154)
Proceeds from issuances of common stock, net              134,092               0
Distributions to limited partners                               0            (172)
Distributions to minority investors                          (163)           (104)
                                                         --------        --------
Net cash provided by financing activities                 151,532          89,809
                                                         --------        --------
Effect of exchange rate changes on cash
  and cash equivalents                                         (5)              0
                                                         --------        --------
Net change in cash and cash equivalents                   (10,295)         (1,925)
Cash and cash equivalents, beginning of period             21,784           6,832
                                                         --------        --------
Cash and cash equivalents, end of period                $  11,489       $   4,907
                                                         ========        ========
</TABLE>

                                        5


<PAGE>



CAPSTAR HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
                                                      Six Months Ended June 30,
                                                     --------------------------
                                                         1997             1996
                                                      ---------       ---------
                                                     (unaudited)

Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized
  interest of $173 and $210, respectively               $ 7,862         $ 5,484
<S>                                                     <C>             <C>
Supplemental disclosure of non-cash investing
  and financing activities:
  Additions to equipment through capital leases         $     0         $   305
  Deferred financing fees not yet paid                  $     0         $   411
  Long-term debt assumed in purchase of property
  and equipment                                         $15,628         $     0
  Operating partnership units issued in purchase
  of property and equipment                             $32,264         $     0
</TABLE>


  See accompanying notes to condensed consolidated financial statements.

                                       6



<PAGE>



CAPSTAR HOTEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AMOUNTS)



  1. ORGANIZATION

  The corporate structure of CapStar Hotel Company and its subsidiaries
  (collectively, the "Company") was formed pursuant to a Formation Agreement
  dated June 20, 1996. The principal activity of the Company is to acquire, own,
  renovate, reposition and manage upscale, full-service hotels throughout North
  America. As of June 30, 1997, the Company owned 32 hotels.

  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  All significant intercompany transactions and balances have been eliminated in
  the consolidation.

  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 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, filed with the SEC on February 20, 1997.

  The accompanying unaudited condensed consolidated interim financial statements
  reflect, in the opinion of management, all adjustments, which are of a normal
  and recurring nature, necessary for a fair presentation of the financial
  position and results of operations and cash flows for the periods presented.
  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.
 
  Deposits, prepaid expenses and other assets include hotel purchase 
  deposits of $23,850 at June 30, 1997 and $1,800 at December 31, 1996.

  During the second quarter, the Company purchased three hotels in Canada.  The
  records for those hotels are kept in Canadian dollars and gains or losses
  resulting from translating foreign currency financial statements are accumu-
  lated in a separate component of stockholders' equity.  Gains or losses
  resulting from foreign exchange transactions are included in determining net
  income.  The effect on net income was not significant.

  The results of operations for the interim periods are not necessarily
  indicative of the results for the entire year.

  Certain 1996 amounts have been reclassified to conform with 1997 presentation.

  3. COMMON STOCK OFFERING

  On March 12, 1997, the Company completed an offering of 5,750,000 shares of
  common stock at a price of $24.75 per share ("the Offering"). After
  underwriting discounts, commissions and other Offering expenses, net proceeds
  to the Company were $134,051. The proceeds of the Offering were used to repay
  a portion of the Company's outstanding indebtedness and to fund the
  acquisition of certain hotels.



                                        7


<PAGE>

  4. EARNINGS PER SHARE

  Primary earnings per share ("EPS") of $0.43 and $0.62 for the three months
  and six months ended June 30, 1997, respectively, have been calculated using
  the weighted average number of shares of common stock and common stock
  equivalents outstanding during the periods of 19,496,509 and 16,356,343,
  respectively. In calculating EPS, net income has been adjusted for minority
  interest, net of tax at the Company's effective tax rate, of $230
  for the three months ended June 30, 1997. Fully diluted EPS was $0.43 and
  $0.61 for the three months and six months ended June 30, 1997, respectively,
  with weighted average number of shares of common stock, common stock
  equivalents, and other dilutive securities of 19,931,519 and 16,640,902,
  respectively. In computing Fully Diluted EPS, net income has been adjusted for
  minority interest, net of tax at the Company's effective tax rate, of $331 and
  $101 for the three months and six months ended June 30, 1997, 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. Therefore, earnings per share
  disclosures are not presented for the three months and six months ended June
  30, 1996 because these limited partnerships were not subject to the provisions
  of Accounting Principles Board Opinion No. 15 ("APB No. 15").

  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 earnings per share. 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 potential dilution. Had
  the Company implemented the requirements of SFAS No. 128, Basic EPS would have
  been $0.44 and $0.63, and Diluted EPS would have been $0.43 and $0.61, for the
  three months and six months ended June 30, 1997, respectively.

  5. LONG-TERM DEBT

  Long-term debt consisted of the following:


                                            June 30, 1997     December 31, 1996
                                            -------------     -----------------

 
 Senior Secured Revolving Credit Facility       $ 168,500           $ 149,000
 
 Senior Subordinated Credit Facility               50,000              50,000

 Mortgage debt                                     15,404                   0

 Notes payable                                        535                 665

 Capital leases                                       556                 696
                                                ---------          ----------
 
                                                  234,995             200,361

 Less current portion                              (1,060)               (498)
                                                ---------           ---------
                                                $ 233,935           $ 199,863
                                                =========           =========


                                        8


<PAGE>





  On September 30, 1996, the Company entered into a three-year $225,000 Senior
  Secured Revolving Credit Facility (the "Credit Facility"). The Credit Facility
  provides for acquisition loans, working and renovation capital and letters of
  credit. The Credit Facility is collateralized by substantially all of the
  Company's assets. Interest on the Credit Facility is payable monthly at the
  Company's election of the lenders' prime rate plus 0.5% or one, two, three or
  six month LIBOR (at the Company's selection) plus 2.0%. The interest rate for
  the Credit Facility was approximately 7.7 % at June 30, 1997.

  On December 13, 1996, The Company entered into a $50,000 unsecured senior
  subordinated credit facility (the "Subordinated Debt") maturing on December
  31, 1999. Interest on the Subordinated Debt is payable monthly and is calcu-
  lated at one, two, three or six month LIBOR (at the Company's selection) plus
  4.0%. At June 30, 1997, the interest rate for the Subordinated Debt was
  approximately 9.5%.

  On January 31, 1997, the Company assumed a $15,628 mortgage in connection with
  the acquisition of the Westchase Hilton & Towers in Houston, Texas. This note
  matures in 2012 and requires monthly principal and interest payments using an
  effective interest rate of approximately 7.5%.

  Aggregate maturities of the above obligations are as follows:



       1997           $    520

       1998              1,098
 
       1999            219,461
 
       2000                825

       2001                825

       Thereafter       12,266
                      --------
                      $234,995
                      ========


  6. MINORITY INTEREST

  On April 1, 1997, the Company issued 809,523 common operating partnership
  units and 392,157 preferred operating partnership units (collectively, the
  "OP Units") to partially finance the purchase of six hotels (the "Highgate
  Portfolio") from Highgate Hotels, Inc. and certain affiliated entities
  (collectively, "Highgate"). The OP Units are convertible into an equal number
  of shares of the Company's common stock. In May 1997, 400,000 shares of the
  common OP Units, valued at $11,000, were converted to common stock of the
  Company.



                                        9


<PAGE>





  7. STOCK PURCHASE PLAN

  In May 1997, the Company implemented a stock purchase plan which allows
  eligible employees to purchase the Company's stock at a discount to market
  value. From its inception through June 30, 1997, the Company issued 1,631
  shares in conjunction with the plan, resulting in net proceeds to the
  Company of $41.


  8. PRO FORMA INFORMATION

  The following pro forma summary presents information as if the material
  acquisition of the Highgate Portfolio on April 1, 1997 had been made at the
  beginning of the respective periods presented. The pro forma information is
  provided for informational purposes only. It is based on historical infor-
  mation and does not necessarily reflect the actual results that would have
  occurred nor is it necessarily indicative of future results of operations of
  the Company.

                              Six Months Ended June 30,
                         -----------------------------------
                             1997                   1996
                         -------------         -------------
 
 Total revenue            $130,236                 $65,895
 Net income                 10,513                   1,036
 Earnings per share         $ 0.64                 $    --


  9. RELATED-PARTY TRANSACTIONS

  In April 1997, the Company acquired the Holiday Inn in Tinton Falls, New
  Jersey and the Holiday Inn Sports Complex in Kansas City, Missouri for an
  aggregate purchase price of $10,128 from two partnerships in which certain
  of the Company's officers had minority ownership interests. The purchase price
  for these hotels was determined through negotiations between the Company, on
  the one hand, and representative of the holders of the majority of the
  beneficial interests in the sellers, on the other hand; such representatives
  are not affiliated with the Company.

  In April 1997, the Company acquired a portfolio of six hotels from Highgate
  for consideration consisting of $68 million cash and $32 million of OP Units
  in the Company's subsidiary operating partnerships. Mahmood Khimji,
  a director of the Company, is a principal of Highgate Hotels, Inc. At the time
  of the acquisition, Mr. Khimji was not a director of the Company.

  Management believes that the purchase prices of the aforementioned 
  acquisitions were determined through arm's-length negotiations between the 
  Company and the sellers.



                                        10


<PAGE>






  10. SUBSEQUENT EVENTS

  On July 1, 1997, the Company entered into a $450 million senior secured credit
  facility (the "1997 Credit Facility") structured as a $350 million, 5-year
  revolving credit facility and a $100 million, 7-year term loan facility.
  Borrowings under the 1997 Credit Facility bear interest, at the Company's
  option, at a rate equal to the lenders' prime rate plus a spread of between 50
  and 112.5 basis points or one, two, three or six month LIBOR (as selected by
  the Company) 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
  ratios. The 1997 Credit Facility provides for acquisition loans, working and
  renovation capital and letters of credit. The initial proceeds from the 1997
  Credit Facility were used to refinance the Credit Facility and the Subordin-
  ated Debt. In connection with the refinancing, the Company expects to incur
  approximately $3,782 (net of a tax benefit of $2,318) of expenses associated
  with the write-off of unamortized deferred financing costs related to the
  Credit Facility and the Subordinated Debt.

  During July 1997, the Company completed the following acquisitions: the
  289-room Doubletree Resort in Palm Springs, CA for $17,250, the 386-room
  National Airport Hilton in Arlington, VA for $36,500, the 95-room Georgetown
  Inn in Washington, D.C. for $14,000, and the 341-room Radisson Hotel & Suites
  in Chicago, IL for $46,000. In August 1997, the Company acquired the 288-room
  Embassy Suites Center City in Philadelphia, PA for $33,600 and the 265-room
  Jekyll Inn on Jekyll Island, GA for $7,550. The acquisitions were funded
  through existing cash and external borrowings.

  In August 1997, the Company announced its intention to sell $150,000 aggregate
  principal amount of its senior subordinated notes due 2007. The consummation
  of such offering is expected to be completed during August 1997.


                                       11


<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 six additional hotels during the first six months of
  1996 on the following dates: February 2, February 16, February 22, February
  29, March 8 and April 17, 1996, bringing the total to 11 hotels owned at June
  30, 1996.

  At December 31, 1996, the Company owned 19 hotels and acquired 13 additional
  hotels during the first six months of 1997 on the following dates: January 27,
  January 31 (two hotels), March 17, March 28, April 1 (six hotels) and April 30
  (two hotels), bringing the total of hotels owned at June 30, 1997 to 32.

  Therefore, the financial statements for the three months and six months ended
  June 30, 1997 and 1996, reflect differing numbers of owned hotels throughout
  the periods.

  FINANCIAL CONDITION

  JUNE 30, 1997 COMPARED WITH DECEMBER 31, 1996

  Total assets increased by $228.9 million to $608.1 million at June 30, 1997
  from $379.2 million at December 31, 1996. This growth was due to the
  acquisition of 13 hotels during the first six months of 1997 and deposits
  related to certain hotels acquired in July 1997.

  Long-term debt increased to $235.0 million at June 30, 1997. This reflects
  borrowings on the hotels acquired, net of repayments with proceeds from the
  Offering.

  The increase in minority interest reflects the OP Units issued in conjunc-
  tion with the acquisition of the Highgate Portfolio. The increase in equity
  resulted from the net proceeds from the Offering that occurred in March and
  the partial conversion of the OP Units in May.

  RESULTS OF OPERATIONS

  THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH THREE MONTHS ENDED JUNE
  30, 1996

  Revenues for the second quarter of 1997 increased to $73.7 million compared to
  $28.2 million in the second quarter of 1996. The significant increase is
  primarily attributable to the acquisition of 21 additional hotels since the
  end of the second quarter of 1996. Operating expenses also increased due to
  the increase in the number of hotels owned during the period.

  Minority interest was significantly higher for the second quarter of 1997 than
  the same period of 1996 due to the minority interest in income relating to the
  outstanding OP Units.

  Net income for the second quarter of 1997 increased significantly to $8.1
  million versus $0.05 million in the second quarter of 1996, reflecting the
  larger number of hotels owned.

  Earnings before interest, income taxes, depreciation and amortization (EBITDA)
  for the second quarter of 1997 improved to $22.1 million compared to $6.8
  million for the same period of 1996.


                                       12


<PAGE>


  SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30,
  1996

  Revenues increased to $121.8 million for the six months ended June 30, 1997
  from $46.3 million for the six months ended June 30, 1996. Operating expenses
  also increased significantly. These increases are a result of the increase in
  the number of hotels owned during the respective periods.

  Interest expense increased to $8.4 million for the six months ended June 30,
  1997 from $7.3 million for the same period in 1996, resulting from the
  increase in debt incurred relating to the acquisition of the hotels since June
  30, 1996. This increase in debt and the related interest expense was partially
  offset by proceeds from two equity offerings and the lower interest rate
  charged on the Credit Facility.

  Net income rose to $10.1 million for the six months ended June 30, 1997
  compared to a net loss of $0.6 million for the same period of 1996.

  EBITDA increased to $33.0 million for the six months ended June 30, 1997
  from $10.6 million for the same period of 1996.

  LIQUIDITY AND CAPITAL RESOURCES

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

  Capital for renovation work has been and will 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
  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 six months ended June 30, 1997, the Company spent $4.4 million and
  $12.9 million, respectively, on such programs. The Company expects to spend an
  additional $16.4 million to complete the initial renovation programs.
  Substantially all renovation programs are expected to be completed within the
  next 12 months.

  Management believes that the Company will have access to sufficient capital
  resources to fund its operating and administrative expenses, to continue to
  service its debt obligations and to acquire additional hotels.

  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.


                                       13


<PAGE>


  PART II. OTHER INFORMATION


  Item 4: Submission of Matters to a Vote of Security Holders

  On May 13, 1997, the Company held its annual meeting at which the stockholders
  of the Company elected ten nominees to the board of directors of the Company.
  14,966,167 votes were cast for the nominees and 5,566 votes were withheld from
  the nominees.

  The stockholders of the Company also ratified the appointment of KPMG Peat
  Marwick LLP as the independent auditors for the Company for the fiscal year
  ended December 31, 1997. The votes for the proposal were cast as follows:
  14,967,468 for, 3,757 against and 2,208 abstentions.

  
  Item 5: Other Information

  (a) In addition to the acquisitions previously reported on Forms 8-K, during
  July 1997, the Company completed the acquisition of the 289-room Doubletree
  Resort in Palm Springs, CA for $17,250,000. In August 1997, the Company
  acquired the 288-room Embassy Suites Center City in Philadelphia, PA for
  $33,600,000 and the 265-room Jekyll Inn on Jekyll Island, GA for $7,550,000.
  The acquisitions were funded through existing cash and external borrowings.


  (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.

  Item 6: Exhibits and Reports on Form 8-K

  (a) Exhibits.

  Exhibit No.

  4.1 -- Credit Agreement among the Company, Lehman Brothers Holdings Inc.,
  Bankers Trust Company, BankBoston, N.A. and Wells Fargo Bank, N.A.,
  dated as of June 30, 1997

  10.1 -- Registration Rights Agreement between the Company and certain
  affiliates of Highgate Hotels, Inc., dated as of April 1, 1997

  10.2 -- First Amendment to Amended and Restated Agreement of Limited
  Partnership of CapStar Management Company, L.P., dated as of April 1,
  1997

  10.3 -- Second Amendment to Amended and Restated Agreement of Limited
  Partnership of CapStar Management Company, L.P., dated as of April 15,
  1997

  10.4 -- Agreement of Limited Partnership of CapStar Management Company II,
  L.P., dated as of April 1, 1997

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<PAGE>



  10.5 -- First Amendment to Agreement of Limited Partnership of CapStar
  Management Company II, L.P., dated as of April 1, 1997

  10.6 -- Second Amendment to Agreement of Limited Partnership of CapStar
  Management Company II, L.P., dated as of April 15, 1997

  27 -- Financial Data Schedule

  (b) Reports on Form 8-K

     Current Report on Form 8-K dated and filed on April 3, 1997, regarding the
     consummation of the acquisition of the Highgate Portfolio.



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<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



         Dated:
     August 14, 1997
                              /s/  PAUL W. WHETSELL
                              ---------------------
                              Paul W. Whetsell
                              President and Chief Executive Officer


 
         Dated:
    August 14, 1997
                              /s/  JOHN EMERY
                              ---------------------
                              John Emery
                              Chief Financial Officer


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